Buying Real Estate Notes: The Ultimate Investment Cash Flow
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Transcript of Buying Real Estate Notes: The Ultimate Investment Cash Flow
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Profiting from America’s biggest Note Opportunities
BUYING REAL ESTATE NOTES The Ultimate Investment Cash Flow
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Death of REO’s
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3 Core Things• Unprecedented
Market Conditions• Understanding The
Discount Note Industry
• Outsourcing the work!
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STOCK MARKETYOUR MONEY
(ANXIOUS MONEY)
Where is it going?
XMarket Crash 2008
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Source: NAR National Address
2013
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5 Years
Only 4½ Million Sold
2008 2013
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Sources: Reuters and ZeroHedge, Bloomberg 2013
Where is all the Inventory?Blackstone 45,000 SFH Carrington 25,000 SFHColony America 9,931 SFHSilver 5,000 SFHTricon Capital 4,000 SFH CA, FL, AZ
3,600 SFH AZ, house in last 5 yearsIL, CA, IN, NC, GA, FL
PLUS Billions more raised to buy SFH foreclosures and
REO’s
800,000 in the last 5 yrs
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Who Are We?
© Copyright CFG, LLC 2014. All Rights Reserved.
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© Copyright CFG, LLC 2014. All Rights Reserved.
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What’s a Note?
1,000
Eddie SpeedP.O. Box 1234South Lake, TX
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John Eddie signs a note for $1,000
John Doe 1,000
Sells the Note
John receives
$850
Check Cashing biz
receives $1,000
at a discount
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Buyer
Ownership Deed
Seller
Mortgage NOTE
Mortgage Lender
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WHY NOTES?The Surge of Growth Ahead!
NOTES
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STOCK MARKETX
Mortgage LenderColonial
Toxic Assets
Market Crash 2008
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With relatively little fanfare, the stock market has become expensive again.While the rest of economy has been growing frustratingly slowly for almost five years, stocks have been rising at a boomlike clip. An investment in the Standard & Poor 500-stock index would have doubled from early 2009 through early 2013 and then gained an additional 18 percent over the last year.Relative to long-term corporate earnings – and more in a minute on why that measure is important – stocks have been more expensive only three times over the past century than they are today, according to data from Robert Shiller, a Nobel laureate in economics. Those other three periods are not exactly reassuring, either: the 1920s, the late 1990s and in the prelude to the 2007 financial crisis.Wall Street, of course, can always come up with justifications for high stock prices. Remember: The Internet changes everything. Or: The business cycle has been repealed. Some of the current justifications even have a ring of reality to them.
Time to Worry About Stock Market BubblesMAY 6, 2014
Nobel Laureate in Economics: Stocks have been more expensive only three time in the
last century: the 1920’s, the late 1990’s and in the prelude to the 2007 financial crisis
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Realtytrac, Bloomberg, Wall Street analysts and Bernanke projected waves of foreclosures starting in 2012 but it never happened:
1. Short sales2. Selling non-performing
loans
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Short Sales Completed, REO Inventories & Primary Market Delinquent Notes
2008 2009 2010 2012 2014 50,000.00
1,050,000.00
2,050,000.00
3,050,000.00
4,050,000.00
5,050,000.00
NPLREOShort Sales
Source: Compiled information from Lawler, Calculated Risk, Realtytrac, Corelogic, Black Knight Financial Services
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MAJOR SHIFT FROM REO TO SELLING NOTES
REO’s NOTESREO’sNOTES
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What it Takes to Buy Notes
0
2
4
6
8
10
12
Knowledge
Minimum Standard
Leveraging Colonial’s Resources is KEY!
Interest Time
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Two Types of Discounted Notes
Non-Performin
g Notes
Performing
Notes Seller FinancedRe-performing
Non-Performing
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What Determines Note’s Value?
