Show Notes

In this segment of HyperFast Wealth, host Dan Lesniak speaks with the founder of Automation Finance, Paul Birkett. Paul has bought thousands of mortgages and has created a way for everyone to benefit from his strategies!

Episode Highlights: 

  • Paul is taking advantage of the remote working opportunities and staying a few weeks in Dublin.
  • After spending 25 years as a corporate executive, Paul arrived in the US just after the economic crisis of 2008.
  • With about 30 rental homes, Paul became incredibly unhappy because of all the admin work.
  • Unlike Europe, the US allows businesses outside of banks to buy mortgage notes.
  • The mortgage business requires a lot less admin work than buying a large number of real estate properties.
  • Roughly 50% of rental property owners only own one property and pay it off on a 30-year mortgage.
  • Paul’s company has created a fund that allows investors to liquidate in a few months with interest.
  • By purchasing mortgages for much less than the borrower owes on the loan, Paul’s company is able to make large dividends.
  • After purchasing the mortgage, Paul negotiates new monthly payments and interest rates so that the homeowner does not have to foreclose.
  • Non-performing loans usually come to the market about 2-3 months after some sort of financial crisis.
  • Over time, Paul has built up personal relationships in the industry and now has clients reach out to him for deals.
  • Due to the global pandemic, many rental property owners are having a hard time making their mortgage payments.
  • With a normal rate of foreclosure in the 1-2% range, the current range of 7-8% is quite concerning.
  • Many large cities, and ones that depend on tourism, are going to take the biggest hit from the pandemic.
  • Washington D.C. has seen a buffer from the effects of the pandemic because of the large number of federal government jobs.
  • There will be opportunities in every area of real estate as a result of COVID’s effects on the income of renters and owners alike.
  • Those that find themselves in the bottom 20% of the economy will be forced to restructure their mortgages.
  • Eventually, the struggles of the bottom 20% will catch up to those that are surging right now.
  • Keep an eye out for deals because there will inevitably be distressed salaries around the country.
  • Even though businesses are closed across the country, real estate prices continue to rise.
  • As the federal government continues to pump money into the economy, the value of the dollar will go down.
  • If the government did nothing, we would experience The Great Depression all over again.
  • Now is a great time to refinance for those with mortgages because of the all-time low rates.
  • It’s not the time to be aggressively buying assets because we can’t be sure of what lies around the corner.
  • Paul’s company was not able to keep up with the number of assets that it was purchasing.
  • Optimism can get you into a lot of trouble when trying to scale your real estate business.

3 Key Points:

  1. One of the downsides of buying a large number of real estate properties is the massive amount of admin work that comes with it.
  2. Right now, there are over 2M home loans in forbearance because of the income troubles caused by COVID.
  3. The lower-income consumers generate the revenue for the higher income jobs, so you can expect that the effects of COVID will catch up to those higher-paid consumers.

Tweetable Quotes:

  • “For 10 people to manage $200M in rental properties would be next to impossible. But with mortgages, what you’re managing is really the borrower and the payment stream.” - Paul Birkett
  • “The bank wants to make sure they are selling to someone who is treating their borrowers well.” - Paul Birkett
  • “The problem is going to be the bottom 20% of the economy...This will be the straw that pushes them into non-performing on their mortgage.” - Paul Birkett
  • “The key thing is to make sure that you are supporting your current tenant...It will get harder to keep good tenants.” - Paul Birkett
  • “It’s a thankless task to try and be in the fed and the treasury right now because there’s very little demand in the economy and anything they do seems to make the rich richer.” - Paul Birkett
  • “Learn everything you can possibly learn before you spend a dollar on real estate.” - Paul Birkett

Resources Mentioned: