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Deal Analysis - Note Investing 101

https://www.noteinvestor.com/101

Congrats!  Your note seller said yes! Now what? After the thrill of making the deal comes to the reality of validating the facts. Taking time to inventory a collateral file is essential to note investing. In this session we will be covering:

The Common Mistakes New Note Investors Make

One Document That Should Be Original

The “3 Ps” of Note Analysis

The Due Diligence Dozen - 12 Questions Every Note Investor Should Answer

Forget roses, this dozen matters way more than flowers!

Join us Tuesday, April 27th at 1 pm for “Deal Analysis & The Due Diligence Dozen” ...and bring your questions as this session is LIVE!

Discovering Notes - Note Investing 101 - https://youtu.be/pjtPZBUTU4M​​

Profiting From Notes - Note Investing 101 - https://youtu.be/kGqZ1QJ_9lA​​

Marketing For Notes - Note Investing 101 - https://youtu.be/HaCnPztbNfE​​

A Day In The Life Of Notes - Note Investing 101 - https://youtu.be/IGqW2pdLkuE​

Ask Us Anything! - Note Investing 101 - https://youtu.be/XgkX2lEjbzA​

Behind the Scenes/ Member Orientation - Note Investing 101 - https://youtu.be/mcHnvb6G8YQ​

Buying Notes In Retirement Accounts - Note Investing 101 - https://youtu.be/gpffKb_Aoeo​

Taking Your Note Business Online - Note Investing 101 - https://youtu.be/QUpR-_HSyRU​ 

Timestamp:

0:10​ - Introduction: “How do you analyze a deal if you want to buy it or refer it to another investor?”

1:02​ - Disclaimer

1:57​ - The “3 Ps” of Note Analysis

2:08​ - People

2:23​ - Property 

3:39​ - Paperwork

5:25​ - The Due Diligence Dozen - 12 Questions Every Note Investor Should Answer

5:59​ - How long has the buyer been making payments and are they current?

7:34​ - Is there a servicer collecting and validating the payments?

9:19​ - Do the documents match the terms presented for sale?

12:14​ - Are the real estate taxes paid current?

13:55​ - Is the Property insured for fire and other hazards?

16:14​ - Is there an updated title report?

17:10​ - What is the lien position and what else is owed on the property?

20:40​ - Who is the current holder or seller of the note being purchased?

22:16​ - Viewer’s question: When a note turns NP and is probably across the country from you, how do you handle disposing of the property after foreclosure?

25:15​ - Where is the original note and will it be delivered at closing?

28:12​ - Viewer’s question: If the original note is lost, and the buyer refuses to sign a replacement note/affidavit, how do you resolve this?

29:21​ - What is the current value of the property?

30:26​ - How much equity does the buyer/payer have?

32:00​ - What is the creditworthiness of the buyer and are there any bankruptcy filings?

36:00​ - https://www.NoteInvestor.com​

36:05​ - https://www.NoteInvestor.com/101​

36:30​ - https://www.NoteInvestingTools.com

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Tracy Z (00:10):

Today we're going to  show you how to look and analyze the deal if you want to buy it, or you want to refer it on to another investor. In this situation, we're talking about notes that already exist, 

Before we do that let’s start off with a disclaimer. Just letting you know that we are not attorneys, financial advisors, tax attorneys or accountants. And we definitely encourage you to seek the competent legal tax and financial advice. 

Past performance doesn't always guarantee future performance. We've been doing this for a combined 50 years. We've seen a lot of things over the years, a lot of different economies. There are basics that you really want to be sure you're doing first when you're looking at buying a note or referring a note.

Fred Rewey (01:34):

We are going to start by going to go over due diligence. Let us introduce to you the 3P's.

Tracy Z (01:59):

The 3 Ps are the cornerstone of deal analysis, due diligence and note investing. 

The first P is PEOPLE. 

Some people call it the payors or the borrower. The person making the payments that's a key part of it. But people also include the seller that is selling you the note.

Fred Rewey (02:23):

The second P is PROPERTY. 

Property is the asset. This is what the note is tied to. This can be the house, a single family residence or a multi-family.

Questions to take note of:  What is the property as far as the value of the property? What's the condition of the property? How accessible are the essential amenities from this property? Such as, are there good schools nearby?  Is it in a judicial versus nonjudicial state? As far as how easy or difficult a foreclose, if they stopped paying me to get that property back.

Tracy Z (02:55):

In the banker's terms they talk about the 3 Cs. Lots of collateral being one of them. Collateral, in this case is the property. The property is what you could take back if they did not pay the promissory note. That is a very important piece. 

Another piece of the property, is it financeable through conventional means? We see a lot of seller financing on hard to finance properties. You might have a home with excessive acreage. You might have a mobile home and land. You might have just a mobile home. These are all the things you want to know about the collateral. Because that will make a big difference in how you perform your due diligence and also what price you want to pay. 

Fred Rewey (03:41):

The 3rd P is PAPERWORK.

Tracy Z (03:43):

That's my specialty. I don't know if anybody loves paperwork, but it's certainly how I got started in the note business on the closing side. The paperwork is what gives you the ability to enforce your rights when you buy a note. 

The paperwork is very important because you want to make sure it exists. It's been done correctly and it gets transferred correctly. This will give you the full ability to enforce just like the original holder of that note. It also is a way for you to verify some of the things that people tell you.

Fred Rewey (04:22):

I also look at paperwork as an ancillary on things like insurance. Is there insurance on the property? Are the taxes current? These things you will see on paperwork.

Tracy Z (04:33):

For paperwork this includes the copy of the closing statement. Some people call it the HUD one settlement statement. But it's that accounting of all the money, the sales price, the down payment and how things were handled. 

Promissory notes are also very important. While the main piece of paperwork is the mortgage or the deed of trust. Some States have contracts for lien and then there's other types of paperwork too. We have a whole transaction checklist of all the standard pieces of paperwork.  

When somebody says, ”yes”, you get them to sign an option agreement. Then we start performing that formal due diligence. Some of this due diligence you can perform without cost and some does incur a cost. It's important to stage it. Do the things first that don't occur a lot of costs when you're doing a deal analysis. 

Now, we have here the Due Diligence Dozen. It's 12 questions that every note investor should answer about their transaction. You want to kick us off with the first?

Fred Rewey (05:58):

First one of these 12 questions. 

How long has the buyer been making payments and are they current? 

This one's pretty basic. Are they living in the property for two years, for two months or for 20 years? How long have they been making payments each and every month? Hopefully, they are current? Are they up to date on their payments? Did they fall behind? If they did, have they made it up? 

This is particularly true in the last year. There were some people that fell behind during COVID. Surprisingly enough, the numbers don't show as many people as you would think necessarily in this environment.  One of the things that they never ever want to lose is their home.

Tracy Z (06:52):

Another word we use a lot in our industry for that is seasoning. You hear somebody say, “Oh, how long has the note been seasoned?” In note investing seasoning makes it a more secure investment because it gives a chance for you to see that the buyer has been making those payments and hopefully we'll continue to make them. 

A note that has one month payment made on it versus a note that has 12, obviously one that has 12 is going to be considered more valuable in my offset. Some other, maybe not so positives, but when we look at it we start adding them all together and in their due diligence. 

The second question is related to the payment history. 

Is there a servicer collecting those payments and validating the payments?

Tracy Z (07:43):

It's more common now to have a third party servicer that collects the payments from the buyer. Borrower keeps track of the interest in principal. Maybe they also do reserves for taxes and insurance, maybe not. 

Sometimes though it's great when there is a third party service. We always suggest people use a third party service because they take away the headache. Kind of like a property manager for a landlord,  a third party servicer is like a note manager for note investors. 

One thing that we see a lot in seller financing is the seller sold to the buyer and they didn't have a servicer or a third-party to collect the payments. That buyer is making the payments direct to the seller. Now it gets a little bit more complicated to validate or verify the payment history for that.

Tracy Z (08:30):

That's where the paperwork comes in. If that's the case, we try to get the seller to give a proof of payment. It's a little easier now because everybody can go online. They can usually get copies of checks deposited into their account. They don't have to show everything in their account. But if they could just get copies of those deposits  made from the buyer, that would be one way to validate a payment history. If a servicer is involved. The seller should get a copy of that payment history to make sure the buyer is paying. All right. Next one.

Fred Rewey (09:07):

Next question is, Do the documents match the terms presented for the sale?

Not a real long one here, not a real tough one to talk about. When someone says, “Hey, I have a note, the property sold for 125,000 and I carried back a hundred thousand dollars note.  Then, I wrote the note at 10% with 30 year amortization. The payments are going to be $877.57.” We need to make  sure that all those numbers match what's really in the document. Just because somebody told us that doesn't make it true. Just because someone gave us the address of the property or the legal description of the property necessarily doesn't make it true.

Fred Rewey (09:56):

When we look at the documents of a property that sold at a price that has a value of X and all the documents match, now they may have said the value is 125,000 and the value's gone up. The part of our due diligence is to make sure the value is at least what we think it is, which is what it's sold. If it went up great. If it went down, that's a problem but doesn't mean we still can't do the deal. It just means the value that we are presented is not the value today. 

Basically we're just cross-checking what was set up front, with what the paperwork backs up. Because at the end of the day, only the paperwork matters. I don't care what anybody says. 

Tracy Z (10:51):

Another piece of the documents that’s really important is terms. Because sometimes we see some really crazy stuff written into seller finance notes and they don't always use the boiler plate. It's very important to take a look at those documents. Read them, anything unusual will definitely stick out. 

The normal things are the interest rate and the payment amount when the note is due. 