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Performing Notes
Re-Performing Note Cost 70% plus
Defaulted Note Cost 20%-50%
Non-Performing Notes
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Paths to Property
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This house represents all the houses in the United States that are on the REO housing market.APPROXIMATELY 400,000
For every REO, there are 25 notes in some stage of default behind the scenes.
REO’s vs. Notes
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REO's vs. NOTES
400,000 REOs9 Million
Delinquent Real Estate Notes
Inventory of Opportunity
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Buyer
Defaulted Note?Modify LoanDeed In Lieu
Foreclose
Buyer Stops Paying!
Non-Performing Loans
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Non-Performing Notes
Modify Deed in Lieu Foreclosure
40% 40% 20%
©NoteSchool 2013
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Non-Performing Notes
REO Property
Modify Deed in Lieu
Foreclosure
Re-Performing Note
Owner Finance or Cash or Rental
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Non-Performing Note Case Study
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Case Study
Property: Stone
Mountain, GACurrent Market Value:
$100,000FTC DISCLAIMER: While these case studies are REAL DEALS that my
students have closed recently, these results are NOT typical. As with all courses, you should not expect to make this much money or any money
with “how-to” advice.
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Non-Performing Notes
REO Property
Foreclosure
Note or Cash or Rental
Modify Deed in Lieu
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Own Note Without Having to Manage ItLoan Servicer
• Collects Pmts • Taxes / Insurance• Borrower Work-out • Foreclosure Mgt
Note Owner
Work done by Who??
Outsource!!
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• 4/2, 1,800 sf • Rent $1,250/mo
“I didn’t need a calculator to pull the trigger on this one!”
Total Cost approx $30,000 Property worth $100,000…with creative financing
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Waterfall
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BUYERS BUY HOUSE
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SIGN NOTE & MAKES PAYMENTS
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PAYMENTS TO THE BANK
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Successful Loan!
BUYER PAYS OFF MORTGAGE
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IfNotpaid
PAYMENT DEFAULT
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IfNotpaid
PAYMENT DEFAULT
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BANK BUNDLES BAD MORTGAGES
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Mortgage Information
HEDGE FUNDS CREATE TAPES
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Mortgage Information
TAPES SENT TO INVESTORS
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Agreed Upon Price
INVESTOR DUE DILIGENCE
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SIGN CONTRACT WITH HEDGE FUND
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New note owner
HEDGE FUNDS CREATE TAPES
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New note ownerRe-Performing
Loan!
MODIFICATION = CASH FLOW
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New note
owner
4 EXIT & PROFIT STRATEGIES
Seller Financing
“Performing Notes”
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REAL ESTATE
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Esta
blish
As-
IS V
alue
What % ?
Investment to Value Ratio = 50%
Investment to Value Ratio = 20%
Non-Performing Notes
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REONon-Performing Loans 80%-90% of
Value
30%-50% of Value
Where do you make
More Money
with Less Risk?
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Buyer
Mortgage NOTE
Mortgage Lender
Mortgage NOTEMortgage
NOTEMortgage
NOTE
Colonial
Mortgage NOTE
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Colonial
Mortgage NOTE
Passive Investor Active
Investor
Hold In-House
STOCK MARKETX
Mortgage NOTE
One Note Many
Notes
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More than just income today…Tax Free Income For Life
Performing Notes
Non-Performing NotesFormula for zero taxes in retirement:Notes + Roth IRA/401K = Tax Free Income for Life
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Esta
blish
As-
IS V
alue
Price Note
Cost of Note
What % ?Investment
to Value Ratio
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What Determines Note’s Value?
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Good Payment Record
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Bad Payment Record
Re-Performing Note Cost 70% plus
Defaulted Note Cost 20% - 50%
Performing Notes
Non-Performing Notes
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Esta
blish
As-
IS V
alue
Price Note
Cost of Note
What % ?Investment
to Value Ratio
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What it Takes to Buy
Series10
2
4
6
8
10
12
Minimum Standard
Knowledge Interest Time
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Performing Notes
Owning Notes
Re-Performing Notes
Seller Financed
Notes
Learn to Be Your Own
Bank
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Performing Note Case Study
Individual Notes
PERFORMING NOTECASE STUDY
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Case StudyOwner Occupied
FTC DISCLAIMER: While these case studies are REAL DEALS that my students have closed recently, these results are NOT typical. As with all courses, you should not expect to make this much money or any
money with “how-to” advice.
