Selling your mortgage note is not all about or just about price. It is also about working wit a buyer who will follow through and actually close at the agreed price. If you have a note to sell and you are not sure who to call, who to trust or what to look for yo will want to watch this short 9 minute video
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?
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
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
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
The following article appeared in the Economy & Markets Newsletter by Harry Dent. The key ahha phrase, “In the next crash, rentals will tend to hold up. Housing prices will fall. Use your equity and cash flow from owned rentals to buy the far cheaper foreclosures (often by just taking over the payments at a discount) then rent them out for even more profits……”
Other Key points, “Rent the House You Live in… Buy One Far Away to Rent Out…”
There was another interesting article in MarketWatch. “Pick your poison: Here are the best neighborhoods for real estate investing if you want income or if you want growth”… CLICK HERE for the article.
investigating real estate mortgages.
This short video explains the variables.. WATCH HERE
Most Financial Services Firms Maintain Optimistic Outlook for US Capital Markets in 2018, but Also Advising Note of Caution
property fundamentals in the markets and property sectors they invest in for 2018 as the U.S. economy continues its extended recovery now heading into its 10th year.
Despite record low unemployment, increased consumer confidence and a strong stock market, many in the industry see slower growth ahead for rent increases, property prices and overall demand for commercial space. As the capital market moves later into the current real estate cycle, financial services firms are maintaining an optimistic outlook for the U.S. economy, although many are also recommending a cautious approach.
S&P Global Ratings, for example, does not expect a steep correction in real estate prices in the New Year, but is forecasting modest price pressure given slowing fundamentals in light of lower economic growth than in previous years.
There are other risks that could develop, S&P added, that could potentially cause a steeper correction in real estate values, including capital market volatility from a steep equity market correction or sudden spike in interest rates. In addition, bank exposure to CRE is at peak levels and a significant reduction in loan originations could dampen valuations.
In its outlook for 2018, LaSalle Investment Management refers to a Goldilocks environment, in which investors should look for an investment that is neither too ‘hot’ nor too ‘cold’ driven by balanced fundamentals and steady pricing.
LaSalle is expecting debt for real estate to remain plentiful in 2018. At the same time, it expects lenders will continue to tighten their underwriting, especially for specific sectors that become “overheated.”
Over the course of the year, Morgan Stanley noted that larger banks of more than $20 billion in assets tightened their lending standard much more than smaller banks. Multifamily loans had the greatest increase in net tightening and loan demand declined more in that category more than others in 2017.
On the positive side, LaSalle expects less hurdles for the major lending sectors in 2018 after the market overcame several potential obstacles in 2017, including the maturity of 2007 vintage loans, CMBS risk retention and Fed oversight of bank real estate.
As 2017 progressed, it became clear that risk retention wasn’t going to be a major market impediment, and issuance increased as the year went on, according to Kroll Bond Ratings Agency (KBRA). Transaction sizes, however, largely remained under $1 billion, which was partially attributable to risk retention that forced a number of originators to exit the market, as well as the size of the CMBS investor base.
On the up side of peaking property this year, KBRA noted, is that single borrower refinancing deals should continue to thrive as borrowers look to lock-in gains from property value increases. Borrowers may also want to lock in rates the Federal Reserve sending signals that more rate increases are to come in 2018.
As always, job growth will be a critical driver of real estate demand. And to the extent that the recently passed tax legislation that slashed corporate rates spurs additional business investment and hiring works as intended, job growth could exceed expectations.
“We’re now confronting a wider range of possible outcomes for the economy, depending on how various initiatives such as federal policy changes play out,” said Spencer Levy, CBRE Americas head of research and senior economic advisor, who added that agility will be more important than ever for investors this year.
Investors should shift to focusing on income gains rather than appreciation as their primary source of returns as cap rates flatten out or, in some cases, start to rise, Levy noted.
Major U.S. office markets are on the verge of a cyclical tipping point, with new construction and softening demand mirroring the evolution of previous CRE cycles, Moody’s Investors Service reported.
And while the markets may be hoping the supply-and-demand cycle plays out differently this time, that isn’t likely, Moody’s noted.
“New office construction is ramping up in many major U.S. cities, so that by the end of next year new inventory will be coming online at roughly double the rate of the past three years, while at the same time the growth of office-using employment will be slowing,” said Kevin Fagan, a Moody’s vice president and senior analyst.
As we enter 2018, there is 154.5 million square feet of new office space under construction, according to CoStar data. That compares to 97.8 million square feet delivered in 2017.
While the amount of office construction is increasing, the 252 million square feet delivered last year or under construction is still one-third lower than the 381 million square feet delivered in 2006 and 2007 when CRE markets last peaked.
However, underwritten office property values today far surpass those of the pre-financial crisis peak, particularly for CBD offices, Moody’s Fagan said.
Similar to the office market, new supply is also running high in the industrial property sector going into 2018 with 318.1 million square feet under construction following 311.6 million square feet delivered last year.
The big difference compared to office is that demand remains very robust for both bulk warehouse and closer-in delivery hubs as e-commerce continues to reshape and boost demand for distribution space. This positions the industrial market to perform well in 2018, although risks would escalate should economic growth slow, according to LaSalle.
While E-commerce is boosting the industrial investment potential, the retail sector continues to bear the brunt from lower traffic and sales. Construction of new retail space continues to decline with just 86 million square feet under construction at the beginning of 2018, well down from the 103.6 million square feet of retail space delivered last year.