If they wrote it as 0% interest rate or perhaps they wrote it at interest only payments. That's where I was going with this, interest only payments are payments that just cover interest. It doesn't advertise the cover principle, maybe they forgot to put an all due and payable date in there, which means those interest only payments would just go forever, right to eternity.

Tracy Z (11:42):

Now there would be a way to buy that note, but you would certainly want to know that upfront. Or perhaps it says in there that they gave the seller life estate so that they could continue living there. Or perhaps this buyer has the first right-to- refusal. If the seller decides to sell the note. Those are all deals that you can still do. You will just handle them differently and also price them differently. It is very important to read those documents because they are not always conforming to bank paper. 

Next question, Are the real estate taxes paid current? 

This is a basic question and easy to answer. You just go online to the tax assessor for the County where the property is located, this is something in almost all counties is available and now you can pull up and see whether taxes are current.

Tracy Z (12:32):

When you order a title this information will also tell you that, but don't wait around for the title. This is one of the very first due diligence steps that I do, even when somebody is just calling it for a quote. You want to talk about why it's so important to make sure real estate taxes are current?

Fred Rewey (12:48):

Because otherwise you're gonna have to pay them.

Tracy Z (12:50):

We always say taxes  take lien priority over mortgages and deeds of trust. They get their money first. Real estate property tax is very important to know that those are being paid currently. 

I know that there's extenuating circumstances and it can take a couple of years before they can go to tax, give a tax lien, go to tax sale and get a tax deed. You have time. But there are people who have lost their lien priority because of those taxes. 

It also indicates the buyer's ability to pay. It's very important to know if there are escrows collected, reserves one 12 for taxes and insurance. The servicer should have been collecting those. A delinquent real estate taxes, it's time to start thinking about that. We also use that sometimes as a negotiating tool to the seller. If the seller doesn't realize that those taxes aren't current, you can explain that to them and maybe they can be deducted off.

Fred Rewey (13:47):

In most cases for the seller. When you tell them that they don't expect you to pay them unceremoniously, they usually take them out of their proceeds, which we've done at closing. 

The next question is basically: Is the property insured for fire and other hazards?

These go hand in hand a little bit, because if someone is delinquent, if it's not service, if they become delinquent in their taxes, it's not uncommon for them to be delinquent in other things. The biggest one that’s next in line would be if they're insured the property. 

Placing the property in insurance is important. We do have a story about property that burned down. When that property burns down, we're insured from the standpoint, it's our money on the line. And we want to get our money back out of it. So it's important that there's insurance on that property. We are the lien on that property. We will get what we're doing and then any remainders obviously for the person that owns the property. Definitely you need to make sure that you've got insurance on a property.

Tracy Z (14:42):

You definitely do. Look at the declaration page, it will show your buyer or borrower as the primary insured. Then it will show the lender, the lien holder as the mortgagee or, or lost payee. If there's more than one lien holder, they're on there as well. 

Sometimes sellers on seller financing don't realize they need to do that. A lot of times you'll get the deck page and it doesn't show the mortgagee or the last payee.  You need to get that added. After you close and you send over the paperwork, then you let the insurance company know that they need to change that to you, or add that to you. Whatever entity you used to buy the note. I'm shocked that so many people that are buying notes who  don't check if the taxes and insurance are current. We, as Fred mentioned, have a story on that. It’s on our website at www.NoteInvestor.com.

Tracy Z (15:31):

Just look up “Burn to Learn”, you will see the whole story about it. We made a choice to close that note because the insurance was current but just lapsed  because of the virus. It was supposed to get it right back on but it burned down over the weekend. That poor buyer  lost their property. Of course, they're not motivated to make payments on a property. Normally they'd had insurance that would have paid off their loan, would have paid us off as the lien holder of the note investor, but it wasn't. There was a whole thing that we had to do to get through that process. But I'm telling you, it is a funny story now, in retrospect. Things like that do happen. So it’s important to insure your property.

Tracy Z (16:13):

All right, next up, Is there an updated title report?

You can get a title policy and then you can update it. If there's no title policy, you can get a new title commitment. You want to know that your buyer vested in title  the lien and the mortgage deed of trust. 

The person selling to you is the one that currently owns the lien. Because we've seen a lot of notes and mortgages transfer more than once. You want to make sure, just like the deed transfers title property, recorded assignments of deeds of trust or mortgage is transferred along with an endorsement of the note. 

Please don't buy notes without getting an updated title report. I prefer title insurance. Some people are more comfortable just getting a report without the insurance, but definitely don't do deals without title reports. That's my opinion.

Fred Rewey (17:09):

Next one, keeping in line with titles, What is the lien position and what else is owed on the property? 

This is very important for several reasons. If things go bad, it determines the order of which people are going to be paid back first. If there's a foreclosure, you want to be first in line because there's not going to be enough money at the end of the day. You want to get paid first.

Fred Rewey (17:48):

You don't have to worry from a recovering your money standpoint of the liens that are behind you, but you do need to worry from what's the status of this payer that liens are stacking up behind. Maybe they took out a second to improve the house. Hey, that's great. There's more equity. My first is sitting in a better position, but maybe there've been problems and people are starting to lien the property. That's just an indication that I could have a problem a little bit later, but you do want to make sure that you're getting the liens that you want. You hear a lot out there about people buying seconds, which means that they are behind the first.

Fred Rewey (18:29):

That means there's somebody in front of them. Take for example the 80, 10, 10, it means the payer got an 80% first mortgage. They had 10% to put down that left 10% in a second. Maybe the seller carried back a little 10% second. Well you have that, you can buy that, but you have an 80% first in front of you that has priority. 

If something goes wrong on your note, or they stop paying, the only way to initiate a foreclosure, is to not jeopardize the note in front of you. Which means you have to pay that off. You have to take care of that. You have to make that note good or make payments on it if they allow that. You really have to take a look at that and understand what is the position you think you're buying? What does the paperwork show that you're buying or verify that you're buying? Then what do you want to do if there's other things going on?

Tracy Z (19:22):

Also you're looking at how much does that buyer or borrower have encumbered against the property. We talk about loan- to- value LTV. There's also something called CLTV, which is cumulative loan to value or combined loan to value. That's all the debts that the buyer owes against the property compared to what the property is worth. Because if people get underwater, meaning they owe more than what the property is worth. They don't have as many options because they don't have much equity and they're much less likely to continue paying if they hit financial hard times. Very important to know lear lien position and other liens on the property. It also affects you. If you're going to take a deed in lieu of foreclosure, even if liens are behind you, if you're in first position, that will also affect you. If you're going to take a deed in lieu foreclosure, you may still have to foreclose those out. All of that should work into understanding your purchase. Now we'd like to buy performing notes and we hope none of that ever happens, but you always have to prepare for the worst case scenario and know what your outs are. You need to have exit strategies. I recently did a presentation on 15 different exit strategies. Have all these different exit strategies and knowing your lien position is one step towards knowing which exit strategy is the best.

Tracy Z (20:40):

All right, next question. Who is the current holder or seller of the note being purchased? 

We talk about the buyer, the payer, and knowing your payer, who's making payments. Are they gainfully employed? But another piece of that is who are you buying the note from? There are a lot of sellers who are great sellers and you buy notes from them maybe once or multiple times. And they are wonderful people. There are also sellers that are pretty savvy and they will not always reveal all the things that they should, which is why you perform your diligence. Or you might find out there was a contract for a deed seller that was unscrupulous and actually got in trouble with several States for taking advantage of buyers and not doing full disclosures. That doesn't happen very often, but it's one of those situations.

Tracy Z (21:35):

You should Google the name of your seller and just see if they have any litigation or outstanding problems that might carry over to you. Now, a title report can tell you that related to this piece of property, that security for your note. However, you might want to look at that seller if they are creating multiple notes in general. Just so you know, your seller and you know your buyer borrower. That is something that we didn't think about so much in the past, but now as people have gotten more savvy, that sort of thing is a very important piece of your due diligence to do a little bit of research on your seller.

Fred Rewey (22:13):

There is a question from the viewer. Karen just typed in Facebook, “when a note turns to non-performing (NP) and this probably across the country from you, how do you handle disposing of the property after foreclosure?” 

It's a great question, Karen. Usually my first call is to a local realtor and depending on strategy on how much you have in it and what it's worth. But you sound like you've completed after the foreclosure aspect. I'm going to look for what a quick sale.

Fred Rewey (22:57):

Meaning, if this is a  hundred thousand dollar property, but if you sell it for 80,000. Can I live with that 80? Yes, I can. Great. Let's do that. Otherwise, maybe I play for the longer strategy, which is maybe let’s fix a few things, try to get the 110k, 120k for the property, or maybe I listed for sale. I carry back another note if I like the property, but if I'm not scared from it overall, and I think, Hey, this is still a pretty good property. I got it back. I'm in at the right price. That may be your best strategy, you bought as a note originally maybe hoping to make it work out, maybe hoping that they would get their payments. They didn't, you took the property back. So unless there's something new that came up about the area or new that came up about the property, it might be a good idea. You know what, let's just take this opportunity to offer this for sale by the owner, get a realtor, help you there since you are at a distance. And just go with that.

Tracy Z (23:49):

One thing also, that's important about that question is when a note turns non-performing, then the first thing you've got to do is work with your servicer. If you have a servicing company and they will normally hire an attorney to start the foreclosure process. We like to try to do a deed in lieu of foreclosure, whenever possible. Some kind of cash for keys, and either you get it back through that means, or through an actual foreclosure. Which can take some time and energy and expense. That's why we like the deed in lieu of foreclosure. All that has to happen before you can start worrying about disposing of the property. 

Fred and I just recently listed a property and we did the flat fee so we could get on the MLS. It was just a flat $299 fee. We offered to pay a buyer's agent, two and a half percent and well that we had access to them the less. It was a fantastic response without having quite as big of expense. We've also used Facebook marketplace to dispose of advertised properties,  Craigslist was used to great, but now we see more action from Facebook marketplace. But if you're worried about the real estate agents commission, that flat fee can be good. I still think if you're long distance, a full service real estate agent is what we refer to.

Fred Rewey (25:04):

You're gonna want somebody to manage it for you. Great question, Karen. Thank you. 

Next on due diligence dozen. Where is the original note and will it be delivered at closing? 

This is really simple. The note is key. It's an original note. It was signed, it's not just a copy. It's not a Xerox. It's not a fax, it's not an email. The note is just as powerful as a check. It’s going to be an actual income. We've done the spit test where you kind of put your spit on there and make sure that it actually smears that it's not a copy, especially as copiers got better and better over the years.

Fred Rewey (25:46):

When I'm dealing with the seller, I asked if they have the original note? Is it in a safe place? It should be in their safe deposit box. Some people have it their attorney keeps it for them or it's an important file on their desk, wherever it is, they should have that. Will it have the ability to be delivered at closing? If it's not, then we can do a loss now note, affidavit. Where we have to ask everybody to sign a new note saying, “Hey, we all recognize the note got lost, but we all agree on what the terms are. And we're deciding on another copy.” They're going to endorse that note over to us. Then we're going to keep it and we're going to have that. You want to make sure that they have the original note and they are able to deliver it at closing.

Tracy Z (26:28):

This is another one of those things that I've found new note investors just don't even think about. You need the original because promissory notes are negotiable instruments. Original notes are very important. We're not saying you can never buy a note if it's lost but there are different steps that you need to go through. 

This is one of those things. I'm really surprised people haven't keyed on more. I think now that it's becoming more common to have to present a note. If you have to go for foreclosure or something like that, that people are becoming more aware of it now. Sometimes you have to play the where in the world is the note game, especially with these sellers. We have a whole process of how we do that. 

Fred Rewey (27:35):

We have a bonus question more on housekeeping. Christopher asked you, do you have these 30 dozen in a document? I could download some more or should I have been taking notes? I got two things for you. Christopher one is since you're on YouTube, if you skip forward to all those little blue bars that have been popping up, those have all the questions. Or in the next couple of days, what we'll do is time code this video, if you will look at the video description, you'll see them all right in there as well.

Tracy Z (28:04):

They will also become part of a blog at www.NoteInvestor.com/101, where we post all of these series.

Fred Rewey (28:11):

There is another question from the viewer, if the original note is lost and the buyer refuses to sign a replacement note affidavit. How do you resolve this?

Tracy Z (28:18):

Great question Christopher. The first course of action I would like to do if the original note is lost is get a replacement. Know about the borrower and get a lost note affidavit from both parties. If they don't, then I suggest that you talk with an attorney and find out in that state how tough it is to foreclose without the original note. Or if you know that seller, perhaps they can do some kind of indemnification as part of their affidavit. If you ever have a problem that they would buy it back. I don't normally like to rely on those. I like to know that we would be able to take care of the situation if we needed to. Some people do buy with just a loss note affidavit signed by the seller without a replacement note.

Tracy Z (29:07):

But it really does depend on the state. Whether you think you're going to have to foreclose or not. I mean, obviously it's a much bigger problem on a non-performing note than a performing note as well. That would be a case-by-case scenario. 

The next question on due diligence dozen is,  What is the current value of the property?

That's your collateral. What is the current value property? It's so important. When we talk about people, property, paperwork, what's the value of the property? Has it gone up? Has it gone down? Right now everybody seems to be going up and that's wonderful, but we lived through 2008. When we bought deals at 50% investment to value. And then they were a hundred percent investment to value because of falling value. Knowing the current value of the property, most of us will do some kind of analysis online.

Tracy Z (29:54):

Then most of us will order either a BPO, a broker's price opinion or a drive by appraisal to get a third-party validation. Now, if it's not local to you, you can't drive by it. That's why we use these third parties. There's all kinds of third parties that provide that service. They're not all created equal. You definitely want to do some of your own little research on comps as well. But get a reliable, local real estate agent or appraiser to give you an opinion of value. A lot of that depends too, how much you're investing. How much equity the buyer has. 

Fred Rewey (30:26):

Next question is,  How much equity does the buyer/payer have? 

The more equity they have in the property, whether that occurred because the property value went up or it occurred because they've been living there a long time making payments for a long time. There's a lot of seasoning as we said earlier, however that equity has occurred, the more equity there is, the less likely you are going to have to foreclose on the property. Because in the event that they get into a situation where they can't afford the property, or they need to move, they're going to sell that property to gain some of the equity back themselves and cash and leave. The more equity equals a safer investment.

Fred Rewey (31:11):

This is also true when you start looking at products that fluctuate in price a lot. How much equity you want to see in something on a single family residence versus how much equity you want to see if it's a piece of raw land. You want to see a greater commitment. If I'm going to buy a note on raw land, I want to see a really big down payment, to know that they are committed to this land. That they're not going to walk away. Also, land prices can fluctuate a lot faster than a single family residence. Especially when we're looking at it in an economy that could go down. They don't go up twice as fast, but they do come down twice as fast. You’re just going to look and see how much equity is. One of those indicators is one of the things we talked about as far as credit and all the other stuff, but it's one indicator of what's going on in the property.

Tracy Z (31:59):

Well, that is what brings us to our last question in the dozen. And that is, What is the credit worthiness of the buyer. And are there any bankruptcy filings? 

How do you check bankruptcy filings? Well, you can go to pacer.gov, and you can sign up to have a free account. They charge 10 cents a page for the data. That's one way you can see if they have bankruptcy filings for the credit worthiness of the buyer. Depending on the seller, they might have a copy of the buyer's credit report. They may not. You may have to do your own research as well if you're creating the note. It's a little easier, get a copy of the buyer's credit report because the buyer's involved and they can give that to you.

Tracy Z (32:43):

If you're working with institutional investors that you're referring the note to, you don't have to worry about this part because they will take care of that for you. When they are ready, they will do a soft poll on that payer's credit and check that as well. If you are buying for your own investment, then you're going to need to network with someone that has the ability to get this information legally as well. 

According to the fair credit reporting act, the buyer's credit, how they paid their bills in the past is a very good indicator of how they will pay their bills in the future. Now, sometimes buyers get into a little trouble because of life circumstances but then they get themselves out.

Tracy Z (33:43):

Somebody only has good credit. But they've had some problems with medical bills, those sort of life-changing situations. That's why all of this comes together. When you're looking at these 12 questions, one question out of the 12, isn't a deal breaker. It's a balancing of the scales. If not a big down payment and that's a negative. Oh, but they've been paying 24 months. That's a positive. Maybe the credit's not perfect, but they put a nice 20% down payment. You're constantly balancing the scales because you're buying notes that may have already fallen out of some thinkers box guidelines. You're looking for the value where other people might not have seen it, but you still want it to be an investment that you can recoup if something does happen.

Tracy Z (34:26):

I always call it balancing scales. Just think about the pros and cons list. When I'm doing a deal and we will present it back and forth to each other, what are the pros and what are the cons? Do the pros outweigh the cons. Do they have offsetting factors? Because if you look at the list and it's all a con or negative then you get that's not a deal you want to do. You definitely have to understand what your outs are? What are your exit strategies and how you're going to make the deal profitable and what you're going to do.

Fred Rewey (35:01):

It's what I love about this business. We went over 12 things and let's just assume that all 12 of those things on a traditional conventional loan if one of those 12 does not hit whatever benchmark then it's done. I don't care if there's 40% equity in the property. You didn't hit this mark, so you don't get to do it. 

That's why we're able to buy notes. That's why this industry exists. That's why roughly between 6 and 8% of all of all real estate notes or if you see me 6% of real estate transactions involved owner carryback financing. It's just what it ends up being. A lot of stuff falls through the cracks. There are good people that might have good credit, but they're self-employed, or just started their own self-employment. But they've got this big down payment. The banker is like, well, I don't care. There's no track record here. You haven't been employed long enough. That's what's great about this industry, all the offsets.

Tracy Z (35:52):

We love the note investing world. We're glad that you joined us here today. We'd like to encourage you to do a couple of things. If you want to learn more, you can go to www.NoteInvestor.com. 

If you go to www.NoteInvestor.com/101, you can enjoy the Note Investing 101 series. You can also sign up to get notifications. We have a blog, a newsletter, a bookstore on all kinds of great information, over 300 articles. We have lots of good stuff. Of course we ask you to like, or share here on Facebook or YouTube. Hit the bell so you get notified when we go live. 

We also have www.NoteInvestingTools.com, which is where we sell our note buyers sites and a couple other resources. We're all about tools, training and support for note investors. Thank you. We appreciate it. 

Happy Note Investing!

[lunarr-rrose]

Taking Your Note Business Online - Note Investing 101

https://www.noteinvestor.com/101​

What does it take to have a thriving note business online? 

In this session, we are going to walk you through the ‘must haves’ when it comes to creating a robust online presence and lead funnel. We will be covering…

Do I need a dedicated website?

What should my website say? 

Should my site attract note sellers, referrals, or investors? 

Do I have to be on social media? 

How can I automate this to work when I am away? 

How do I get potential note sellers to contact me? 

Join us Tuesday, April 20th at 1:00 pm EST for “Taking Your Note Business Online”…and bring your questions as this session is LIVE!

