Introduction

Welcome to The Gold Collar Investor Podcast with your host, Pancham Gupta. This podcast is dedicated to helping high-paid professionals to break out of Wall Street investments and create multiple income streams. Here is your host, Pancham Gupta.

Hi, this is Joe Fairless. If you wanna diversify out of Wall Street investments, then listen to The Gold Collar Investor Podcast.

Hey, this is Mauricio Rauld, founder and CEO of Premier Law Group and if you are serious about investing in real estate, listen to The Gold Collar Investor podcast with Pancham Gupta.

Robert: Hi, there. I’m Robert Helms, host of The Real Estate Guys Radio Program and if you want to have better results in your life, you gotta put better ideas in your mind. You’re in the right place here at The Gold Collar Investor Podcast.

Pancham: Welcome to The Gold Collar Investor Podcast. This is your host, Pancham. Thanks for tuning in today. Now, I want to remind you that we have this Gold Collar Investor Club where we are doing some great deals. We’re putting together investment opportunities for accredited investors, and if you’re an accredited investor and you’re not part of the Gold Collar Investor Club, I don’t want you to miss out on these opportunities. Make sure you sign up on thegoldcollarinvestor.com/club and we will schedule — I will schedule a 30-minute conversation to go over your investing goals. Now, let’s get into today’s show.

Have you ever had a feeling where everything is going great for you but you’re not content? You are making a high salary, have a big house and a nice car. You stay in nice hotels and fly business class. You have accumulated so many frequent flying miles and hotel nights that you use those for your personal trips and get luxurious upgrades. Life is good. In the eyes of your family and friends, you have made it. However, you know deep inside that you are not happy. You do not know what is not right or what needs to be fixed, but something is missing. Maybe you wanted to become a writer when you were young but someone told you that writing doesn’t make much money. Maybe you wanted to direct movies. I have a friend, really good friend, who is an engineer but wants to be a movie director. He’s now getting into it and I’m really, really happy for him. You are shackled to something called golden handcuffs. This high salary has afforded you a great lifestyle but it’s hard to turn back. You do not even feel like talking about this with your family because you know they are going to outright reject this idea of you doing something else and leaving what you have got going. How do you get out of this feeling? Well, my guest today on The Gold Collar Investor Podcast has been through this exact same journey. It took him 20 years to get out of this feeling. My guest’s name is Paul Birkett. Paul Birkett is the founder of Automation Finance, where they buy distressed debt at a discount, work with the borrower to get them back on track, and pay investors up to 8 percent in return. Within 6 years, they have saved more than 2,000 families from foreclosure and, as CEO, Paul oversees Automation Finance’s management of $200 million worth of distressed mortgages. Previously, Paul spent 18 years at Pepsi-Cola company where he served as vice-president and general manager for the $3 billion non-carbonated beverage portfolio and the New York market unit. They recently raised seed around as well of $50 million.

Paul, welcome to the show.

Paul: Pancham, thank you so much for having me.

Pancham: No, thank you for your time here. You know, so glad to have you on the show. I know you’re coming in from Dublin, Ireland, here and, you know, in the middle of pandemic. So, before we get going, are you ready to fire up my listeners break out of Wall Street investments?

Paul: I’m going to show them how to do what I did. So, yes, I am.

Pancham: Great, can’t wait to get into that. So, you know, give us a quick overview about your background and, you know, more importantly, the person behind that background.

Paul: Well, so I run a business called Automation Finance. We are a crowdfunding real estate investment business. So, we buy mortgages — actually, rather than real estate, we buy the mortgage, and the mortgage typically is behind on payments and our job is to work with the borrower to get the borrower caught up and we can do things that banks cannot do for regulatory reasons and also for lots of other reasons that we can get into in the discussion and we pay our investors 8 percent, preferred return of 8 percent and that comes from the mortgage payments. We’re buying these loans for about 60 cents on the dollar. And so, if I was to say to you, “Hey, let’s buy real estate for 60 cents on the dollar,” you’d say, “Well, that sounds too good to be true.” But the mortgage business, you can do that every day and we’ll talk about how we do that. And this was a business I got into. I have no business being in this business. This is my second job. I wasn’t educated in the United States. In fact, I didn’t come to live in the US until 2010, and at that time, I was an executive at the Pepsi-Cola company and I started buying single-family homes to rent which I rented and some of your investors, your listeners rather, will be investors in rental properties. And I got up to 72 doors and that’s a full-time job. I thought it was passive income. It’s not passive at all. That’s a full-time job.