Property:
Hallowell, KSCurrent Market Value:
$56,000
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$34,616
158 Monthly Payments
Mortgage Note
at 9% interest
Monthly Payments of:
$374.69
You Pay
$31,233For This Note
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$375
$375
$375
$375
$375
$375
Mortgage Note
$34,616.49 At 9% Interest
Pmt / $375 158 Mos Remain
$375
JAN FEB
$375
MAR APR MAY JUNE
$375
$375
$375
JULY AUG SEP OCT NOV
$59,250
158 Times!
11% Return
You Pay
$31,233
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Valu
e $
56,0
00
Cost of Note Invest - $31,233
62% of Value Investment to Value ratio
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Own Note Without Having to Manage It
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
Loan Servicer • Collects Pmts •Taxes / Insurance• Licensed & Compliant• Borrower Work-out
Work done by Who??
Outsource!!271 Months
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Term of Note
Loan Servicer Monthly Pmts
Note Owner
one time fee = $150
*Industry average is around $25
Pmt.
Pmt.Pmt.Pmt.Pmt.Pmt.
Pmt.
JAN FEB
Pmt.
MAR APR MAY JUNE
Pmt.
Pmt.
Pmt.JULY AUG SEP OCT NOV
Payment minus Servicing fee*
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Cash Flow with Real Estate Notes
Mortgage NOTE
YOUMortgage
NOTEMortgage
NOTEMortgage
NOTEMortgage
NOTEMortgage
NOTEMortgage
NOTE
10 notes x $600/ea = $6,000/month
BE THE BANK
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How to Retire Tax Free Forever
TAX FREE!
AFTERTAX
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$110
,000
Sal
eTerms of Sale
$110K Sales Price - $10K Down Pmt - $100K Seller 1st
LienDown Payment
= $10,000
1st lien Note= $100,000
Buyer’s Equity
Buyer’s Debt
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$100,000
360 Monthly Payments
Mortgage Note
at 10% interest
Monthly Payments of:
$878
You Pay
$70,000For This Note
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$878
$878
$878
$878
$878
$878
Mortgage Note
$100,000 @ 10% Interest
Pmt / $878 360 Mos Remain
$878
JAN FEB
$878
MAR APR MAY JUNE
$878
$878
$878
JULY AUG SEP OCT NOV
$316,080
360 Times!
14.8% Return
You Pay
$70,000
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100,000 @ 10% Pmt / $878 30 year term
Loan Amortized
Jan 2014 Dec 2044
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
360 pmts
TIMELINEInvested with Self Directed IRA = $70,000
Yield = 14.8% annually
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$70,000
360 Monthly Payments
Hard Money Loan
Monthly Payments of:
$878
What is the interest rate
for this Note?
14.8%
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Pmt / $878 30 year term
Terms of Loan
Jan 2014 Dec 2044
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
360 pmts
TIMELINEInterest Rate = 14.8%
$70,000
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Partials are Like Pizza Pies
$6
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Partials are Like Pizza Pies
$2
$2 $2
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$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
360 pmts
Note Term Bought or Sold
Buy 30 yrs
Sell …
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100,000 @ 10% Pmt / $878 30 year term
Loan Amortized
Jan 2014 Dec 2044
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
360 pmts
Roth Buys Entire Note for $70,000
$30,000
Note bought at discount
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$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
Most Valuable Portion Least Valuable Portion
360 pmts
Negotiate to Buy Entire Note $70,000
1st half 2nd half
![Page 82: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/82.jpg)
100,000 @ 10% Pmt / $878 30 year term
Loan Amortized
Jan 2014 Dec 2044
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
360 pmts
TIMELINERoth Sells Front Endto Investor
Own Back-endin Roth Acct
Roth Buys Entire Term
![Page 83: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/83.jpg)
100,000 @ 10% Pmt / $878 30 year term Loan Amortized
Jan 2014 Dec 2044
$878
$878
$878
$878
$878
$878
$69,900
11 yrs 19 yrs
$100
30 Years $70,000
Yield = 10% Yield = Enough!!!