Timestamp: 

0:10​ - Introduction: Taking Your Note Business Online

1:25​ - Disclaimer

1:51​ - Benefits of Notes In IRAs

1:43​ - Marketing your note business online.

1:57​ - Do I need a website? What is the purpose of a website (related to notes)? 

4:45​ - What platform should my website be on? 

6:30​ - What about ‘free’ sites?

8:52​ - What should my website contain? 

10:01​ - How much does it cost? 

12:06​ - How do I get visitors to my website? 

14:17​ - If you add a squeeze page, how do you collect the data?

16:26​ - https://www.NoteBuyerSites.com​ - a walk-thru of a note website

23:28​ - https://www.NoteInvestor.com​

23:54​ - https://www.NoteInvestor.com/101​

28:51​- Next week’s topic: Top Questions You Should Ask Before Buying or Investing In A Note

Discovering Notes - Note Investing 101:

https://youtu.be/pjtPZBUTU4M​​

Profiting From Notes - Note Investing 101: 

https://youtu.be/kGqZ1QJ_9lA​​

Marketing For Notes - Note Investing 101: 

https://youtu.be/HaCnPztbNfE​​

A Day In The Life Of Notes - Note Investing 101:

https://youtu.be/IGqW2pdLkuE​

Ask Us Anything! - Note Investing 101: 

https://youtu.be/XgkX2lEjbzA​

Behind the Scenes/ Member Orientation - Note Investing 101: https://youtu.be/mcHnvb6G8YQ​

Buying Notes In Retirement Accounts - Note Investing 101: https://youtu.be/gpffKb_Aoeo​

 https://www.noteinvestor.com/101

--------------------------

Fred Rewey (00:11):

Welcome to Note Investing 101 with Fred Rewey and Tracy Z. 

If you've been following along, this is like our seventh (eight) one that we did of this. We're just pulling back the curtain a little bit. Unveiling the basic, how to's, fundamentals of the note industry. Why do we like it so much? We have a combined 50 years experience in the industry. You'll find anybody you talk to that work with us. We pretty much knew no nonsense. We're going to tell you the way it is. We've done that on every session and this one is not to be excluded of that

Tracy Z (00:45):

Today, we're going to talk about taking your note business online.

When I got started in the note business in 1988, there weren't a lot of websites running around. Al Gore hadn't invented it yet. We had our first personal website, I think 1997. We got involved with websites for the note business earlier than that with our corporate job but our own personal website, we started in 1997. Then we went into doing a blog and we've really expanded. It's been a big part of our growth in the last 10 to15 years. Today we're here to talk a little bit about how to take your note business online.

 Fred Rewey (01:25):

But first let’s do a disclaimer.  We are not attorneys. We don't pretend to be one on TV. We don't pretend to be one on YouTube. We are not security people. We are not accountants. We are not going to give you legal advice or financial advice. You need to do that on your own. Did I leave anything else out?

 Tracy Z (01:41):

I think you covered it all. Today we're going to talk about marketing your note business.

 Fred Rewey (01:44):

First I wanted to go through some questions. The most popular questions when it comes to running an online note business. Then we're going to walk you through some sites and show you some demos and some things of how you want to build them yourself.

Very first off is, "Do I need a website? And what's the purpose of a website related to notes?"

 I hope we're not talking anymore about whether someone should have a website when it comes to a company.

Tracy Z (02:13):

Yes, everybody, in our opinion, any business, not just the note business, pretty much needs a website. Now there are some exceptions every once in a while, you'll hire somebody up on Facebook marketplace or something that doesn't have a website. But in the financial world, when you're buying someone's important asset, like a real estate note, they want to know that you're real. And the way that they will see if you're real is if they'll go out on the internet and search for you. You do want to have a professional looking website. Now, good news you don't have to spend thousands and thousands of dollars anymore to get a professional looking website. Besides just looking professional, what are the other benefits to having a website.

 Fred Rewey (02:46):

I think it's guaranteed credibility. As you're saying, people are going to check you out.

Another thing is a website is working 24/7.  When we started a website long ago, like Tracy in ‘97 it was kind of an experiment. I didn't know that people are going to do this. Now people search you online, not only to see if you're real, they're searching for information about the note industry, about their current situation.

A lot of times it’s happening after hours. That is at two in the morning when they're stressed and worried about what to do. That's when they're looking for the solutions and you're not going to be there on the phone. Your website is doing the talking for you.

The other thing about a website is that you have to remember this is a people’s business. Nothing replaces talking to somebody one-on-one. The only purpose of your website is to give enough information for credibility and get them to want to talk to you and learn more. And that's it.

A lot of times people think, Oh, they get overwhelmed by a website or I need too much. Yes, you want to educate. Yes, you want them to know about you, but it only has one goal and that's to get them on the phone.

 Tracy Z (04:00):

The other great thing about a website is most of us work from home. Some people have physical office space. We'd done both over the years. But the nice thing about a website, it's kind of like your brick and mortar business. You don't have to have a brick and mortar business, but it's like your office space but online. It just adds that level of credibility.  As Fred said, it works 24/7. People can get information to actually submit a request for a quote. We've experienced that we’ve woken up in the morning and had people requesting quotes on notes just off of our website.

 Fred Rewey (04:27):

It's the great equalizer. No one knows when they go. If you have a good looking website, it doesn't have to be the, all the bells and whistles. Sometimes you can overkill it in that sense. But a good looking website no one will ever know whether there are two employees or 200,000 employees working behind that website. You're all on an equal playing field.

The next question is, "What platforms should my website be on?"

This may be a bit of an advanced question for some of you. Going, "Well, wait a minute. I didn't know there were multiple things. I just knew the internet". There are a couple of different things out there. Do you want to talk about this though, in relation to WordPress?

 Tracy Z (04:59):

Well, we have a preference. We like using the WordPress platform to build our websites. It's a self hosted version. You have a hosting, an SSL certificate and your own domain name. We like WordPress because we find it's simple for most people to use. We found over the years with its blog feature that you have the ability to post articles, that it's very search engine is optimized friendly. Now that is not the only type. Some people like to program HTML. Some people like Wix. Some people like GoDaddy's website builder. There are lots of other choices but we really like WordPress because you can find lots of professionals to help you with it. The interface and the search engines are very easy.

Fred Rewey (05:43):

I think, for me, one of the biggest takeaways as Tracy said is that it's easy for you to work on. It's easy in a sense that you might see there are so many themes out there. You can go, "Oh, I love to look at this". You can buy it bolted on. The nice thing is when you want to make changes you're not paying somebody $50 or $100 an hour. If the back interface of that is going, "Oh, I want to change my phone number. I want to change my address, or I want to change the sentence." It's very easy to use behind the scenes. That's why it's a platform. In addition to the fact, Google loves it. It's streamlined and everything else.

 Tracy Z (06:13):

It's a little hard at the beginning to get the site to set up. Sometimes it's to your benefit to buy a premade theme or to hire someone to implement the theme. But once it's set up and operational, it's very simple to go in and post a new article. Then you can have that article shared out on social media.

 Fred Rewey (06:30):

Next question. “If you're just starting out and you're searching for, where can I get a website?”

 You probably see a lot about free sites, companies that offer you a free site. If you buy the domain name there, which is whatever the name of your company is, ours is www.Noteinvestor.com or whatever it is for you. And they'll say, "Hey, if you buy that here, you can have a free website or you can have a free email." Our advice to you, it doesn't cost a lot to host a website and it doesn't cost a lot to build a whole website but there are a lot of traps that go along with a free site.

 Tracy Z (07:01):

A lot of times if they're offering it for free, because there is a physical cost associated with the domain name and hosting. Then if they're offering it for free, it's usually because either you don't get to have your own domain, your own website, you're sharing resources. Or perhaps it's because they're going to put a bunch of advertising on your site, which is just going to distract your customer.

We recommend you buy a domain name. They only cost about $15 a year, and then you get hosting. We like to get flywheel hosting. There are lots of other hosting companies. Somebody will say they like to Go daddy. Some will say that they like HostGator. They had some like BlueHosts, but the thing is, you don't want to be on this big shared hosting platform.

You want your own hosting. You want to be able to have an SSL certificate. That ranges about under $150 a year for that kind of hosting. And then you want an email at your domain name, and that is usually provided by an email provider at your domain name. It's usually different from hosting. Sometimes it's combined with it.

 Fred Rewey (07:57):

The other thing about free sites that I think becomes the even bigger issue is what happens when you outgrow them and want to move it. A lot of times you're held hostage there. They may own your URL and you didn't know that. You've built this business and you think you own the URL. Now you want to move it but you can’t because they own the URL.

Sometimes you do own the URL but they're offering these astronomical prices to release it to you. I would avoid the free sites. There may be a couple of good ones out there off the top of my head but I'm not going to recommend anybody because everybody is changing every day.

If you have a question, you can certainly email one of us either Fred@noteinvestor.com or Tracy@NoteInvestor.com Or info@NoteInvestor.com.  We'll be glad and try to steer you in the right way if we can.

 Tracy Z (08:47):

But we're not going to steer you towards the free site though.

 Fred Rewey (08:52):

Next, "What should my website contain?"

 Tracy Z (08:56):

All kinds of good stuff, right? It should contain a Contact Us Page. This is very important so that people get a hold of you. It should contain an About Page. These are some basic pages that should be on a website. I think in the note business it should contain a Quote Request Worksheet. It’s important to have a Frequently Asked Questions page. That’s five or six main pages like that.