Pancham: Yeah. I actually had a similar experience when I was working full time. I did the exact same thing, you know, had properties, five different states, same thing, same experience. Go ahead, sorry to cut you off.

Paul: So Friday nights, I would hop on a plane to either go to southern Florida or Phoenix or Los Angeles or Las Vegas to meet with brokers and do all of the real estate stuff, thinking that next month, it will become passive because this is the busy month. Next month will be fine. But next month never comes. And so I was buying a short sale, which is where the bank sells a property for less than the borrower owes on that property so the bank takes a loss, and a short sale became a loan sale. So I ended up buying the mortgage. Now, Pancham, that blew my mind, because where you’re from, where I’m from, only a bank can own a mortgage. A private individual cannot have a mortgage, that just seems so crazy to me. And so I researched it very thoroughly and found that with minimal licensing, an ordinary person, so long as they know what they’re doing, can buy a mortgage or can even write a mortgage or certainly they could in 2010, 2011. They can’t do it so easily now but they could then. And so I thought, wow. Well, if I compare it to my real estate investing, what happens when the toilet breaks? They call me. What happens when the tenant moves out? They call me. What happens when a tree falls on the house or a house goes on fire? They call me. The answer to every question is “They call me.” When you own the mortgage, they don’t call the bank. When the toilet breaks, they fix their own toilet. When a tree falls on their house, they call their insurer and they get the house fixed, and on and on. And so I thought, wow, this mortgage thing is much more scalable than the single-family home rental business. And so, 7 years later, we now have about 2,500 mortgages with just a team of six people. It’s about $250 million of face value. And we bought those loans at 60 cents on the dollar, or less in some cases, and just last year, we started to crowdfund. All our funding had come from Wall Street so we’re paying Wall Street rates to Wall Street investment banks and so on and that’s fine. But there was no opportunity for just the regular investor. So, we’re regular guys, there’s nothing special about us. We just built a lot of systems and a lot of expertise over the 7 or 8 years but now we can make that available to everybody. So they can invest with us right alongside us and we do all of the work. And since we’ve started, we’ve made about 16 percent a year and now we split that with the investor. About half goes to the investor and we keep the other half to run the business. And that’s it. That’s the short answer.

Pancham: Amazing background there. I have so many questions there and I relate to some of that so much that when you said you had 72 doors and you thought it was passive and you were flying after Friday, you know, to these places, like Florida, Phoenix, Vegas, and, you know, thinking that, “Oh, next month, it’s gonna be passive,” I can tell you from my own experience, it’s never passive, because you call me, right? Like the tenants —

Paul: Never.

Pancham: — tell you, even if you have a property manager, it’s the same thing, right? So, it becomes a job, you know, outside of a job. So, question there, right, like, yeah, you were doing all of this while you were working at this amazing career, corporate life, you were running Pepsi-Cola’s, you know, one of the biggest non-carbonated drinks unit, right? And, you know, you escaped the corporate life and now you’re an entrepreneur. Tell our listeners like why it took you 20 years of talking about being an entrepreneur before you actually pulled the plug.

