What’s My Note Worth?
A question all note sellers have and have a right to know.
Timing Your Mortgage Note Sale is everything.
So, when is the correct time to sell your mortgage note?
REAL ESTATE PRIVACY–PROTECT YOUR ASSETS
The following utube video with my friends Walter Wofford and Jim Ingersoll is so to the point as to the value of trusts in any form of a real estate transaction.
They discuss the ultra importance of transactional privacy and how that helps with asset protection.Under what circumstances would you want the general public to know the properties you own?
Trusts provide privacy and effectively separate all of your investment assets. They are not hard to use and provide tremendous privacy in your deals as a trustee is used to hold title and the trust agreement is not recorded at the courthouse.
Under what circumstances would you not like the public to know that you own a property?
What are the benefits of using trusts?
1. Privacy – Keep your name and LLC out of public records
2. Liens and judgments
3. Probate benefits
4. Sell the entity, not the property
5. Personal property trusts for IRAs, cars, boats, etc
Borrowing our way out of Debt
Today I cam across this article title,” The Three Ds of Doom: Debt, Default, Depression”. Without sounding negative, it certainly makes one think about the current economy. Everything appears to be booming, at least here in the greater Phoenix Metroplex. But………..what is under the covers. What goes up always comes down. It is a fact of life. Now apply this to the niche business. It is the paper side of real estate.
In the very near future, Capstone will be launching a Utube note training series on buying Notes. One of the topics as part of the due diligence series will be a deep dive into Investment to Value and Loan to Value. In other words, what is the note buyers safety net in the event of a downturn. How to minimize the pain in your portfolio. The only way I know is to have an EQUITY SPREAD. For instance, if a note has a $100,000 unpaid loan balance (aka UPB), what is your risk tolerance. What safety net do you require? The Capstone safety net is an Investment to Value (ITV) not exceeding 65% and a Loan to Value not exceeding 70%. Some say this is too big a filter. I guess time will tell. Anyway–moving on to the article.
The Three Ds of Doom: Debt, Default, Depression
July 17, 2019
“Borrowing our way out of debt” generates the three Ds of Doom: debt leads to default which ushers in Depression.
Let’s start by defining Economic Depression: a Depression is a Recession that isn’t fixed by conventional fiscal and monetary stimulus. In other words, when a recession drags on despite massive fiscal and monetary stimulus being thrown into the economy, then the stimulus-resistant stagnation is called a Depression. Read more
AUGUST PHX NOTE INVESTORS FORUM MEETUP
The August 7th Note Investors Forum Meetup focus on:
TOPICS: Several New Case Studies
Where Does a New Note Investor Begin
Bring your questions, This will be an interactive meeting.
The Next Note Investors Forum Meeting will be
Wednesday, August 7th 11:30am-1:30pm
La Famiglia Restaurant, SE corner of Dobson & Guadalupe, Mesa
Case-Shiller: National House Price Index increased 3.7% year-over-year in March
Case-Shiller: National House Price Index increased 3.7% year-over-year in March
S&P/Case-Shiller released the monthly Home Price Indices for March (“March” is a 3 month average of January, February and March prices).
This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.
Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.
From S&P: S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Continue to Weaken
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.7% annual gain in March, down from 3.9% in the previous month. The 10-City Composite annual increase came in at 2.3%, down from 2.5% in the previous month. The 20-City Composite posted a 2.7% year-over-year gain, down from 3.0% in the previous month.
Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities. In March, Las Vegas led the way with an 8.2% year-over-year price increase, followed by Phoenix with a 6.1% increase, and Tampa with a 5.3% increase. Four of the 20 cities reported greater price increases in the year ending March 2019 versus the year ending February 2019.
(NOTE: The Phoenix Market did a complete u-turn NORTH. 45% of all inventory was sold in April. What was a down turn, is now back on track. The Phoenix area is growing by 86,000 people every year. Maricopa County is the fasted growing county in country. CLICK HERE FOR THE LOCAL REIA STATS
New to Market – New Performing Notes
Property Locations
IL IN MI OH TN
BPO Range: $33,000 – $70,000
UPB RANGE: $17,785 – $34,860
PURCHASE PRICE RANGE: $19,000 – $26,200
PRICING RANGE: 76% to 90% of UPB
Re-Performing Loans & Seasoned Performing Loans
Click Here to Access
Case Studies ~ Buy A Performing Note – Then It Goes South — Part 3
CASE STUDY 3
This post is a 3rd in a series of 4 regarding how a perfectly good performing note goes south due to life event situation.
This particular note was in the small town of Marshall, IN. The note -Contract for Deed- was originated in 2009. The payors significant other passed in 2010. My IRA purchased the note in 2015. The note was scheduled to mature in June, 2019. I was unaware of the loss of the male payor. The payment history evolved into a rolling 120 days, meaning after 4 months the payor paid the balance or part of the balance to stay out of the forfeiture procedure. However this payment history caught up with the payor in that there was a $5,000 unpaid balance balloon that went beyond the due date of the note.