Then I think it should have an Article Sections. Like some people call it a blog. You can try to post something at least once a month, preferably every other week, if you're really feeling Gung ho once a week but at least once a month to show that you're keeping things up to date and fresh. What else do you think?

 Fred Rewey (09:35):

Well, you pretty much named everything. You covered everything. I mean it's a combination of all those things.

 Tracy Z (09:46):

Also you can add video. You can upload videos to let's say YouTube or Vimeo, and then you can share embedded on your website. The video would be another more advanced technology, but you don't have to do that. All the WordPress sites are compatible with that.

 Fred Rewey (10:05):

"How much does it cost?" It depends.

It could be free. You can do it yourself. I'm not going to say free completely though, because yes, you can do most of it free. But you are going to have to buy a domain like Tracy says anywhere from $99.5 to $159.5 a year. You're going to need to buy hosting, which at the base level is probably going to be somewhere around 10 bucks a month.

At the high level, somewhere around, well, let's see $10 to $15, maybe somewhere between say $75 and $100 for some decent hosting. And then you're probably going to want to buy a theme, in which there are free things out there that are very good. By the way, there's a big difference between a free website and a free theme. If you find a theme that you liked and it’s free then that's certainly good. But if you want to have one built, you're probably going to get quotes of anywhere from $1000 to $2,000. I'm going to tell you right now on an average custom site and correct me if I'm wrong because you got your more that side of the business, but if you're spending more than 750 bucks for a custom site, you probably have a lot of bells and whistles.

 Tracy Z (11:10):

Because we've gotten so good at building websites and we found that our members have a need for websites, because they are getting charged from $1000, $2,000 up to $3000 for a simple website. For this reason we created a division of our company that helps people set up their notes on our website. It's run by our daughter. We decided we were going to try to provide people a platform to have a website just like we had with www.NoteInvestor.com for an affordable entry level.

If you want a custom site, they'll start at the $899, like Fred mentioned.  We also have ready to go note buyer website templates that are only $497. We offer a discount to our Note Investing tools members as well. There are other affordable options, we're not the only ones that provide that. But from us we got the www.NoteBuyerSites.com

 Fred Rewey (12:01):

And we are going to show you that site. We'll use it as an example.  

Next question is a big question actually. "How do I get visitors to my website?"

Because just having a website alone doesn't necessarily work.

 Tracy Z (12:15):

That's very true. There are many strategies for it. You have to realize that you can't just build it and they will come. You still have to market your website. It's just like if you had a brick and mortar office, you might have a couple of people that happen to walk by, but you have to advertise and market that your business is there. It's the same way with your website. There are several strategies for that. You can do offline methodology to bring people to your website. That might be your networking, your referrals or your direct mail. There are also the online methods to drive people.

 Fred Rewey (12:45):

You can advertise. You can use Pay Per Click. You can pay for an ad on Google and immediately have somebody click through it. You can have alliances with other people, maybe doing banner swaps for example. If that's something you want to do. You have the SEO aspect of it.

 Tracy Z (12:58):

SEO stands for search engine optimization. Now that's done harder and harder over the years. It does still work. You just have to consistently add fresh, new and unique content.

Preferably we used to say over 350 words, but then we sell over 500 words. But now we're really talking 750 to a thousand words of good quality, unique content that you add. And if you consistently add content that uses good SEO practices, then you will slowly but surely work your way up in the rankings. But there is some longevity that it takes now compared to what it used to be.

 Fred Rewey (13:33):

If somebody's watching this money right now, chances are you're going to get contacted. Someone will probably promise you a number one ranking for $1000, $2000 up to $3000 a month. The only way to be on the number one page of Google is if you have an advertising budget, you buy ad words, you're paying so much for someone to click on it and things like that. But people that say they're going to optimize your website to get you a number one ranking and all this other stuff. That game has sailed. It's not there anymore. Just save yourself some money, do a little bit of research and realize that is just not where to direct your efforts.

Tracy Z (14:16):

We have a question from a viewer.

 Fred Rewey (14:19):

"If you add a squeeze page, how do you collect the data?"

 Tracy Z (14:23):

There are lots of choices. I'll start with the simplest version then I'll let Fred talk about a more complex version. The simple version that all our websites come with, it's called input form. We use gravity forms, people input their information, it is stored in the website and it sends you an email to let you know that someone did that and then you can manually respond back to them. That's the very simplest form but there are other really cool automated ways that can happen for you. You want to talk about those?

 Fred Rewey (15:01):

I'm real big in automation of it though but from an expense standpoint, you pretty much start out from what Tracy is talking about because it's the simplest, cheapest and it's the easiest. When you get going, though, what I like is automating everything. The way I automated is the same thing.

Let me show you an example. This here as they get into the websites, when they enter their input triggers in my contact management system, it collects their name, email and whatever data I want specifically collected. Then what happens is that they go into an email sequence per se. They'll get a welcome email. "Hey, thanks for that. Thanks for requesting this." It will create a system of triggers. For example maybe it sends them a video.

 Fred Rewey (15:43):

Maybe it gives them a certain tag when they watch the video. Maybe it sends them an email when they did not watch the video versus when they did watch the video. It automates all that behind the scenes. And I love that. There's some very inexpensive ways to do that. You can do that at a very basic level with something like a MailChimp or an Aweber. You can also get into something like a Karcher, which is what I use. It may cost a little bit more, but it can also create the landing pages and everything else for you. I'll show you some examples of that as we get into it. But that's a great question.

 Tracy Z (16:12):

It is a great question. I always say start with the inexpensive and then when the manual methodology takes too long to keep up with it then you've got enough business going that you want to pay for the automation.

 Fred Rewey (16:25):

All right, let's jump in. Let me share my screen real quick and we’ll jump into a couple of these to show you exactly what we have going here.

If you go to www.NoteBuyerSites.com, this is the place that shows you where we have these sites that Tracy mentioned, these are turnkey sites. Now these are not accustomed to only you. Anybody buys them they get the same site. Obviously we customize your name and phone numbers and things like that.

This is your presence online. From here you can gradually build your website. This is your quick start in a turnkey operation.

 Fred Rewey (17:06):

The first thing you would do is look at themes, you can build these yourself. You can choose whatever kind, look and feel that will work for you.

I'm just going to jump into one example. Let’s try “confidence” because that's one of our newest ones. This is exactly what a website would look for you. Of course it will have your name and information.

Let's talk about a couple of basic things that need to be in here. In the beginning it needs to have something kind of warm and fuzzy. You can see right here out of the gate is a request to quote.

 Fred Rewey (17:41):

You also need to put action items right out of the gate. You can see at the very top on “Cash for your note” there's a “Contact us sell your note today".

When we go to the next tab there's another one "Get started today".

When you go to the next tab that scrolls through, it's "Get help now".

The visitors of your website, if they need some help, maybe they want to request a quote. Then right out of the gate, it will give them some options on what they can do. Now, remember we are talking about people looking at this in the middle of the night. This gives them several options.

 Tracy Z (18:18):

Yes. You can download a PDF. They can call or the option we like is the online worksheet. You go to the online worksheet. It will contain the information that they will give you so that you can start to work up a quote.

Somebody wants to sell their real estate note. This is mostly geared for people who have sold property with seller financing. Then they could provide the basic information. You will be able to get back to them with a quote.

Then of course, you've got a "Contact us page". That page has your information, your logo, your company name etc.

Also it has a blog and the “About us page”.

 Tracy Z (19:09):

This is the blog. This is just that little excerpt of the articles. One of the cool things about these websites that comes preloaded with 15 articles is it's ready to use content that you can modify to make your own or you can use as is.

 Fred Rewey (19:28):

Let me just walk through the homepage a little bit. In here it will tell about your company, on this particular theme working with us means leaving your headaches behind and getting your money now.

As Tracy mentioned there are articles right here on this website. When someone goes, “Well wait a minute, what would be five reasons I would offer on our financing? “ There are multiple articles here that can answer that question.

 Tracy Z (20:11):

Absolutely, all of our sites have the same basic content. They just have different themes that have different homepages. Some people like to modify these and add some customized content to speak to investors. Me, I kind of liked that new real estate theme that our daughter just did. Do you think that was theme four? Yes, right there.  That's a nice one. Looks very much like your real estate thing.  

Of course you change out any of the photos. Our web team does that at no additional cost, as long as you do it at setup you can switch out photos. You can also switch out colors. It can be customized to extra colors.

 Fred Rewey (20:51):

Here's another one. And again, this is a sidebar. These lists are articles on the left side and of course they can also click on any of the recent posts. Plus it always has this “get in touch right away” tab so we know how to get a hold of somebody.

 Tracy Z (21:04):

Both the “quote sheet” and the “contact us” page have a simple form. When somebody fills-out these forms it goes into the backend of your website and then it will notify you. That can be exported as well. If you want to get fancy, like Fred said, you can actually integrate it with the MailChimp or a Kartra, when somebody fills out a form that will be added to the database.

  Fred Rewey (21:28):

Let me give you an example of that. When you go to www.noteinvestor.com many of you are getting the notifications for when we do these. You probably came in here at some point and one of the things you'll see, like this is how we do an opt-in on some of our pages. You can see someone that has what I call a bribe. Tracy says it's an incentive, but basically it is something to encourage them to give their email.

This is not necessarily directly to note sellers specifically, you would go to another site for that, but this moves towards investors. If they click on this it will open up this form. If they put in their name and email then they get to download the information and all the things that are happening behind the scenes.

 And what immediately happened after that was they went into an email file. All those things exist as they go through there. So you can have something fancy like that. Or you can just have something simple as far as Tracy said what kind of dictates that is, well, how many emails you're getting. If you're getting 10 emails a day, then you probably want to automate that .If you're getting one or two, then that's something you want to think about.