Paul: Well, thank you, uncle, because that is a question I asked myself so many, many times. So I left college — when I was a kid in college, just in school in college, I was the guy who had the paper round. I was the guy who cleaned cars. I was the guy who mowed lawns. I was the guy — I started off in the cell phone business back when cell phones was like, “What? A phone that doesn’t attach to the wall?” Like this was a long time ago and so at college I actually had two cell phone stores here in Dublin. I’m actually in Dublin right now. I’m overseeing my family just before Thanksgiving, and so that was my “I was going to be a business guy” and then I got a call, I was also running the college charity when I was at school, and I got a call from Procter & Gamble, one of the finest companies in the world, and they invited me on this recruitment weekend in London. I thought, “Hey, a weekend in London, nice. I’ll go on that because it’ll be like a vacation.” Now, I never worked as hard in my life as I did on that weekend. Basically, they put you through your paces, the recruitment, kind of a giant test case study. And it was just amazing. It blew my mind. So cut a long story short, I joined Procter & Gamble for 4 years just to learn, get a bit more experience. Then after 4 years, my old boss from Procter & Gamble called me and said, “Hey, Paul, come join me at Pepsi. I’m the head of sales, you can be the marketing guy. And, you know, you’ve got to interview and all that, but, you know, it’d be great if you’d come and join.” So I joined Pepsi and I tripled my salary from Procter & Gamble to Pepsi. So now I was like, “Whoa, I’m loaded.” Now, this was 20 years ago, more than 20 years ago. So I go in and I start working at Pepsi. And after 2 years, I get promoted. Well, I’m fantastic. Then I get promoted again. Wow. Fantastic. Wow, next up, I could be a vice-president. If I keep working, I’d be vice-president. Guess what, 16 years, 17 years goes by, and after about 10 years, I’m saying to myself, “Why am I doing this?” Yes, I get paid a lot. I was very well paid. I wasn’t like the CEO or anything like that, but I was upper middle management and I was doing okay and the stock options were good and the bonuses were good and the salary was good and I was single and I bought 72 doors that were rented out. I had a lot of cash coming in, and, no, you know, real draws on my money that I needed to think about. And my dad said to me, about 10 years ago, “But, Paul, you must love it. It’s so exciting, Beyoncé, the Super Bowl,” because I’d worked on all of these things. I thought, “Dad, last year is just like the year before, it’s just like next year, it’s just like the year after.” Now, Pepsi’s a spectacular company and I had great times there, I learned a lot. But at the end of the day, you are either an entrepreneur or you are not, and I was an entrepreneur who was also a coward. Because just like when you get up on that diving board for the first time at 14 years of age and it doesn’t look too high from the ground but when you get up on the platform and you look down, you go, “Whoa, that’s a long way down.” And now, I’ve got tons of money coming in, I’ve got a fancy apartment in New York, I fly all around the US on the company plane, I can do more or less whatever I want, I can just ride this out into retirement. But really, it was really not for me. There’s no way to step off that diving board in a careful, you know, step-by-step manner. You either get off or you stay on the diving board. And at some point, I had to just go. And I thought, okay, I’m going to do it. And what I actually did was I didn’t tell anybody because I knew my friends and everyone will go crazy. Because it makes no sense. Why would you give up all of this position and power and money to go and do this business? And tell me about the business again, the mortgage business? What do you know about the mortgage business? Nothing. And what are these borrowers? Oh, they don’t pay? You’re buying mortgages where the borrower doesn’t pay? Have you hit your head? Is there something wrong with you? Are you crazy? And so I just did it quietly and quietly, after about a year, told people, you know, what I was doing. And even then they still went crazy. But at least then I was able to point at some green shoots of success. I spent 10 years too long in corporate life. And I’m sure you have many, many listeners who are driving their car, out for a run, whatever they’re doing right now, listening to this, going, “Yeah, you know what, I really wish I could do an entrepreneurial thing but I have this reason and next year the kids go to college and, and, and…” There’s always an “and, and, and,” but at some point, you need to do it.

Pancham: Right. As they say, you know, someday is not in the week. It’s Monday, Tuesday, Wednesday, someday is not a day. So, you’re telling me that getting free Super Bowl tickets was not for you?

Paul: No, correct.

Pancham: I’m just kidding —

Paul: I went to three Super Bowls in a row and, in fact, I was the organizer of the New York Super Bowl. So I was the one who was — I was the Pepsi — I was asked to come on to the Super Bowl team to arrange that whole thing. It was interesting to say the least because those people who remember it, we had a lot of snow that year. It was a really, really, really cold year that year, but quite good fun.

Pancham: Yeah, I wish I had known you then. Maybe I would have gotten a Super Bowl ticket. So, you know, I totally get what you’re saying because I went through a very similar path and it’s not easy. So tell me about the mindset, the day you quit, right?

Paul: Yeah.

Pancham: Or maybe week leading up to that day when you’re quitting, right, like what was going through your mindset that now you have this, you know, this amazing job, amazing, you know, career and all that and money coming in from all over the place. What was going through your head? Like how did you convince yourself, the mindset, and I know, you know, even my family was against me quitting, like how did you convince yourself?

