Nathan Turner with Earnest Investing

Intro: Broadcasting live from the Business RadioX studios in Houston, Texas. It’s time for Houston Business Radio. Now, here’s your host.

Trisha Stetzel: Hello, Houston. Trisha Stetzel here bringing you another episode of Houston Business Radio. Today’s guest is Nathan Turner, founder of Earnest Investing and a seasoned mortgage note investor. We’re going to talk a little bit more about that later. After years in traditional real estate, Nathan transitioned into specializing in mortgage notes, helping investors diversify their portfolios and generate steady passive income. He also runs the Diversified Mortgage Expo, an annual event that brings together experts in note investing and seller financing. Nathan’s mission is to build lasting relationships and educate investors at every level, and he’s here to share why? Note investing is a powerful alternative to traditional real estate. Nathan, welcome to the show.

Nathan Turner: I’m so glad to be here. Thank you so much.

Trisha Stetzel: I’m very excited to have you today. So tell us a little bit more about Nathan and then let’s dive into earnest investing.

Nathan Turner: Yeah. Sounds good. So I’m Nathan Turner. I have been in note investing for about 15 years. But outside of that, probably the most unique thing is I live in Canada, so I live just outside of Calgary, Alberta. Uh, which, if you don’t know, that’s fine. There’s the Calgary Stampede. If you’re in the rodeo business, you maybe have heard of that. If not, I’m about an hour outside of Banff and I think everyone’s heard of that one. And it’s it is as pretty as all the pictures. It’s as pretty as everybody says. So if you haven’t visited yet, it’s definitely worth it. Um, I, uh, I’d like to just be outside as much as I can. I’d like to go and visit all the mountains. I like to go and hike. I like snowboarding, I like doing all those fun things and got my three kids, and we tried to go on as many adventures as we can. And, uh, my wife, of course, is always by my side and she’s the best.

Trisha Stetzel: And we had to put that in there. Uh, she didn’t pay us. I’m just kidding.

Nathan Turner: No.

Trisha Stetzel: Well, we. And we have something else in common. We love snowboarding, too, so we’ll have to have a.

Nathan Turner: Fantastic.

Trisha Stetzel: Nathan. Excellent. Uh, okay, so let’s talk a little bit more about your business. So tell me more about earnest investing.

Nathan Turner: Yeah. So earnest investing is a is actually a fund that we put together a little over a year ago. Um, and it is based on, you know, investors put money into the fund, and then I go out and buy mortgage notes. And in Texas there are deeds of trust. But same thing. Uh, not the same thing, but For our purposes, the same thing. It’s. It’s a loan against a property. Uh, so somebody, you know, they want to go and buy a house. Great. So you typically we go to the bank, uh, we get a loan from the bank. They set it up as either a mortgage or deed of trust, depending on the state. At some point in the future, uh, the bank or the lender, whoever it is that gave you that loan says, you know what? I would rather recapitalize, get my cash back and move on and do something else with that capital. So then they contact somebody like me and I say, well, I will do that. I will buy whatever that loan is that you’ve got. Outstanding. Uh, and I step into the role of the lender. So I don’t actually lend out the money, but I do. I technically am a lender. I step into that role and I become the bank for whoever’s living in the house.

Trisha Stetzel: Okay. Very interesting. So you started in traditional real estate, uh, before you transitioned into mortgage notes. So number one, what made you shift and what advantages denotes offer that people often overlook?

Nathan Turner: So why did I shift? That’s a great question. So I really like let’s just, you know, get it straight. I love real estate. I’m a big, big fan. Um, I was doing fix and flip back when it was really easy to do that 2005 and six, where the market was just really conducive to fix and flip. It was very easy to do. Um, as the market turned, I got stuck with actually just one property that I ended up becoming a landlord. I liked that much less, uh, being a landlord was a lot more work and, uh, just yeah, a lot more to do, more headaches and things to deal with. Uh, but I did like that monthly income, and that was an attractive part of it for me. So I didn’t like the landlording thing I did. I do like real estate. I like that there’s a hard asset there. I was introduced into this world of of note investing, uh, about late 2008 and 2009, where, um, you can buy just the loan instead of taking over the property as the bank. We don’t actually take ownership of the house. So whoever’s living in the house, they still retain ownership, but the loan itself transfers over to me. So what that means for me is I get all of that monthly income, the part that I did like without having to take care of the property, the part that I didn’t like. So to me, it was just like the perfect marriage of of how this all comes together and best of both worlds in my mind.

