[00:00:00] Lorraine Millington You’re now receiving payments from the borrower as if you are the Chase, or Wells Fargo or the Bank of America in this transaction. And how it works as being passive is because I’m not responsible for the day-to-day aspects of that property. When someone goes to purchase or someone takes out a loan or takes out a mortgage to purchase a property, they’re not calling the bank and saying, hey, I have a leak in my roof. Oh, hey, the toilet is stopped up, or hey, the trash is on, no, you’re taking care of that yourself because you own that property.

[00:01:01] Nicole Pendergrass   Hi, everyone, welcome back to another episode. Today, I’m actually really excited to bring to you Lorraine Millington. Now, you know that I am focused on exposing you guys to alternative strategies for building wealth. And in that Lorraine is like the perfect example of something that is really alternative, because I know you’ve heard about being the bank, you know, is the best to be the bank in the financial transaction. But in this case, Lorraine is literally being the bank and showing you how to do that. So we talked about mortgage note investing and how to actually purchase the debt. A lot of tiles we’ve been talking about in the past, had to be on the equity side of things. But there is some potential and upside to be on the debt side. There are a lot of protections there as well. And I think it’s just great to be diversified in your approach. As long as you’re knowledgeable and you’re teaming up with the right people who are knowledgeable, why not do a little bit of debt and equity and have that both in your portfolio? So in any case, Lorraine is a real estate entrepreneur, a mortgage note, investor, tax accountant, and a mindset and performance breakthrough coach. That’s just crazy. She does so much stuff. And I really, as soon as I met her, or I saw her profile online, I knew I needed to have her on the show. And once we talked we really clicked and I said okay, that’s that confirms it for me. You need to come on and share with my listeners everything that you know and what you’re doing. And I love her business name. She is the founder and CEO of Melanin Homes, and Melanin Tax Solutions. So that’s right up my alley. You know, I know I love anything Melanin in the name, right? But Lorraine and her team specialize in passive income strategies through mortgage note investing. And as a tax accountant, her company provides tax, bookkeeping and resolution services to individuals and small business owners. As a mindset and performance breakthrough coach, Lorraine helps people get out of their own way by removing the mental blocks and limiting beliefs that are keeping them stuck in what they are doing and preventing them from moving forward to who they should be being. That’s so good. You guys are really going to love Lorraine once you hear her speak and hear our conversation today. So make sure you stay tuned for the entire episode. There are some opportunities in there and you don’t want to miss it. Welcome, everyone. Hi, welcome back to the Share The Wealth Show. And this is the show where we talk about strategies to grow, protect and build minority wealth. And today we have with us, Lorraine Millington and I’m so excited to bring her to you guys so that you can hear what she has to say. We just met recently but we had a call and after that call was like, oh my God, I wish this whole thing was recorded. Because it was just phenomenal. Everything that we were talking about and her mindset is out of this world what she’s doing is so different. Not a lot of people are doing that. And I think she’ll be able to bring some insights, gems and actionable steps to you guys that you can really use to build wealth in a way that still is real estate related but it’s a little bit off the beaten path of what most people are doing and we’ll give some ways that you can get started to with that but in any case, Lorraine, welcome thank you for joining us. 

[00:04:43] Lorraine Millington Thank you Nicole so much this is I mean similar to what you mentioned first, absolutely love the name of the show Share The Wealth and it’s so important as we talked about on the call that we had about just giving back but not only in the aspect I’m okay, well, this is what I’m doing, but actually helping to guide people along with what it is that we discovered and the things that we’ve come across. So, so excited to talk to you and your audience here today.

[00:05:10] Nicole Pendergrass

Thank you. So actually, I’m going to give everybody an overview of your background, you sent me your bios, and I’ll be reading that as our preview. But just give us a high level of where you kind of started, what got you to the path of what you’re doing today. And just mainly, like, what, what was transformational in the mindset that made you say, okay, whatever I was doing before, that’s not really working. Let me shift gears, or did you always grow up? Like with this directive, you know, laid out, just kind of lay the groundwork for us?