Paul: I was terrified but I said — the one thing I came back to all the time, “If not now, when?” I was 42 when I did it. Forty-two is pretty late, so am I going to wait for 43 or 45 and have another few years where I’m — you spend a lot of time working and — it was just that working for someone else was just not for me. And so I’d been, you know, putting this off for a long, long time. And once I went in and had the meeting and all that, the calmness just came because I knew — I’d never been happier than walking out that day with my cardboard box just like in the movies, you know, the box, you put your stuff in it, and I just walked out and got my car and drove back to the city and I met one of my colleagues, it was about 2:30 in the afternoon, I met one of my colleagues in a bar, we were the only two people in the bar and I think this is just great. This is probably the best day of my life. I’m sitting in an empty, dingy bar in Manhattan with someone from work having a beer at 2:30 in the afternoon.

Pancham: Wow, that’s quite a story there. So, all right, thank you for sharing all of that. Let’s switch gears and talk about your amazing business that you have. You buy, what? The mortgages? And, you know, from people who actually don’t pay? So, you know, explain a little bit like, you know, what does that mean? Like a listener who’s listening who doesn’t know, like, you know, what does that distressed note look like and how do you actually identify one and go out and buy it?

Paul: Right. So, this is an opaque business. You can’t go to Walmart and say, “Could you point me to the distressed debt please?” You can’t call up Chase and say, “Hey, Chase, I’m looking for distressed mortgages.” It just doesn’t work like that. This is a relationships business. And I built up relationships over the last 8 years by going to all the conferences and by cold calling 5,000 banks every quarter. And that’s what we do, we call the banks and we call the banks and we say, “Hey, listen, bank, you may have some loans that are behind. Would you be interested in selling them?” Now, the reason the bank will sell them is because — we won’t get into the accounting rules right now, but the accounting rules for a mortgage where the borrower is not paying, the bank has to make a full provision for all of that mortgage. So, even though the borrower may only be behind five or six payments, they have to write the value of that mortgage down. So it’s very, very bad for the bank. What the bank may choose to do is to sell that loan at a discount, and the bank is taking a loss, there’s no doubt about that, but they get the loan off their books. That’s one benefit. The second benefit is if you think, if each of your listeners thinks of their bank that they bank with, they open the newspaper and see, “Oh, XYZ Bank is foreclosing on some family and putting them out on the street,” that’s very bad news. That’s bad PR for the bank. So, the bank would rather not see that. They’d rather just get rid of it. And they sell it to someone like us. We can do something the bank can’t do. If you call your bank and say, “Hey, listen, I’m out of work for a couple of months. I want to not pay my mortgage for three months,” and the bank says, “Yeah, sure, no problem, Pancham. You just get back to us whenever you want,” you tell all your friends and guess what happens? Everyone stops paying.

Pancham: Yeah.

Paul: So they can’t take that risk so they sell the loan. And no one has ever heard of Automation Finance except you and me so it’s not like we’ve got millions and millions and millions of mortgages across the country and we’re worried about people stopping paying. So we call up the borrower and say, “Hey, understand you lost your job. Understand you’ve missed five or ten or whatever mortgage payments. But have you got a new job now? Yes, you have. But you can’t catch up on all those missed payments because you have no job. So how could you catch up on the missed payments? You don’t have any money.” So we will either forgive those payments or add them to the back of the loan or whatever. There’s a whole host of different things that we can do that gets the borrower’s payment down to about 75 percent of what the rent would be for that house. Because if I foreclose, which I could do, take the house, and then put it on one of those TV shows, you know —

Pancham: Yeah.

Paul: — if I was to go in and do that, I could do that and make a quick profit. The person who gets foreclosed is now homeless. They’ve got to rent a house. They’re going to rent a house in the same neighborhood probably because they’ve now got a job in that area. And so, what? How is society served? It’s not. Just a fix and flip guy made some money. Well, that’s fine, I have no problem with that, but that’s not a sustainable business for me. What’s a sustainable business for me is to keep Mr. and Mrs. Smith in their home, reduce their payment, and put them in a position where they can easily pay me every single month. They pay me and I use that money to pay our investors. And that’s what we’ve been doing for the last — well, we’ve been doing that for 8 years but we just started the crowdfund last year so we’re just really growing that out now.