Trisha Stetzel: Yeah, absolutely. So my next question was going to be, how does the investor actually make money from buying the loan? So do you want to take that a little bit deeper for us?

Nathan Turner: Sure. Yeah. So um, when I’m looking at buying any kind of a loan, Let’s put some numbers behind it just to make it a little easier to visualize. So we’ll use easy numbers. These are maybe not realistic, but just stay with me. So let’s say the balance of the loan is $100,000. The house is worth 150. Um, I would come along and there’s a lot of factors that go into it. What’s the interest rate? You know, how long is the term, uh, where is it located? When what’s the payment history? All those kind of things go into it. But for super simple discussion we say, okay, so if the balance is $100,000, um, I’m willing to pay out the bank and become that the new bank and step into that role. I anytime that I’m going to do that, I am taking on a little bit of a risk. Uh, you know, I haven’t formed this relationship with the borrower. I this is stepping into a different situation. So it’s always done at a discount. So if it’s $100,000 balance, I’m probably not going to pay more than, let’s say, 80,000. And again, like I said, there’s lots of factors and there’s lots of things that go behind that. But in any case, I’m going to buy it at some kind of a discount. So because I’ve bought it at a discount, whatever that posted rate is, let’s say the rate today is 7% because I bought it at a discount. My return would actually jump up to nine, ten, 11 somewhere in there depending on on all those other factors. So automatically I end up stepping into a higher return. Plus I’ve got an additional equity position in there. So it just increases my safety, helps me feel a little bit better about the whole investment as a whole.

Trisha Stetzel: Yeah, absolutely. Okay. So I’m guessing I’m not the only one. Some of the listeners have probably never heard of this before.

Nathan Turner: Most likely.

Trisha Stetzel: Yeah. So I’m curious because you’ve been doing this, it sounds like since around 2008, 2009. Um, are you seeing trends in your industry where more people are doing node investing? Or is it still like this big secret?

Nathan Turner: It’s mostly secret still, which is it’s fascinating to me because it’s actually been around a very long time. And especially in Texas, seller financing is done more in Texas than anywhere else in the country combined. In fact, there’s a higher rate of seller financed loans being created than anywhere else. Even if you combine all the other states together, they don’t add up to what Texas does. So I’m actually a big fan of Texas loans. They’re fantastic. But because of that, uh, I forgot where I was going on that.

Trisha Stetzel: Yeah. No worries. It was. I was asking if it’s still secret or are you seeing.

Speaker4: Yeah. Yeah, yeah.

Trisha Stetzel: That way.

Nathan Turner: Right. So yeah, it’s still relatively unknown, which is kind of interesting and I, I honestly don’t exactly know why. Um, it’s a great business and there’s not a ton of barriers to entry there. There’s certainly some education that you need to get because we’re dealing with the finance, not the property. Uh, which takes a little while to get your head around, but, uh, but because of that fact, maybe that’s what it is, but I’m not exactly sure why. It’s not as well known as I think it should be. But anyway, I don’t mind it being a secret either, so I guess I’m okay.

Trisha Stetzel: Well, it’s not a secret anymore, because everyone’s listening.

Nathan Turner: Nathan, right?

Trisha Stetzel: Yeah. Um, so we’re about halfway through, and I’m sure people are already interested in having a conversation. Especially my Texas friends may want to learn more or even have a conversation with you. What is the best way to connect with you?

Nathan Turner: Nathan I think probably the best way is to just go to the website, uh, which is Ernest Investing.com, and that’s e a r. So Ernest Investing.com is, uh, place where you can learn a little bit more about notes. There’s a link there to the Diversified Mortgage Expo. And then of course, there’s a couple of different places on there where you can create an appointment with me and we can have a conversation.

Trisha Stetzel: Fantastic. And you guys, as always, I’ll have that in the show notes. So if you’re sitting in front of your computer, you can just point and click to find out more about Nathan, his business, as well as a few other things. So, Nathan, I heard through the grapevine that you have a book coming out. Can we talk about that?

Nathan Turner: Sure. Well, I’m just putting the finishing touches on it, so it should be ready here very shortly. I think it’ll be ready by the time this airs.

Speaker4: But yes, it is.

Trisha Stetzel: Tell us more.