 [00:05:50] Lorraine Millington

Sure, sure. So I will say this has definitely been a journey, like when they say, you know, wealth is a journey, or life is a journey that is absolutely true. And so how I got here has been a few steps. So I initially started, I have always been around real estate, my family has been within the real estate space for a long time. But a lot of it was more of the traditional aspects. So like, the fixing, and flipping or the the buy and hold, like having rentals, that is what I understood how to how to build upon having assets and having your assets make money for you. That’s what I understood from young. But I also understood that to mean, we’re still trading time for money, right? Like, even if you have, even if you have a rental even if you’re doing fix and flips and the result of those efforts is large, and it’s great, you’re still personally involved, you’re still the one handling the day to day aspects of things, you’re still the one who’s basically a technician, if you will, not necessarily an entrepreneur or CEO. And so once I started to look into other ways that I could get involved with real estate, without me physically being involved in the day-to-day aspects of things. That’s how I got to where I am. And essentially what I’m talking about is being introduced to mortgage note investing. And really the idea behind purchasing or being involved with the debt that is associated with property instead of purchasing or dealing with the property itself. And what the aha for me was in just getting introduced to mortgage and investing is that debt isn’t bad. And I think especially in my culture, or just the culture in general, a lot of times we’re taught if you don’t have the money in the bank, or if you don’t have your savings don’t go in, who don’t go out and take out extra than what you have, don’t go out and take out debt. And when I learned this beautiful word called leverage, and being able to say, Okay, I’m going to, I’m going to take advantage of the fact that I don’t have everything, but it’s the opportunity cost, right? The opportunity cost that it would cost me to sit here and save up money and work all of these different jobs and continue to trade time for money. And the time that I could be spending leveraging so somebody else’s money or OPM as it’s sometimes called to be able to still get in that position, and then build upon that. So I think that that hopefully answers your question about what was the turning point of what was the trigger? It’s understanding that if I sit here and continue to work my job and saving my 401k and compound and make the bank’s interest or make other people money, while I’m trying to see if that’s going to be the hamster wheel growth, right, like, I’m going to continue to be inching along. And as soon as I get close to something, that’s when the game changes and I kind of have to start all over again. So sorry, long-winded answer, but that’s really just the progression of how I got to where I am now.

[00:08:51] Nicole Pendergrass Wow. So no, that’s not a long-winded answer. That was perfect. That was great. So sthen what were you doing in your W-2 before?

[00:08:56] Lorraine Millington Okay, yeah, so I went the college route, I got the bachelor’s I even got my master’s degree. But I also wanted to be in the industry that I was looking to pursue before actually going all the way and so sort of what I’m talking about as law school. So I worked in a legal capacity for a long period of time. And I considered going to law school for a long period of time what I also realized and in college sort of taught me this is that you have to take out of it what you make it right like it’s not like I guess grammar school or high school where you go, you’re given a playbook you complete that playbook. You’re moving on like college, you can really like identify and craft what it is that you wanted to do. And I didn’t necessarily understand that when I first went to college. But I learned that in college and I knew I wasn’t going to jump into another degree and incur more debt, even though I said debt can be good, that might not necessarily be the best debt to get into because that doesn’t all the time make you making money. And so when I’m talking about good debt is debt that is that can be considered an asset versus a liability. And I think we could probably touch upon that a little bit more later on. But so I’ve always worked in more of a legal capacity. And I still do to a degree, especially when dealing with contracts and all of the paper associated with mortgage note investing. But yeah, I’ve worked in legal for a long time, I’ve also been a tax professional, I’m still technically a tax professional as well. So these, these different activities, or these different industries that I have been in has also given me insight into what are some of the wealthier or some of the people who have learned this through it being passed down through generations, what they’ve been able to pass on. And so just tying it back to your show, Share The Wealth, like that’s exactly how it is shared. It’s passed down generationally most of the time. And so it’s really important to put ourselves in those rooms, and also seek out this information. And that’s kind of what I’ve learned from being illegal as well. There’s always something to learn.

[00:11:08] Nicole Pendergrass  Yes. I can’t. Oh, my goodness. You are already preaching.

[00:11:18] Lorraine Millington Bring it on. We want it on.