Pancham: Great. Well, that’s one of the most simple and amazing explanation I’ve heard on distressed notes and thank you for sharing that. So, let’s talk about the classification of these notes. Do you like, you know, I’m into multifamily buildings —

Paul: Yeah.

Pancham: — we have something called, you know, class A, class B, class C, this is not set in stone, it’s a little subjective depending on who you ask, but, for you, like in the notes business, do you have something like this? Like, “Oh, this is a —

Paul: Yes.

Pancham: — you know, great note or whatever classification.” Yeah.

Paul: So our competitive advantage is in the class B, class C area. The difference between notes and real estate is the papers, papers, paper. So, the paper is written against an asset. If you’re buying class A, non-performing multifamily, you’re competing with Goldman Sachs to buy that paper. If you were buying B and C, Goldman Sachs are probably not interested in buying that paper because their cost of management is too high. As soon as you hear Goldman Sachs, everyone adds 20 percent to the cost of the new toilet or whatever. So, in the mortgage business, we have law firms in 50 states, we do business on a daily basis with about 150 law firms. We have competitive rates with those law firms, because I make it sound very easy. It’s not like we call up the borrower and they go, “Thanks so much, I can’t wait to send you money.” We’ve got to send them a legal letter. We often start foreclosure to show that we’re real and there’s a lot more work to be done. Our competitive advantage is in those lower priced assets. Homes that are valued between $75,000 and $150,000. Now, you’re in New York, $150,000 won’t buy you a shack for $150,000, but in the Midwest, $100,000 or $150,000 will buy you a three-bedroom, two-bathroom house in a good school district, a bike ride from town where you could get a job. I mean, it’s very different across the country. We tend to go not — we’re not buying stuff in Manhattan on Central Park. We’re buying stuff in Ohio, all the way to the Sunbelt, out to the West Coast. We buy in every stage. We’ve even got a couple of super-duper houses in Hawaii, which one day I’d like to go and visit but I haven’t seen them yet. But we buy everywhere. And we specialize in the lower value stuff. Because our costs are cheaper, we can get stuff done much more quickly and that’s where we spend most of our time.

Pancham: Got it, got it. Okay. So, there is really no industry standard though? Like when you say class B and C, you’re basically saying that that’s a terminology you’re using based on how much like the underlying asset is worth, $75, $250,000 a door, right?

Paul: Yeah, yeah.

Pancham: That’s how you came up with that? Okay. All right. Sounds good. Let’s talk about, switch gears here, like, you know, you’ve been talking about impending mortgage crisis, and especially with this pandemic, you know, people got hurt, they lost jobs, we have number of people getting furloughed and eventually losing their jobs. That is definitely going to have an impact. So, tell us about that. Like, you know, what’s your take on this?

Paul: So, we see a K-shaped recovery. If you think — we’re up to 35 million people who claimed unemployment. Most of those people worked in travel, in leisure, in hospitality businesses. Those businesses are not open. They’re still not open and those that are open are — a lot of them are closing again it seems, as the numbers spike day after day after day. Most of those people are renters. So those people are not paying rent. They’re not home owners typically, especially not bar staff, those type of people, hourly paid workers. It’s going to be very tough for them. Remember this, 50 percent of all the landlords across the country only own one property. So, the lack of rent paid by the single-family home will be subvented by the owner of the house. They’ll be able to come out of pocket for a month or 2 or 3, but after 6 or 9 or 12 months, that’s going to be a big problem. So, the people who are renters are going to have a very tough time getting back. You’ll also see the latest CoreLogic numbers come out for September just a week or two ago, and year to date, real estate prices for single-family homes are up 6.4 percent. How can you have a global pandemic and real estate prices go up when there’s 30 million people unemployed? Well, the devil, as always, is in the detail. The people who are still employed are doing just fine because they work from home or they’re in the legal profession or they’re accountants or whatever. They’re not involved in retail and customer facing activity, and business is going fine for them. They all have mortgages that are underwritten by Fannie or Freddie and they have a 12-month moratorium on foreclosure. So they don’t need to make a mortgage payment until next March at the earliest. Those people will all be fine, that’s 80 percent of the market. But the other 20 percent of the market are the people who own the restaurants, the people who own the bowling alleys, the people who own multiple Airbnbs that they rent out as a business. Those people don’t have government-sponsored mortgages through Fannie and Freddie. They’ve got non-conforming mortgages and they are not able to enjoy the same forbearance plans that the government-sponsored mortgages will have. So what we will see in the next 3, 6, 9 months, because the mortgage industry is not like the stock market, it just doesn’t zip around up and down every day, it takes a lot longer to roll over, those mortgages will not be repaid and those mortgages will go into delinquency. Right now, there are about 3 million of those mortgages. In a normal year, there would be about 1 million. And that 3 million is going up a little bit more each day. As the economy continues to struggle, that’s going to be a problem. And so hundreds of thousands or maybe millions of mortgages will come to the market and that will be a big opportunity for us to work with your listeners to buy those mortgages and modify them. Because, long term, everything will be fine, in the long run, in a year or 2 or maybe 3. But for the next 6 to 12 months, I think it’s going to be very, very tough.