Nathan Turner: I’m really excited about this because it’s something that I’ve been thinking about for a long time. I think part of me thought, you know what? I think I need enough experience to be able to have the right to write a book. Uh, and I feel like I’m there now. So the book is really all about, um, my journey and notes in general and what that’s all about. And I’ll turns out it just kind of in the writing of it. It really kind of focused on the community of note investing and what a big deal that is and how important that is to just get into this world where generally we pretty much all know each other and I love it. I love that we get to just be this, you know, little secret society almost. We’re doing this business. It’s great.

Trisha Stetzel: Yeah, I love that. Okay. So have you titled the book yet?

Nathan Turner: Yes, it’s called Passive Secured Unique, which is the tagline for my business.

Speaker4: Okay.

Nathan Turner: And yeah, so it’s just talking about this really cool business which is passive and secured by real estate. And it’s really unique. Not a lot of people know about it.

Trisha Stetzel: I love that, that’s fantastic. So where can folks find it, since we know that it’s going to be out and ready for purchase?

Nathan Turner: Yeah. Uh, at the very least on the website, we’ll we’ll have links there to be able to acquire it. However that’s going to go out. We’re not exactly sure yet. But, uh, but definitely on the website. That’ll be the place to start.

Trisha Stetzel: Fantastic. Congratulations. That is an amazing accomplishment. And yes, you’ve been doing this business absolutely long enough to write about it. So you guys go to Ernest Investing.com e a n e investing.com to check out that information around the book. All right, Nathan, I want to know a little bit more about the Diversified Mortgage Expo. What time of year does that happen? Tell me who should come to it where it happens?

Speaker4: Yeah.

Nathan Turner: Diversified Mortgage Expo is so much fun. We we took this over. My wife and I, we, uh, took this over about three years ago. Uh, we run it at the beginning of May, typically that first weekend in May in Nashville, Tennessee. And it’s just a place for everybody to come together and everybody is anybody who’s brand new to the business, and they’ve just barely heard about this all the way to people who have multi-million dollar funds. And it just it it makes me so happy to see all these people coming together. And node investors are some of the friendliest people out there and so open and so sharing with everything. So somebody who’s brand new can show up and go and sit at the same table as somebody who’s very seasoned and, you know, has all these assets under management and everything else, and they can have a really great conversation and there’s no judgment. There’s no like, oh, well, talk to me when you’ve done this a while and there’s nothing like that. It’s very inviting. It’s very open. We come together the night before we start the conference. We do an ax throwing tournament, uh, just to help break the ice and have some fun. And then it’s a no sales, you know, purely in informational, educational, so that you can learn more about this. And, and really the idea is that you can meet other people that are in the business so that you can start making some connections and get some business done.

Trisha Stetzel: I love that. Okay, so Nathan’s giving us some information about the secret society of node investing and this expo. So you guys if you want, if you’re interested in node investing and you want to learn more about the expo, please reach out to Nathan. I am sure he’s happy to share the information about both with you guys. All right. I want to jump back if it’s okay. So that was fun, but I want to jump back over to node investing. What are some of the biggest challenges that you see in that space, and how do you coach others or even yourself, uh, to overcome those challenges?

Nathan Turner: So there’s a few things. Um, regulation is a big one. And just learning the ropes. And part of what makes that challenging is. Yes, there are some national standards, but then there are also some state specific standards. And so learning what’s okay in Texas versus Florida versus Ohio, uh, and they’re very different. And they’re depending on what happens and how it’s set up, how you deal with a non-performer if they start, if they default, what happens there? Each state has their own way of dealing with it. So getting that education up front is really important. And again, that’s not a pitch because I don’t teach. But I can certainly introduce you to some people who do. So understanding how it works to begin with, that’s a that’s a major challenge. And that’s something that you really need to focus on before you decide you want to jump into this. On the back end of that, let’s say you do end up getting a defaulted note. Let’s say, you know, somebody’s paying. Something happens. Uh, there’s some life challenge that comes their way and they’re not able to make payments. Almost always, I’ll just preface that almost always, if we do end up going to a foreclosure, it’s usually because the house is vacant.