Fast forward to February, 2019, I was tired of constantly contacting the payor. I did not want to go thru the forfeiture process as to take back the house –due to condition, was not a viable option. Plus 9 months and $3,000 in attorney fees were not viable. In prior conversations, it was discovered she was the caregiver of her mother and was not working. He current husband was not working. After multiple conversations, she realized she needed help. Her Dad was brought into the conversation. He agreed to help her out. They agreed to bring the payments current. In exchange to removing the deceased payors name from the CFD, they agreed to a loan modification which extended the term 12 months, and stay current. If they ran late past 15 days, the newly executed Quit Claim deed would be recorded and my IRA would own the house.
It was a win-win. The payor benefited by having the deceased partner removed from any claim of ownership, the loan was brought current, I avoided the possibility of a 9 month forefeiture procedure and the payor will own her house free and clear in 12 months with the extension of the balloon due date.
Even though the remaining balance was small, the solution was perfect for all.
I have learned, if one works with the payor and developes a dialog, future unfortunate events can be worked out much easier. But, it is all about how can the payor feels and appreciates that they are being helped so they will be open to a solution which also benefits the note holder in the event needed.
This case study was presented at the May 1 Note Investors Forum Meetup
Case Studies ~ Buy A Performing Note – Then It Goes South — Part 2
As discussed in my prior blog, Note workouts are not rocket science. It is a matter of treating every party fairly.
CASE STUDY 2
This 2nd case study happened on a 2nd Mishawaka, IN property. My
partner & I bought a non-performing note(NPN) in October, 2014. The payor had become functionally unable to do anything due to a debilitating disease and had been out of the house for 2 years. We tried a workout which was not viable but did get a deed in lieu of foreclosure with cash for keys.
After fixing the place up, we found a recently divorced lady. She was happy with a probtionary rent-to-own for 12 months a and Seller-carry to follow with 10% down. She was also qualified by an RMLO oer Dodd-Frank. We sold the 1st note to a partial note investor and kept the second.
Fast forward, the payor stopped paying due to illness. Again we developed a good working relationship with her. After a series of discussions, she confirmed that she really did want to stay and agreed to a loan modification. The “we” was the partial note buyer.
The end result is after consulting with our legal counsel and her daughter, the payor signed a Quit Claim deed to be held in escrow and agreed to a payoff schedule for her to get caught up on the back payments. If she falls behind on any payment for more than 15 days we can record the Quit Claim deed. My company will own the house. We have avoided the the foreclosure process to boot. The bottom line: the payor is happy and agreed to bring the loan current, the partial buyer is happy as she is geting paid, my partner is happy as we are both collecting on our second and have avoided a negative situation –the long forfeiture process.. This was/is a total win-win.
Potentially, we may have to record the deed and rehab, but for now it is all good.
Case Studies ~ Buy A Performing Note – Then It Goes South — Part 1
I have been in the note space in various ways since 1985 with the purchase
of 20 acres in Scarborough, ME which was developed into 17 house lots. The last lot I sold with seller-carry.
To that point, in the last 14 months 4 notes have taken a turn for the worst and required developing a work out strategy to protect my interests or if a partial to protect the interests of the partial buyer.
Currently I buy, keep, create partials and broker notes from around the country. Mostly performing notes | Contract for Deeds. Very rarely do I purchase non-performing notes. It just is not my thing. However, notes can and do go bad. The payor has personal issues, etc. Life just happens.
CASE STUDY 1
I purchased a performing note in Mishawaka, IN in 2015. Great #’s great pay history. Good colateral. I found a buyer to fund the purchase via selling a partial and in effect a double close. It was good for them and good for my ROTH. Fast forward to April, 2018, the payors health took a turn for the worst. They called the servicer stating they would not continue paying and were going into a Bankruptcy. My 1st challenge was to keep my partial investor whole. I made up 4 months to the partial buyer, completed a deed in lieu with the payor, rehabbed the house and resold it in February, 2019 at which time the partial buyer was made whole. Throught the process, the partial buyer was in the loop and concurred with the workout and dispostion. They were made whole at the COE. A couple of months later they thanked me stating it was all good especially the net 11% return. To boot my ROTH cleared $20k on a small value asset of < than $70,000. It was a win for everyone. Even on a lower value property.
Note workouts are not rocket science. It is a matter of treating every party fairly.
PHOENIX – NOTE INVESTORS FORUM MEETUP
The May 1st Note Investors Forum Meetup will be chalked full case studies;
Real Life Recent Topics:
- Loan Modifications & Workouts
- How to structure and evaluate land notes
Finding opportunity in the pain and ……….work the Opportunity.
La Famiglia Restaurant, SE corner of Dobson & Guadalupe, Mesa
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