Pancham: Got it, got it. I would agree with that and, you know, definitely, you have a long road ahead of you and a lot of opportunity for Automation Finance, for sure. So, that’s great. I think I have one last question for you before I move on to the next section of the show and this question I have been asking recently from every single person and the question is this: Do you have a morning routine that you follow? And if so, do you think that attributes to your success?

Paul: I do. I have two routines, a night routine and a morning routine. The night routine, I try my best to do but I don’t always succeed, and that is I try to go to bed at night with inbox zero. I try to manage everything before I go to bed because I sleep much better knowing that there’s nothing festering in my inbox. So that’s what I do. Then in the morning, I never look at my e-mail until about 9:30. I get up, I exercise, I have breakfast, and then I come back and look at the email. So I get a long break overnight and first thing in the morning. And there’s nothing worse than looking at your e-mail first thing and then stopping and going to have breakfast, because you’re not really having your breakfast, you’re going, “Oh, I didn’t do that thing that he said.” So I just think that’s a much better way to do it. It’s the simple things that you can do constantly, I think are very helpful.

Pancham: Great. Great. That’s a great tip there. I don’t think I would ever be able to implement that inbox zero at night. All right, thank you for sharing that. So, we’ll be back after this message.

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If you are an accredited investor and have been thinking about putting your money to work for you, then I have good news for you. I have created an investor club which I call the Gold Collar Investor Club. I will be putting together investing opportunities exclusively for the group. These are opportunities where I have done the due diligence for you and will be investing my own money alongside you. If you are interested, please sign up on thegoldcollarinvestor.com/club. I will reach out to schedule a 30-minute phone conversation to discuss your investing goals once you sign up. This can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some passive income. And in case you are wondering what is an accredited investor, accredited investor is someone who has earned more than $200,000 as filing single or more than $300,000 filing jointly for the last 2 years. Another way to qualify as an accredited investor is if your total net worth is more than $1 million, excluding your personal home. It includes your stocks, 401(k)s, IRAs, cars, etc., just not the equity in your personal home. If this is you, I would highly encourage you to sign up.

Pancham: So, Paul, this is the second section of the show which I call Taking the Leap Round. I ask these four questions to every single guest on the show. My first question for you is when was the first time you invested outside of Wall Street?

Paul: I saw a retail store for sale in a foreclosure auction in Ireland when I was 17 or 18 years of age and I got a bunch of friends together and we ended up buying it. It was a disaster. It ended up being a disaster because the guy we rented the store to didn’t pay, but that was the first time. I knew from a very young age that Wall Street was not going to be where I would make money. It’s fine if you work there, but if you don’t work there, I’m not sure it’s the best place to put your money.

Pancham: Great. My second question for you is what fears did you have to overcome when you bought that retail store? I’m sure you were, you know, 17, maybe you didn’t have any fears.

Paul: Yeah. Well, I thought — we thought we knew what we were doing. We trusted the agents that we spoke to. You always have to understand what are people’s incentives and I assumed that people who I was paying were there to help me, but they weren’t. They were there to help themselves, and if they helped me as a side outcome, that was fine. And we didn’t lose any money but it was very difficult. Just the four of us working on it was very, very difficult, very embarrassing.

Pancham: Well, you do and you learn, right?

Paul: Yeah.

Pancham: Yeah.

Paul: I wish I still owned it today. Today, it’s worth a million dollars or more, but that’s life.