 Fred Rewey (22:32):

All right, well that's the walk- through of some of the websites. Thank you for following along on that. Now, any of those you can build like the turnkey sites. As we told you, we sell, we have 497 bucks or something, and that sets you up within like 72 hours. Assuming we get all the questions answered or you can build it yourself. You can go out and search for WordPress, you want to be self hosted and you want to go find a theme that you like, and then you start changing and building all the content on it.

 Tracy Z (23:02):

Yes. The great thing about the websites is you build it, you own it. It’s your own domain. It has an SSL certificate. It comes with one year of hosting. You do have to purchase the domain name. Then after that renewing your hosting ranges between $96 and $120 a year. Then you just renew your domain name. The only thing you have to remember is if you want to use an email at your domain name, it just has to go through your domain provider. Websites are a great thing. We love them. If you go out and do very many searches in Google, you'll see that www.NoteInvestor.com pops up a lot. The www.NoteInvestor.com website is built on the exact same WordPress themes and platforms that we use to do the www.NoteBuyerSite.com

 Tracy Z (23:43):

We give you the same kind of things that we use to promote our own business. We don't provide something that we don't use and believe in ourselves.

Again we invite you to go to www.NoteInvestor.com/101 that's where you get all the updates for what's going on with www.NoteInvestor.com.

Maybe just for a few moments, let's do a little bonus discussion about why websites are so great for sharing content for social media. We use that a lot. When we post a new article, we'll go out to our social media platforms like Facebook, LinkedIn, Twitter and Instagram then we'll share a link to that blog post. It becomes good information that's what I think social media, at least in our industry should be about, is sharing information and educating. I don't think social media is about a sale so much as people get to know, like, and trust you. So that is another way that if you write articles and blogs on your website, you can bring their visitors back to your website.

 Fred Rewey (24:41):

Also understanding social media is kind of a blip on the radar. Let's say you write an article or you buy a website like ours that comes with 15 articles. It's not a share at once and never got to share it again. Chances are if you have a hundred people on Facebook that follow you and you post that maybe seven will see it. Then based on their reactions, maybe 14, we'll get to see it. So you have the opportunity of sharing that every six weeks or five weeks or four weeks. Share that same article but do a different reason or why you're sharing it on Facebook.

Fred Rewey (25:18):

Like if you're doing a different post but linking to that same article, you can recycle that. You can have excerpts of it. You can ask different questions that point to them. We have a whole part of our company that does social media services for people in the note business. And it does a lot of reusing those articles and getting it where you look like you're active that way. I mean, we're talking about Facebook. Linkedin is great for being able to share. Twitter's okay but not so much for deal flow. But some of it is really just being seen in lots of locations, search engines like Google and stuff like that. They pay attention to that. They see if you're active on other platforms that aren't just their own and that does have some weight.

 Tracy Z (25:58):

It absolutely does. Then you can go another step further. You could list your website and your business on Google business pages, Facebook pages and LinkedIn business pages. All of those create valuable links. Think of them like breadcrumbs back to your website. That is the sort of thing search engines look for. One thing to think about, if you do get a website, remember to come up with content that other people have used. That's great when you're setting up a brochure site just to get started. But if you want to go to that next level, that extra effort, then you would want to go through and rewrite the content that’s unique to you. Put it in your own words and unique content, meaning somebody else's habit is something else that search engines like to see, but you've got a place to start and you can build and grow from it.

 Fred Rewey (26:40):

I just want to say one more thing about social media that I just thought of. Social media can get overwhelming and I can do a whole webinar on how to make that a lot easier. There is some softwares and things you can do to make it a lot easier. But even if you don't think you're going to be involved in social media today, if you come up with a company name and you find out it hasn't been taken on Facebook, Twitter or whatever it may be. Go get it and lock it up with your email.

 Fred Rewey (27:15):

Lock it up even if you don't use it, even if you don't broadcast it, make sure you lock it up and have your name because someday you may want to use it and I highly suspect you will.

 Also you don't want someone else using it because if you build all this leverage and all this good promotion then someone else has your name on Twitter, Facebook and LinkedIn then you don't really want to get into that down the line.

 Tracy Z (27:42):

Yes, also think about what domain name or URL you want. When we started out, we were Diversified Investment Services, Inc. hence our website name became www.DiversifiedInvestment.com and we still own that. We quickly realized that it’s a big mouthful, it was long and hard to spell. We then learned that your domain name does not have to match your company name. Then we decided to go with www.NoteInvestor.com.

That was a nice, short, catchy and easy to remember URL. It describes exactly what we do.

Make your domain name easy to spell and easy to remember. If that also matches your company name then great, but it doesn't have to. Remember the domain name, your website URL can be an asset of your company.

Fred Rewey (28:39):

If you want to see more of these videos, go to www.NoteInvestor.com/101 . We've got about, I think this is the eight one. I know we're doing at last one.

Tracy Z (28:53):

Can I talk about it for a second? For our next session we're going through the top questions you should ask before buying or investing in a note.  We will deep dive into some of the very specific questions that need clarification before buying, selling or brokering a real estate note.

 Fred Rewey (29:14):

If you want to check out the turnkey sites go to www.NoteBuyerSites.com. You can just cruise through there to get ideas of which ones you can buy or ideas for just building your own.

Now, don't take our content, but certainly take a look at the ideas behind it.

Once again, thank you so much for joining us. Thank you for all the comments this week.

We did the 101 series. Like, share, subscribe, hit the bell. Share with a friend.

 Tracy Z (29:42):

Hit the bell so that you'll be notified when we go live next time.

 Fred Rewey (29:44):

Thanks everybody.

 Tracy Z (29:47):

Happy note investing!

[lunarr-rrose]

Buying Notes In Retirement Accounts - Note Investing 101

https://www.noteinvestor.com/101​

Thinking of using real estate notes in your retirement account? 

This Note Investing 101 session covers 10 tips for buying notes in a Self-Directed IRA.  

Join us on Tuesday, April 13th at 1 pm EST as we discuss these topics and more:

7 Benefits of Owning Real Estate Notes in A Self-directed IRA

Knowing Your Note Type

Creating A Playbook For Your Note Investing Pan

Fundamental Questions To Ask Before Every Note Purchase

3 Ways To Minimize Risk

Timestamp: 

0:11​ - Introduction: Notes In Retirement Accounts

0:58​ - Disclaimer

1:51​ - Benefits of Notes In IRAs

3:16​ - Generate Interest Income

3:58​ - Purchase at a Discount for Increased Yield

4:49​ - Backed by Real Estate as Security

5:14​ - Less Hands-On Than Owning Property

6:16​ - Licensed Third Party Servicers Can Manage Payments and Collections

6:51​ - Ability to re-work the note, take a deed in lieu, or take the property back through foreclosure in the event of non-payment.

7:48​ - Profits are Tax-Deferred (or even tax-free with a Roth IRA)

10:10​ - IRA Example Case Study

17:16​ - 10 Tips For Buying Notes In IRAs

17:22​ - Tip #1 - Know Your Note Type

18:37​ - Tip #2 - Have A Playbook For Investing Guidelines

21:12​ - Tip #3 - Master The Time Value Of Money

22:51​ - Tip #4 - Embrace The Boring – Due Diligence Matter

24:43​ - Tip #5 - Seek Professional Help

25:16​ - Tip #6 - Spread The Risk

26:09​ - Tip #7 - Find Creative Solutions

27:41​ - Tip #8 - Tap Into Deal Flow

28:20​ - Tip #9 - Learn From Others

29:25​ - Tip #10 - Use A Self-Directed IRA Custodian

32:23​ - https://www.NoteInvestor.com​

Discovering Notes - Note Investing 101 - https://youtu.be/pjtPZBUTU4M​​

Profiting From Notes - Note Investing 101 - https://youtu.be/kGqZ1QJ_9lA​​

Marketing For Notes - Note Investing 101 - https://youtu.be/HaCnPztbNfE​​

A Day In The Life Of Notes - Note Investing 101 - https://youtu.be/IGqW2pdLkuE​

Ask Us Anything! - Note Investing 101 - https://youtu.be/XgkX2lEjbzA​

Behind the Scenes/ Member Orientation - Note Investing 101 - https://youtu.be/mcHnvb6G8YQ​

https://www.noteinvestor.com/101

------------------------------------------------

Tracy Z:

Hello and welcome. This is Tracy Z 

Fred Rewey:

I’m Fred Rewey

Tracy Z:

I like how they've got their names We did that actually, but we're on the opposite sides today. You want to be Tracy and I'll be Fred.

Fred Rewey (00:23):

The picture of the cows hidden behind my head too. So if you were there it would be like this. No. It's going to mess everything up.

Tracy Z (00:35):

Welcome. We are here today to talk about notes in retirement accounts. How to put real estate notes in self-directed retirement accounts and we love self-directed retirement accounts. We'll talk a little bit about the benefits, and then we're going to give you an example of a deal. Then we're going to go through our 10 tips for buying notes and retirement accounts. Before we get started, we'll do the quick little disclaimer, just to let you know that we are not financial advisors, attorneys or tax advisors, and that all investment carries risks. We definitely recommend that you review any transactions with those professionals because they provide a great service.

Fred Rewey (01:12):

Past performance is no guarantee of future results. We don't play financial advisors on TV. We don't play financial advisors on YouTube consult your real professional people.

Tracy Z (01:23):

That's right. Because we'd have to add professional then.

Fred Rewey (01:26):

That's clearly why we have to do that. It's disclaimer, is that clearly these people do. I don't want to wear a tie.