[00:11:19] Nicole Pendergrass Okay, so just for me to revert a little bit, you also said you were raised in a real estate, family, but more traditional route. So what were your parents doing with real estate?

[00:11:30] Lorraine Millington So my grandmother actually came here from Jamaica. And one of the first things that she did when she came to the States is she bought a small family, small apartment building, right? So that’s what I grew up seeing, I grew up seeing, okay, you have an asset, and this asset is going to it’s going to generate income for you. Now, what I also saw was some of the back and forth, and the headaches that come along with dealing with tenants and being a landlord, and all those sorts of things. And fun fact, for those who are listening, not all landlords are, you know, rolling in the dough or not all landlords are slum Lords that, you know, just collecting rent and not there to actually maintain the property and, you know, provide a decent living for those that are living there. And so in seeing that, and seeing some of the tug and pull and being more of a technician, and when I say that, even when we are in positions of control, right, whether that’s being a manager of a business, whether that’s being the owner of a building, and acting as a landlord, we are still technically physically involved in those in those industries or in those activities. And so to me, it becomes more of an active-passive type of strategy instead of an actual passive where the money is doing the work for you. And so once I really started to see that, like, Okay, I want to be an entrepreneur, I want to work for myself, but I don’t want to give myself those golden handcuffs, either. And when I say golden handcuffs, it’s like you’re giving off the impression or you’re essentially in a position that would seem as though you’re running the show, and you’re doing your own thing, but you’re still handcuffed, you’re still tied to whatever it is that you’re doing. And once you actually have the ability to separate yourself from that business, you can still be in control of it. And so that saying of control everything, own nothing really resonated with me because I want to be able to control whatever it is that I’m doing so that I don’t have to physically be there. But I don’t want to have to own it to the point where I have to be there every single day monitoring and doing everything that it takes to keep it going. And so yeah, that’s what I grew up in. And it’s not to say that that was a bad thing at all I’m so grateful for that experience. I’m just also super grateful to know that there are other ways to accomplish that same thing and build upon the foundation I was already put in place.

[00:13:59] Nicole Pendergrass Nice. Okay, so that’s where I was gonna go was basically so you saw the positives and negatives of owning multifamily real estate and being a landlord and all the issues and managing it. Like even if you have a property manager, you still have to manage the manager and make sure the property is performing and all that, and like that’s the position that I’m in you know, I’m a landlord on multifamily buildings and so I deal with all of that and that it is a headache, but I feel like the value and the benefit outweighs at headache right now, at least for until I can get ultimately to the place where I can step away, right? That’s what this all is for you put in the work in that for now. So that later, you can have that option to step away and have that asset in that portfolio and have the people hiring and people under you who are managing all the day-to-day. And you don’t have to do that you can spend your time doing or you build enough equity and net worth that you can now invest that all completely passively. You know what I mean? So this is that upfront work to get to that point. But if you’ve already found a way where you can pretty much be passive from the beginning, hey, I think we want to know what that is and how to get involved with that. So how about you like just dive in? And let us know, what is mortgage note investing? How can a regular individual person get started with that?