Investors see exceptions within the sector, however. Grocery-anchored retail space in well-located centers remains in demand as reflected in the strong capital market activity at these centers that we believe will continue, according to LaSalle.
CBRE sees retailers and investors gravitating to either the discount and off-price sectors or luxury. This may create weakness, and, in many cases, investment opportunities, in secondary and suburban markets.
Today an IRA administrator questioned -requested an explanation on the sale of a partial. He said he had never seen this type of transaction before. Neither had his compliance officer.
They were confused and requested a simple explanation which follows.
All of the following statements are true:
- Partials can be difficult to understand.
- Partials can be simple.
- Partials may be a safer note investment than selling a full note.
- Partials are a conservative tool which is perfect for a ROTH IRA
- Partials are a great tool to grow ones’ ROTH IRA if one is selling the front payments and keeping the tail, in affect an annuity for the future.
- When one is selling a Partial, you are recouping your initial investment and the tail is effect “free” future cash flow.
“Bob” is buying 3 partials–funding the last purchase of 125 payments(blue) for $18,900.
My entity is keeping the remaining payments –gold(the tail).My entity is assigning all the payments to him as evidenced by an allonge which keeps this transaction SEC compliant.
This is a great deal for Bob, because I will always be in the deal protecting the remaining payments(gold).
After Bob receives his payments, the remaining payments will be reconveyed to my entity as evidenced by a Reconveyance of Agreement for Deed which references the Purchase and Sale Agreement.
In the event of an early payoff, default or if Bob opts to exercise the 60 month buy back provision the following chart –the Entitlement Schedule –Schedule B illustrates how that scenario will be administered.
The IRA Administrator has executed the following docs:
- Purchase Agreement
- Reconveyance of Agreement for Deed which will be recorded and is subject to the Purchase and Sale Agreement. This doc puts everyone on notice and guarantees the return of the note to me after Tom has been fully paid for his investment subject to the entitlement schedule
Bob will record the Assignment of Contract for Deed to protect himself and will have the original note and the allonge(transfers the note) which will be archived by the Servicier and distribute the 125 payments to Bob. In the event of an early payoff or if the purchaser wants to exercise his 60 month option for an early buyback, his administrator as a road map for future reference.
The IRA company rep understood this transaction when explained in plain English. Additionally he received the following Partial from our NoteHolder’s Handbook–Note Holders Handbook_Partials.
A partial is one of the safest ways to invest in notes.
The IRA Administrator thanked me for providing a “Great explanation!”
If a person wants to become a homeowner but lacks the qualifications to qualify for a traditional mortgage, signing a land contract is another option for purchasing property.
A land contract is a written agreement between the seller of the property and a potential buyer. Instead of taking out a mortgage and making payments to a bank, the buyer makes payments to the seller. But the seller retains ownership of the property until the buyer pays the entire purchase price. The land contract is essentially a type of rent-to-own agreement.
When a land contract is convenient
People can use land contracts to buy or sell any type of property, including personal residences, commercial buildings and land. There are several common situations where a buyer and a seller might use a land contract instead of going through the conventional mortgage process:
- The buyer lacks the credit, down payment or income that traditional lenders require.
- The seller needs to sell a property as quickly as possible.
- The seller prefers to accept payments in return for a higher sale price.
A land contract provides quite a bit of leeway when it comes to the conditions of the sale. Some of the items that the buyer and seller have to agree on include:
- The down payment.
- Length of the contract.
- The interest rate.
- The final sale price of the property.
Sellers may allow buyers to make regular payments on property over a certain period of time, or they can demand a balloon payment after a specified amount of time. For example, the contract might state that the buyer has to pay off the entire sale price within five years. During the five years, the buyer could take steps to improve his credit and secure approval for a conventional mortgage.
On average, it takes 65 days for a home to sell. If the seller doesn’t want to wait this long or fears that a bank may turn down a mortgage for the property, the seller can opt to sell it with a land contract. Lenders may not agree to a mortgage for a property that requires extensive repairs or doesn’t meet other criteria. The seller has the option of selling it through a land contract instead of making the improvements or repairs.
Real estate markets constantly fluctuate; in a down market, the seller can often get more money for the property by offering a land contract. Buyers are typically willing to pay a higher overall price in exchange for seller financing.
Risks of buying or selling property with a land contract
A land contract has disadvantages for both the buyer and the seller.
A buyer who purchases a home with a traditional mortgage accumulates equity as he makes payments. He also gets to take advantage of gains in the housing market that raise the value of the house. Should the buyer decide to sell the property before the mortgage is paid off, the buyer still gets to realize the equity in the home.
However, if the buyer uses a land contract and decides he doesn’t want to remain in the home, he has no equity, even though he has made payments, a down payment and the home has risen in value.
It’s important to note that the courts consider the buyer an equitable titleholder to the property. This means that the buyer has an interest in the property, which prevents the seller from completing any actions that disrupt the buyer’s potential claim to the property.
A seller in a land contract has to assume the risk of a mortgage lender. There’s always the possibility that the buyer may not make the agreed-upon monthly payments. This is one reason that buyers usually pay more for property bought with a land contract.
The seller can file a land contract forfeiture in court that basically evicts the buyer and terminates the buyer’s interest in the property, but this option takes time. However, the seller gets to keep all payments made by the buyer and retains ownership of the property.