Tracy Z (01:33):

That's a good point. We want to ask you to like share and subscribe, hit the bell, which will give you reminders when we go live. We're having a lot of fun with these note investing 101 sessions.

Fred Rewey (01:45):

This is the seventh one, I think we've done or something like that.

Tracy Z (01:49):

Let's start off with the benefits of putting a real estate note in self-directed IRA. Now, just a quick little refresher. If you missed any of the prior ones, we're talking about notes, promissory notes that are secured by real estate. We're talking about a retirement account that allows for self-direction. Meaning that you can pick different investments besides stocks, bonds, mutual funds, anything that is allowed by the IRS code, basically on for IRS. You want to kick us off with benefit.

Fred Rewey (02:19):

Just let me picked up on what you're saying a little bit though. I mean this is live and there are people joining here that are from. Just to back up a little bit on the notes for a quick second, a lot of people buy a property and you can certainly have property and things like that. But a note is basically where you own the loan on the property instead you're essentially the bank. Maybe you had a property and you sold it to someone and they agreed to pay you. Or you bought a note or something like that. And you're going to put that in your IRA. So we're not talking about physical real estate. We're actually talking about the cashflow, but you can put those. And a lot of people don't even know this. A lot of people with even self-directed IRAs don't know that they can put those in their retirement.

Tracy Z (02:58):

Just keep in mind that it be an asset you already own that you transfer into your IRA. You can't borrow money from your IRA would have to be something that you buy from someone else, a third independent party or property that your IRA buys and then creates a note. There are a few little rules in there, but we'll talk about that today. All right. Benefit number one, notes in IRAs. You get to Generate Interest income. Interest income is different than buying real estate because interest income is basically what all the banks charged, right? For people to borrow money. And with real estate, you're looking for appreciation or cashflow off of tenants. But with notes, you get to generate interest income with having owners in the property that take care of the management, the taxes and the insurance, instead of rental income, you get interest income. That's one of the benefits of having notes in IRAs is that interest income. Benefit number two.

Fred Rewey (03:59):

You can purchase notes at a discount. This is a great way. Somebody may have a note and they're getting $500 a month for that note and they're earning an 8% return on it. But if you buy that note at a discount, which is very common it's how most notes are transacted, you actually receive an even greater amount on your money. You have a greater return on your money, I should say. And you get to decide, we'll talk about it later. We've talked about another one's you decide how much you want to pay. So you decide what your risks are. You decide how much you want to pay. But the big thing is, is you're actually purchasing notes. You're purchasing an asset at a discount and putting it in your IRA.

Tracy Z (04:35):

The beauty of that is when you purchase something at a discount, in addition to getting the extra yield, like Fred was mentioning, if they pay off early, then your yield goes up and that's all going to be what we're going to cover today. Number three, you've got an asset that's backed by real estate as security. So this is very important because there's notes out there that are unsecured there's notes that are based on businesses or autos or cars, planes, trains, automobiles. But we talk specifically about notes that are backed by real estate because real estate is a hard asset. And for some reason, someone doesn't make payments on the notes. Then you have options. Number four.

Fred Rewey (05:16):

It's less hands-on than owning property. So if you've ever owned property and own a rental, then you know exactly what I'm talking about. You know, at 2 am you get a call because the toilet's not working or the roof has a leak or, you know, somebody is not happy with the hose fitting outside of the house, whatever it may be. When you own the note, you're just like the bank. So, you know, as someone that you may be paying out a mortgage or something like that, you know, if you have a problem with your house, you don't get to call the bank and say, Hey, you know, I have these problems. You have to deal with it yourself. Well, when you own a note, you're not getting those phone calls. So it's a lot less hands on. And the only time you're actually talking is when Hey, object doesn't come in or someone wants to pay off. But you know, in theory, you're not getting any of those phone calls because it's not even applicable to you. You don't own the property. You only own the cashflow.

Tracy Z (06:00):

Yes. And there's some benefits to having things that are less hands-on in your IRA account as well, because then you're not providing any kind of service to your IRA, which is one of the things you have to watch out for, with self-directed retirement accounts. So as Fred mentioned, you're not having to take those calls. There's another benefit you can hire licensed third-party servicers to manage the payments and handle any collections and think of a third party servicer like a property manager for real estate. The benefit is though that they don't charge near as much. An average servicing fee is usually somewhere between 20 and $30 a month. It goes up a little bit. If it goes into a non-paying note and they have to do more work on the collection side, but that's another beauty is that you can do a lot more notes than you could do properties per se, because they are less hands-on and you can hire these third parties.

Fred Rewey (06:51):

The next one thing would be is really, I mean, it says a lot of things here, but it's really a flexibility in dealing with it. So you have the ability to rework a note. So maybe the person making payments wants to increase their payments. You can certainly facilitate that. Maybe they want to rewrite the note and do something different with it in the event that they don't pay you and they have to leave. You can take a deed and loop, which means they just sign back over the property and then you know what to sell it. And you do it again. Or you can, you have all the rights that like a bank does where you can take back the property foreclosure in the event of a non-payment as well. But there's a lot of flexibility. And to the point we made earlier about, you know, minimizing your risk by buying at a discount and things like that, you know, you could literally have creative things where you go, Hey, you know, call somebody say, Hey, if you double your payment, I'll lower your interest rate. And then they could pay it off sooner. But guess what? You've accelerated the money coming into your IRA and your return has gone up even higher. So you have a lot of flexibility when it comes to the paperwork.

Tracy Z (07:45):

There are a lot of great strategies of how to do that. And the last benefit we want to touch on today is probably one of our favorites. And that is profits are tax deferred or even tax free with a Roth IRA. When we talk about IRAs, but remember we've got traditional IRAs, Roth IRAs, solo 401k's, Simples, SEPs, HSHS, Coverdell, educational savings accounts. There's all kinds of these tax benefited accounts, where they seem, depending on the account, it's either tax deferred. You don't have to pay any taxes until you take it out or it's tax free in the case of the Roth type. So those are the main benefits of notes in retirement accounts. And we've seen a lot of notes in retirements. We've definitely seen it improve. I think the first time I bought a note in a retirement account was about 1997. It was fairly new then, and didn't have a lot of choices of custodians, but now you have lots of choices of custodians.

Fred Rewey (08:43):

I was going to say one more thing. I was gonna add to the tax deferred. So one of the reasons why this is really important when you start talking to retirement accounts and anybody that has had a good hit, and this is when you sell a property and you get this big hit of income or something happens is maybe you have a note outside of your IRA and somebody pays off and you get it. And then you have the tax consequence. And those, this is important. So even if, even if you eventually have a, you know, maybe it's not a Roth, maybe it's not something that you ever have to pay tax on, but let's talk about traditional for just a second. You know, if those, hits your tax based on when you take the money out, you're not taxed on that, Hey, this, this year was a big hit. And then this year didn't make much, and this year was another big hit in some things like that. So you spread that out to where your tax consequence is, not these windfall moments, but basically when you're, when the schedule says, you have to start taking it out, or you start choosing to take it off. And that's very, very important, protecting your money longer term.

Tracy Z (09:33):

All right, well, since we're touching on the tax stuff, we'll add one more to that, but not giving tax or financial advice. And that is some people like notes in IRAs instead of owning the real estate itself. Because when you own real estate, you do get appreciation in something called depreciation. So you get some really great tax write off for a real estate owns right in your normal outside of your IRA. So a lot of people like to put the notes in the IRAs because they don't have the appreciation and depreciation. It's just the interest income. And so that's why they really liked to put them in there. So those are all the benefits related to being a tax benefited account. All right. So now we'll do the example. That was good. I'm glad you added to that. So the example on this one is a first performing note in Dallas, Texas, and this was purchased in my IRA. And do you want to start?

Fred Rewey (10:23):

So I'll just lay down and Tracy can tell you what, what we did here, but basically the sale price of the property was $91,900. The down payment was 5,000, which isn't a particularly very big down payment. The original balance of the note that they created was $86,900. And the terms they wrote the note at 9.5%, which meant that it was basically 249 months long, and the payments were 829 cents a month. When Tracy saw the note, when we saw for the IRA, there had been 72 payments already made on the note. So there's some seasoning here. So about six years and there were 176 payments remaining in the note, remember it was started at 249, they've made 72, that leaves 176 to go. So that made the current balance. At that time, the unpaid balance is $75,834, or what we would say would be LTV, which is a loan to value of the property, which have you assumed the value of the property is the $91,900 . And it could be more, but at that moment, let's just say $91,900 that would be 83%. In other words, they have basically 17% equity in the property.

Tracy Z (11:33):

And if you're falling along home, you're saying, Hey, 72 and 176 is adds up to one month less that's because this buyer made a little bit extra that kind of rounded up every month. So they did pay down a little bit, which didn't affect the amortization that much. But I only mentioned it because when you buy those that already exist, you're buying on the unpaid principal balance at that moment in time, the amount that the buyer would have to come in and pay off if they wanted to pay it up because they can pay off if they want. So what's cool about this note was, is that because it had been six years in the Dallas, Texas market. Oh, we do need that stucked up on the screen. Thank you. What was really cool about this note is, that thank you.

Tracy Z (12:13):

We have people behind the scenes. So what's really cool about this. One was that the values had gone up as many areas have. So when we look at these notes, as part of due diligence, we get a valuation with the properties currently worked, and while we're not buying the property, we're buying the note. It is secured by that property. So the value of that property helps our position. So in this case, it actually had gone up to over a hundred thousand dollars at the property is worth. So that means that long devalue that Fred mentioned it actually in, in today's dollars, been more like 75%. So here's what we did with that note. We bought it in an IRA for $68,430. So now that's the amount we've invested to buy the note. Now we look at investment to value. What are we investing compared to the property's value?