Nathan Turner: Uh, and maybe they’ve passed away or they’ve abandoned the property. That’s usually when foreclosure happens. It’s very rare that we actually foreclose on a person. It’s usually just on an empty house. That being said, once we take back that property, that’s the next big risk is we’re getting into a property where because we’ve only bought the note, uh, we don’t actually have the right to go inside that house. Unlike traditional real estate. So as much as we have seen it from the outside, we’ve sent somebody out there to go and look at it and observe and everything else. It has happened for sure. Where we take back that property, we get inside and. Oh no. And it’s certainly not what we thought it was going to be. So that’s the it taking back that house. And then, you know, maybe we start doing renovations and we open up a wall and we go, oh, shoot, there’s that. Uh, and that’s the risk where we end up, um, having most of our challenges is when we actually start dealing with the property itself.

Speaker4: Wow.

Trisha Stetzel: Okay, that sounds a little scary.

Speaker4: Uh, so they’re a little bit risky.

Trisha Stetzel: A little risk involved, right? Uh, it’s not all, um, roses, right? Uh, and I think with any, any kind of investing, there’s a bit of risk or calculated risk.

Speaker4: Um, when.

Nathan Turner: Absolutely. And it’s something you need to be aware of and, and to take into account, like you say, it’s not all sunshine and rainbows. I wish it was. That would make my life so much easier. But no, it it’s a real business. There are real challenges. Uh, so you just need to be prepared for that.

Trisha Stetzel: Okay, so, Nathan, um, we know there’s a book coming out. It’s probably already out. Uh, for those of you who are listening today. So go and take a look for the book on Ernest Investing.com. What’s next for you, Nathan? And for earnest investing.

Nathan Turner: I. I am in the midst of, um, preparing my long term play. So as I’m running this fund, part of that, you know, my income is, of course, mixed in with that. Um, and then a big focus for me is building up my own portfolio. And for me, this is my retirement. Um, the plan is, you know, get a whole bunch of notes, uh, that are making monthly payments. And then there’s some management involved with that, of course. Uh, but more or less, I’m, you know, quote unquote, retired where my wife and I can go and travel. My, our kids are just about all gone. Uh, we’ve got one left in high school for another couple of years, and then he’ll move out. And then I don’t know, you know, whether that’s going visiting kids or whether that’s going and doing whatever, uh, different service around the world or who knows what. But, uh, but we’ll be set up to where we can make that choice, and we can have the freedom to be able to go and do whatever we want to do, whenever we want to do it. So that’s the long term play.

Trisha Stetzel: I love that when you first got into real estate, did you think this was going to be the legacy? Uh, the long term plan for you was real estate.

Nathan Turner: Um, I was hoping it would be I. But at the same time, when I very first got involved, it was fix and flip. And so that’s very physically taxing. And so I recognize that, um, you know, I can only last so long doing that kind of thing. Uh, so that was part of the question is like, how do we make this work long term? And, you know, you can hire crews and all those kind of things. Uh, and definitely that works. But the market’s not always really good for flipping. So. Okay. What about renting. Well same thing then you now you’re dealing with tenants and there’s turnover and again repairs to the property those kinds of things. So surely there’s something else, a different way that this can work. So that’s why I think notes is such a great fit for me.

Trisha Stetzel: Yeah. So you talked a little bit about or you just said you were introduced to note investing around 2000, 2008. Can you tell me a little bit more about that experience? So you’re in traditional real estate. You’ve done all the hard work, the labor behind fix and Flip. Uh, and you were introduced to note investing. So how did that even happen?

Nathan Turner: Yeah. You know, it’s another one of those cases of right place, right time, uh, where I, a colleague of mine, he called me up and said, hey, I’ve got this opportunity. Are you interested? We had, uh, been given charge over about 60 properties, mostly centered in the Midwest. Uh, a couple kind of spread out here and there. But it was a deal where these investors had bought this portfolio of properties. They’re supposed to flip it out to another group. Of course, this was back in 2007, when everything seemed like it was never going to end. Uh, the deal went south, and now they’re stuck with all these properties. So they’d contacted us and said, okay, so can you guys do something? Uh, they had their own, you know, full time jobs. Whatever. Can you guys figure this out? So we we thought we’d come up with the whole concept of seller finance. We thought we were pretty smart there, uh, because, again, we’d never heard of it. It’s still not that common. So we started selling these houses on terms. So basically seller financing, uh, we would take a down payment and then structure a monthly payment plan that included principal and interest payment.