$878
$878$878
$878$878
![Page 84: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/84.jpg)
TIMELINE100,000 @ 10% Pmt / $878 30 year term
Loan Amortized
Jan 2014 Dec 2044
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
$878
360 pmts
Roth Sells Front Endto Investor
Own Back-endin Roth AcctRoth Buys Entire
Term
![Page 85: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/85.jpg)
Sell Partial & Own Back-End of Note
$69,900
$878
$878
$878
$878
$878
$878
132 PmtsSold to Investor
TIMELINE
$100 in Roth Acct$8
78$8
78$8
78$8
78$8
78$878
You Keep Remaining 228
Pmts
100,000 @ 10% Pmt / $878 30 year term
10% Return HUGE Return
![Page 86: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/86.jpg)
THE NEXT STEP
Buy Notes, Be The Bank
![Page 87: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/87.jpg)
2 Advanced
Note Classes
![Page 88: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/88.jpg)
Big MoneyFrom bad debts
Tuition $2,000
3-Day Live Class
Family or Biz Partner FREE
![Page 89: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/89.jpg)
You’ll learn how to . . . • How to get Note Sellers• Work-out Strategies• Government Funds Avaialble• Property analysis & determining the value• Different types of Defaulted Notes• Lien positions and title reports
Big MoneyFrom bad debts
![Page 90: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/90.jpg)
On-Demand Training Course
14 Modules (3 days worth of training)
Learn easily At your own paceNon-Performing
Notes
![Page 91: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/91.jpg)
3-day Live Class
Case Studies of Authentic Deals
Rich Rewardstm
In Real Estate Notes
![Page 92: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/92.jpg)
You’ll learn how to . . . • Marketing To Attract More Clients• Create Alternative Cash Flows• Negotiations To Close More Deals• Steer Clear of Legal Issues• Math To Pocket More Profits• How Partials Work• Much More
Rich Rewardstm
In Real Estate Notes
![Page 93: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/93.jpg)
On-Demand Training Course
Learn easily at your own pace
12 Modules (3 days worth of training)
Performing Notes
![Page 94: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/94.jpg)
Each class has 12 + Events Annually
• Arlington, TX: Oct 3rd – 5th
• Charlotte, NC: Nov 14th – 16th
• Atlanta, GA: Dec 12th – 14th
• Ft Lauderdale, FL: Oct 10th – 12th
• Irving, TX: Nov 21st – 23rd • Los Angeles, CA: Dec 5th –
7th
![Page 95: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/95.jpg)
Both Classes Combined for
$1,297
Either Class: $797
![Page 96: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/96.jpg)
Gold in NotesOne-Day Workshop
Saturday Oct 11th Time: 9am – 4pm
• Members:– FREE . . . Must call Robyn– spouse $ …
• Non-Members: – $49 early bird– $79
Presented by: Joe Varnadore
![Page 97: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/97.jpg)
Financial Deal Architect• Case Studies (from actual deals)• Building Cash Flows• Sourcing Capital• Creative Finance
![Page 98: Buying Real Estate Notes: The Ultimate Investment Cash Flow](https://reader036.fdocuments.in/reader036/viewer/2022081604/58a508331a28ab8e1c8b47b7/html5/thumbnails/98.jpg)
Your IRA Buying Performing Notes • Building retirement acct as your own
mini-bank• Phenomenal leveraging techniques with
notes