Pancham: Yeah, that’s life, right? So my third question for you is can you share with us one investment that did not go as expected? Would it be that one or some — like let me guess —

Paul: No, but, I mean, people have said to me, “How’d you learn? I said I learn by mistakes. And in the mortgage business, I’ve made every single mistake that you can make and, therefore, I now know how not to make those mistakes again. But one of the things that we did at the very beginning was I bought one loan and it went well, then I bought 10 loans and that went extremely well, then I bought almost 1,000 loans at once. And that was a disaster, because 1 is to 10 is not the same as 10 is to 1,000. And so we were overwhelmed and even when the boxes came, it was 50 or 60 giant boxes full of paper. We couldn’t cope. We had no systems to manage that. And we lost about 18 months of return because we were just working through box after box after box of paper and this is not easy to do when you don’t have systems. Now we can do it without a problem, but back then, it was really, really tough. And that was — if you’ve a business plan that says you’re going to start generating cash after 6 months and it takes you 15 or 16 months to generate cash, you run very low on cash very quickly. My costs were way higher, just like buying a multifamily. Your costs are way higher and it takes longer to get the cash flow. So that’s exactly what happened to us.

Pancham: Got it, got it. Okay.

Paul: It worked out great in the end, I have to say, but there were some 100-hour weeks for several months in the beginning.

Pancham: And sleepless nights, I’m sure.

Paul: Yeah. Yeah.

Pancham: Yeah. So, my last question for you, Paul, is what is one piece of advice you would give to people who are thinking of investing in Main Street that is outside of Wall Street?

Paul: I would think that everyone owes it to their own financial future to invest outside of Wall Street. Wall Street is fine but you’ve got to understand the incentives. If you take the average pension, for example, the 1 percent management fee across 30 years is 30 percent. You’re only getting 70 percent of the return from your own pension. You’re much better served by finding assets that you want to invest in that you can understand and doing that for your own future.

Pancham: Great advice there. Well, thank you, Paul, for sharing all that wisdom and knowledge and the impending mortgage crisis that’s coming and your background and how you were able to escape the corporate world, the Super Bowl tickets, and the corporate plane rides and all that. And, you know, how can listeners connect with you? I know you’ve put together a great report on, you know, real estate mortgage market and can you talk about that report a little bit? And then how — we can talk about how they can get that.

Paul: Yeah. So, every month for our investors, whether you’re an investor or you’re not an investor, in our crowdfund, I do an update and I publish it on LinkedIn. It’s a video, it’s about 10 minutes long, and I also share the charts. So I spend my time digging through the charts to see what’s happening in the markets, what’s happening with the mortgage market. Most of this data is not publicly available. It’s stuff that I can get because we subscribe to services or I know a lot of the people in the industry and they’ll give me information. So, I do that every month. You can always find information on us at automationfinance.com or on the SEC website. If people are thinking of investing to get the target return of 8 percent, they should read the prospectus. Remember, this is — any investing is a risk-bearing exercise, there’s no risk-free way to invest. So, if people want to do that, if people want to invest, that’s great. And if people would like to subscribe to the monthly updates, I’m happy to share that with people too.

Pancham: Yeah, sure. So I think we put together a special handle for you which is called PepsiPaul, right? Which is how everyone calls you. PepsiPaul@thegoldcollarinvestor.com. So if you e-mail that e-mail address, they can get the report and, you know, they can also get subscribed to your newsletter. Thank you, Paul, here for your knowledge. I really appreciate your time.

Paul: Thanks, Pancham. It was great being on with you.

Pancham: Thank you. I hope that you really enjoyed my show with Paul today, you know, and got to learn from his entrepreneurial journey. You know, it’s very hard. I could really relate to him based on how what he felt when he was working at Pepsi and how he went into the entrepreneurial journey and got into this very, you know, specific niche within real estate. It’s not easy to get into this and it’s very, very hard but once you know how to do it, it can be really profitable. So, as usual, thank you for listening. I really appreciate you. If you have questions email me at p@thegoldcollarinvestor.com. This is Pancham, signing off. Until next time. Take care.

Thank you for listening to The Gold Collar Investor Podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollarinvestor.com and follow us on Facebook at The Gold Collar Investor. The information on this podcast are opinions. As always, please consult your own financial team before investing.