[00:15:28] Lorraine Millington Sure. And what I will also add to what you just said that this is absolutely not a deterrent to get into multifamily investing or actually owning real property because there are so many benefits, especially tax benefits, and leverage benefits in terms of being able to refinance properties, and then throw that into another asset that actually absolutely apply to multifamily investing. And I’m also going to touch upon how it can work in conjunction with mortgage note investing so that you can really like kind of double-edged sword. So a high-level overview of what mortgage note investing is. And so essentially, again, it is purchasing the debt that is associated with property instead of the property itself. So we really resemble the bank and these transactions. And so when we’re thinking about note investing, it can go in one of two directions, it can either be a performing loan, or a non-performing loan. And when we think about a performing loan, think about a scenario where a borrower goes to a financial institution. Similar to that you one of the top ones, I’ll just throw out like the chase is in the Bank of America and the Wells Fargo’s of the world, right? So they go to one of these financial institutions to take out a loan to purchase a property and that is essentially creating a mortgage on that property. We are signing a promissory note to say that we promise to pay back X amount of money that we’re borrowing over a certain duration of time, at a particular interest rate. These are the mucous specifics that are outlined in the note. And so as we’re signing this permissive area, not to say that we promise to satisfy these obligations of the loan, we have the note investor or purchasing that paper. And as long as the borrower is continuing to make their payments on this loan, that is a performing rule. And so you as the investor, if you come in and now purchase this note or purchase this paper, you are now receiving payments from the borrower as if you are the Chase, or the Wells Fargo or the Bank of America in this transaction. And how it works as being passive is because I’m not responsible for the day-to-day aspects of that property. When someone goes to purchase, or someone takes out a loan, or takes out a mortgage to purchase a property. They’re not calling the bank and saying, Hey, I have a leak in my roof, oh, hey, the toilet is stopped up, or hey, the trash is on No, you’re taking care of that yourself because you own that property. And so that’s the benefit of stepping into this transaction as the bank because your sole responsibility is to get what we sometimes term mailbox money, you are continuing to receive these payments. Now on the flip side of this, in that same instance, you know, someone takes out a loan, purchase a property and sign the promissory note, but maybe down the line, they stop making their payments. So they are no longer performing on their promise to pay back this loan at this interest rate over this duration of time. So then that in some instances will become a non-performing loan. Now some people listening might say, Okay, well, why would I want to purchase paper or purchase debt that the bar was no longer making their payments on? And the reason you do that is that you are the bank in that transaction. So you do have a few options available to you if you do decide to purchase a non-performing loan. Now what you can do is now modifying this loan. Now that the person is dealing with technically an individual instead of just being a number to one of these financial institutions. So if it makes business sense, yes, you can go in and modify the terms either extending the length of time that that person has to pay back this loan, increasing the interest rate, whatever the strategy is, to keep that person in the home. You as the note investor, aka the bank in this transaction have the ability Need to do that. Also, because you are the bank, if either the home is no longer occupied or the borrower is no longer communicating with you or willing to work with you on a modification, you do have the ability to foreclose. So this just gives you flexibility and control in the transaction that it does keep in passing, but then also provides you the ability to make money. Now, how someone can get started in something like this, and I do generally I have a five, a bullet point five checklist that I suggest of people having in plays in order to be able to get started, one of those being having an entity in place. Because this is super important when we’re making these investments, especially if we’re stepping in as the bank just to protect us from liability and an anonymity standpoint, having capital now when we when I talk about capital, and I think in when people think about loans or mortgages, that doesn’t necessarily mean you need to have hundreds of 1000s of dollars in the bank in order to be able to purchase one of these loans. I mean, I have seen loans 25,000, and under I’ve seen loans $100,000. And over. So there’s definitely a wide range. And so there is the ability to get in, depending on what your price point is to still be able to experience this type of transaction. Also, what’s really important, in my opinion, is having some knowledge of education just within any type of investment that we get involved in. And so whether that means going to training courses, putting in the time to actually understand what’s involved with this transaction or signing up with a mentor or a coach, someone who was actually doing note investing is actually purchasing notes. So be able to walk through with them and giving more of a learn while you earn you’re cutting, you’re cutting your learning curve a little bit more by working with someone one on one, and then you’re actually able to apply that knowledge practically by actually purchasing a note and going through a transaction. Another thing that I would say having in place is boots on the ground. So when I say boots on the ground, because no investing, we have the ability to do this all over the country. So once you’re able to gather a team, or again, if you’re, if you’re working with a partner, or mentor or a coach that already has some of these things in place, now you’re able to extend your reach. So with me being in New York, you know, some loans here, well might be too expensive, we were talking about 234 $100,000 worth of loans. But if I have the ability to now invest in Idaho, let’s just say or even Indiana or Illinois that has a lower price point, and can still provide me with those same returns than that, that that allows me the ability to expand. So I’m just listing out some of these things. Because these are really beneficial items to have in order to be able to get started. But I would say at a minimum, if you’re listening and you  know, you have a little bit of capital to deploy, and you’re really interested in something like this, really start educating yourself and aligning yourself with people who are already in this line or in this in this industry. And kind of bootstrap from there.