Nathan Turner: And again, we thought we’d invented seller finance. So it was in the in the time where we had created some of these notes and I was looking for, okay, so what’s our back end like? We I don’t know that we want to hang on to these long terms. So surely, you know, you can sell a turnkey rental. So to me this is even better. We don’t even have to take care of the property. So, doing some internet research, I went and took a class down in Houston. In fact, uh, where it was all about this guy that was teaching about, uh, buying the kind of notes that I was creating. So I thought, oh, this is perfect. What a great fit. And then in the course of that, um, class, he said, well, there’s a conference coming up in fall of 2009, in New Orleans. You should come and check that out. And I go into this room and there’s like 200 investors in there that have been doing this for 30 years. And I’m like, this, this is a thing. People do this. No way. And so to me, that was it. Like I was hooked right away.

Speaker4: Yeah. That was really the introduction.

Nathan Turner: Right place, right time.

Trisha Stetzel: Yeah, I love that. Uh, maybe you should come to Texas and buy the billion dollar lottery ticket, and I’ll. I’ll be your best friend. I’m kidding.

Speaker4: There you go.

Trisha Stetzel: Right place at the right time.

Speaker4: Yeah.

Trisha Stetzel: Um, okay, I’ve got one more question for you as we wrap up, Nathan. Looking ahead. Um, what do you see as the future of node investing? And how do you think it’s going to open up new opportunities for everyday investors who have maybe never considered it, like you so many years ago?

Nathan Turner: Yeah, that’s a great question because, um, I think partially, you know, to understand the future, we got to look at the past. So as I was getting into this business, I thought, so how long is this going to last? You know, what’s the opportunity here is kind of trying to plan for the future, to see exactly this, you know, how long could I do this? And, uh, in the middle of doing that, I’m like, okay, well, these guys have been doing it for 30 years, you know, since the 80s. Whatever has been around longer than that. And then it was watching a movie with my wife about somebody in the 1800s where this guy had bought this woman’s debts, and he was kind of holding it over her. And now I own your debts. And I was like, wait, wait, that’s what I do. I buy other people’s debts. I’m like, okay, so it’s been around at least that long. And then later we’re, you know, in Sunday school and church and and talking about buying debts in the Bible, I’m like, wait a second. So it’s been around really pretty much forever. Uh, going forward, I think that seller finance is going to be I think it’s going to become more and more common.

Nathan Turner: Uh, dealing with banks is increasingly more difficult. And there’s a better way that within reason, of course, like we we have to set up these loans that are ethical and proper. We never want to be taking advantage of anybody. Um, but there are many situations where banks really don’t know how to deal with somebody who’s self-employed, for example. Um, and we’re seeing a rise in that, and people are starting to work for themselves more. Well, if banks can’t figure that out, that’s where we come in. And then we’ve got these seller finance, uh, type of offers that we can come up with. And then that creates a secondary market where somebody says, well, I’ve created this note now I’d like to cash out of it. So they come in, contact somebody like me. I think that that’s going to be a bigger portion of what we’re buying going forward. Uh, barring something happening in the world that that creates another opportunity. But there’s always going to be something out there for sure.

Trisha Stetzel: Yeah, absolutely. Well, this has been so much fun, Nathan. I learned something that I had no idea. I’m so glad that we, uh, had the opportunity to have this conversation today and appreciate you sharing so much information about the secret society. There might be people who are interested in joining. I’m just saying.

Speaker4: Absolutely, absolutely.

Trisha Stetzel: Nathan, one more time. Share your contact information with the audience, please.

Nathan Turner: Yeah. So the website is Ernest Investing.com. Uh, and that’s e n e s t, and, uh, that’s the place to go for whatever you want to learn some more about it. If you want to connect to the Diversified Mortgage Expo or if you wanted to set an appointment and come and talk to me, and I’m happy to chat and just see what we can do together.

Trisha Stetzel: I love that, or by or by Nathan’s book or by.

Speaker4: Or find the book there too. Yeah.

Trisha Stetzel: I love this. Well, thank you so much. I appreciate your time today, Nathan.

Speaker4: Thank you.

Trisha Stetzel: That’s all the time we have for today. If you found value in this conversation I had with Nathan today, share it with a fellow entrepreneur, veteran or a Houston leader ready to grow. Be sure to follow, rate, and review the show. It helps us reach more bold business minds just like yours and your business. Your leadership and your legacy are built one intentional step at a time. So stay inspired, stay focused, and keep building the business and the life you deserve.