[00:22:45] Nicole Pendergrass Wow. Okay, so that was a lot.

[00:22:48] Lorraine Millington That was long-winded. Okay, got it.

[00:22:49] Nicole Pendergrass  No, no, it’s great. I love it. So what I’m hearing is that you can get started with smaller amounts of capital, you can partner with finding a mentor, you could probably even partner together with people create an entity and join capital together to purchase you know, a note you can decide to go performing versus non-performing. Now, besides the ease or you know, as you’re having performing notes already giving you returns versus buying a non-performing note where you have to try to modify get in touch with the homeowner and see, you know, if you can get it to become performing or going through foreclosure, that seems that’s like a little bit more work involved with a nonperforming note, to me that shows that there’s some value there. But what’s the difference between in returns between a performing note and a non-performing note like once you get the non-performing note performing, you know, like and then what would the boots in the ground be like just to go by and make sure that there’s actually a property there like it kind of go into the, I guess, the return on both sides? And like basically, I know if it’s non-performing, when you’re buying it, there’s no returns.

[00:24:03] Lorraine Millington Not necessarily.

[00:24:03] Nicole Pendergrass So, okay. Yeah, price point if like price point versus like, what the value of the property is, you know, all of that kind of that sort of, like, what are the numbers look like?

[00:24:16] Lorraine Millington  And so when talking about numbers. And even just thinking about it from a performing versus non-performing standpoint, when we’re talking about purchasing the debt that is associated with these properties, we are generally getting this at a discount already. So some of our profit or some of our return on investment is already built in. And so when I, when I’m saying that we are calculating, okay, when we’re purchasing debt, a lot of times the amount of the debt that we’re purchasing is not actually the amount that we’re going to receive, we’re actually going to receive more than that. That’s the whole point of the compounding of profit and compounding of interest. And so we’re thinking about performing loans, some of what we’re factoring in is the risk, right? Because even though they’re continuing to make their payments, they’re making their payments monthly. And we’re getting payments over time. What if there’s an early payoff? What if, again, they stopped making their payments, so we’re factoring in those risk factors or that risk tolerance into our numbers. So just to give some really, because every note is different. And so I don’t generally I don’t give general cash on cash returns or general ROI percentages, because every situation is going to be different. But I would say I feel comfortable in saying that if I’m looking at a performing loan, and I’m trying to calculate, and I have a whole spreadsheet that does all these calculations, and all of that. But if I’m trying to calculate what is going to be my cash on cash return, and essentially that is, what I pay for the loan, minus expenses, and admin fees, and closing costs, and all of that, and how much is it generating in relation to the principal and interest payment that I’m receiving every month, and what I have generally seen as at least 10%, of a cash on cash return, and roughly a little bit higher than that in terms of yield, depending on what I’m solving for. So I would say at least a 10% cash on cash return again, that would mean money that I’m receiving annually in relation to the investment that I’ve made. Now, when I’m talking about ROI, or return on investment, I relate that more to a non-performing loan. And the reason why is because generally speaking, when I have a non-performing loan, that I’m taking all the way to being able to recoup this asset back in my portfolio, I’m receiving a lump sum. And so that that return on investment is a return on what again, what I initially spent on this note, minus all of the expenses and all of the time that was included in for, for me to complete this, this asset will complete this investment. And generally, what I will see in that instance, I’m going to be very conservative in these numbers is at least a 30 to maybe 40% return on investment. Now again, that would be in instances where it was a non-performing loan. So I haven’t received any monthly payments on this on this asset. But I took it to either foreclosure auction or I ended up taking back possession of this property. And now I’m selling this property as is. So I’m not putting any labor into it. I’m not even doing any lipstick remodels, nothing I’m selling this asset as is that the reason why I’m getting this return on investment is that I initially paid less for the debts than what was owed on it because of the inherent risk that’s involved. And then now because the property is worth more than what the debt on this asset is which is all figured out when we’re doing our due diligence. That’s what my spread is made. So hopefully that answers the question in terms of what some of the numbers look like. And again, I’m being very conservative without using an actual asset to or comparison, but those are what some of the numbers look like.