Tracy Z (13:03):

And that's a 74 ITV just based on that old sale price. Of course, it's more like a 68% ITD when you look at the current value of the property. So in paying that amount in discounting it, as we talked about earlier, when you look at the unpaid balance and you minus out what we've invested now, we have a discount is $7,404. So they came in and paid off tomorrow. They have to pay out the whole $75,834, and we get all that money back, including our discount. But normally if they pay according to term, they're going to pay over time. They're going to make that $800.29 cents a month for the less of the term, which was 176 months. If they do that, if they pay as expected, the anticipated yield to the IRA is a 11.36%, a nice respectable return.

Fred Rewey (13:48):

And just to back up just a second, for those of you that may be joining, and hadn't seen some of the other episodes to kind of understand where the discount comes from here or why some would even do it. You know, the sellers had a 70, you know, we're owed at the time, $75,000. So some people, one of the first questions you get is, well, why would they take a discount? Well, I mean, I think most of us, especially if we have a need or want, if someone owes me, $75,000, but it's over the course of 176 months, and someone said, Hey, tell you what, I'll give you $68,000 in change right now. And then you can walk away and, you know, yeah, it's a little bit of a discount. You'd probably take it, especially if you had an important need or want. The other thing is, that nothing changes for the payer.

Fred Rewey (14:28):

So the way they wrote the note was 9.5. So if we had paid $75,834 for this note, which we wouldn't, but if we had, we would be earning 9.5% on our money. But since we bought it at a discount, now we're paying, we're paying less money for the same cashflow. We're still getting 176 payments, and we're still getting the $800.29 a month. So that means the only thing that can change is the yield goes up for us, not for the payer, nothing changes for them, but we bought the same cashflow for less money. So that's how we're able to do it. And that's one of the amazing things about this industry is the ability to get increased yield. A lot of people aren't willing, you know, why would anybody do that? Well, that's why they would want to sell. And why would anybody buy it? Well, clearly 11.36%, right now, when you have something that is better than 74% ITV, cause right now we know the value is higher and now it's backed by real estate. That's, pretty powerful

Tracy Z (15:23):

Its very powerful. Now Texas happens to be one of the largest producers of seller finance notes. In fact, for all the years you've been tracking it, they have. And one of the reasons is that they have a non-judicial foreclosure process. And so it's, it's not really hard to foreclose, if people don't pay. Now we buy notes. We like performing notes. We like notes where people are paying. We like the cashflow. We're not looking to get the property back, but if somebody gets into a hard life situation, we'll work with them to get them back on track, definitely during COVID and those sorts of things. You know, there's been special circumstances where people have these life events and we get them back on tracks. Cause we want to have them stay in the home. But if they don't, then you do have the ability to rework it or get a deed in lieu as Fred mentioned. But what normally happens with these notes, they usually pay off early because people pay at nine and a half percent. We see higher interest rates on seller finance notes, and they get a nice payment history. And guess what? They now are able to go out and refinance a lower interest rate, or maybe they sell the property or something like that. So the beauty of buying at a discount is if that pays off early, your yield goes up.

Fred Rewey (16:33):

And just so everybody understands the mechanics of it, basically, you know, it's not like you're writing a check. So you have the money in an IRA. The IRA is writing a check in this case for $68,430. And purchasing that note, the monthly payments are also going to go into the IRA. They don't go to you. You don't cash them. You don't, you definitely don't want to do that. So, so basically your IRA, which is yours, is purchasing using the money to purchase it. And then the payments are going to go in there. But you know what? There's no limit to what an IRA can earn. So in this case, it's a learning, you know, earning 11.36. Now, if you bought it at a lower discount, you'd be earning even more. If they pay off early, guess what? You're going to get a higher return.

Tracy Z (17:12):

Excellent. Well, that's a good lead into our 10 tips. So let's talk about our 10 tips for buying notes in a self-directed IRA. So tip number one is to know your type. So some people like performing, some people like non-performing, some people like notes secured by mobile homes. Some people don't like notes secured by mobile homes.

Fred Rewey (17:33):

I don't like things that move just for the record. The name is mobile.

Tracy Z (17:44):

Some people like notes secured by land. Some people like notes secured by commercial property. There are some people like notes in judicial foreclosure States. Some like them in non-judicial foreclosure state. Some people like to buy notes where investors are paying. Some people like to buy notes where individuals that live in the home are paying. So know what your note type is. Don't just go into like, I'm going to buy a note, like really think through what your risk tolerance is and what kind of a note you'd like to.

Fred Rewey (18:11):

And this is usually in line with what you know, forgetting about the note for a second. This is usually in line with the type of property that you would feel comfortable, really owning as a property, even though we're talking about notes. So you would feel comfortable. Hey, I'd be okay if I owned a property that had a renter in it, or, you know, an owner in it, I'd be okay with owning a commercial property, but not this big or something like that. So it's usually in line with what you'd feel comfortably owning is also what you'd feel comfortable in. So tip number two. So basically just kind of dovetails off that is have a playbook for your investing guidelines. One of the coolest things I loved about this industry, when I learned about it is the amount of flexibility or the amount of power that we have to decide what our parameters are.

Fred Rewey (18:55):

So, you know, when we start talking about what's the discount going to be, or what am I going to pay for this note? Well, I decide on the return I want on the note, I decided if I want to earn 9%, 10%, 11%, 12%, 14%. Now if I choose too high, I may not be able to get the deal, but at least no one's making me, you know, only earn 4%. I get to choose the same as true. When you start talking about how much money do I want into something, as far as what the risk is. So let's say it's a hundred thousand dollar note and maybe I don't want to be in any more than 75% of whatever the value of the property is. Well, if it's a hundred thousand dollar home, then that means the most I'm going to want in it is $75,000.

Fred Rewey (19:32):

Now for you, it may be 80. It may be 85, maybe 70. Yeah, it might be 50, but you know, imagine if it, if it's 70 now, if I have a $70,000 investment on a hundred thousand dollar property, how good do I feel that if things go bad, if they can't pay and I can't work with them and I have to take the property back, what's the likelihood of my getting my money back out of it. It's pretty good. There's a lot of equity in that property. So you get to decide what that is. You can decide how long of note you want to buy. You get to decide on all the things we talk about it on the different types, but you kind of can set those guidelines and you can stick to those guidelines and you go, you know what? I'm not going to go for a higher yield if it puts me outside my comfort zone.

Tracy Z (20:11):

That's a really good point. And the reason we talk about this is to understand your investment, to value your buyers loan, to value or equity position, because it's not just what you invest. Your buyer is more motivated when they have skin in the game, as well. Think about your discounts, think about your yields because you want to go into it, looking for the type of notes that fit that. Now, if you say I want a performing note, grade A 50% investment to value my buyer has a 60% equity or, or we'll see that wouldn't be those numbers wouldn't work 40% equity. And I want to be in a 50% investment to value. And I want this 14 yield and look, you're not going to get that kind of great yield most normally on those grade A notes. So you kind of have to think about what your parameters are.

Tracy Z (20:55):

If you want a grade A note, you're going to have to drop down your yield expectations a little bit. If you're willing to buy something a little riskier than you could get a higher yield, but you're going to want to temper that with some investment to value issues like Fred said. So we only talk about that because there's a whole playbook there. The next piece, number three is master the time value of money. Because if you heard us talking about yield and discount and amortization calculations for understanding yield over a long period of time are different than a cash on cash basis of ROI. That most real estate investors are familiar with. Remember that with a note, people are paying it down until it pays to zero. So that's why we say understand the time value of money and understanding that will also give you some abilities to do some other things we're going to talk about in the next few tips.

Fred Rewey (21:46):

Well, you did an entire course on the time value. She did a course called how to calculate cash flows, which by the way I said she shouldn't do. She said, she came with me the idea, and she's like, you know, I want to do this course. And I said, and by the way, it is probably if I was to pick three things that everybody needs to know, that would be one of them. My only issue was, one. It's going to be a lot of work and two, nobody's going to want to watch it because people don't know what they don't know. And so this is, I mean, hundreds of people have seen this and love this course. And it really is. Because when you have a handle of that, it's not just about notes. It's about buying cars and buying houses and financing. Anything. You never look at money. It's a very empowering powering item is to be able to handle the financial calculator and understand that, you know, if you're involved in a financial transaction and you're not the one with the financial calculator, guess what the other side is. So that's what you want to be able to kind of, you know, play the T the, the, the equal the playing field, if you will. Mastering the time value money. I mean you did an entire course.

Tracy Z (22:46):

And I really have enjoyed the feedback from people that have taken that course.

Fred Rewey (22:51):

So number four is to basically embrace the boring. And I think this is funny that I'm the one that has to talk about this one, because you know, this is the closing of the due diligence. More specifically, the due diligence though. I mean, the closing is basically, you know, the paperwork and how it goes, but due diligence matters. It's easy to get excited about the yield. It's easy to get excited about the note and maybe the property, which by the way, isn't your property, you own the loan on the property, but you don't actually own the property, but it's the details that matter. And you know, when you, when you've got a deal, you have to take your time to make sure, are they employed? Are their taxes, you know current is there insurance on the property in case it burns down.

Fred Rewey (23:32):

And by the way, we'll share a burndown story with you at some point. But you know, these are things that you, you know, that it's easy to skip over or assume, and you don't want to do that. So we do, you know, we have checklists and we have our members and our trainings and things like that. We have very specific checklists and you know what? You need to go through them every time. I don't think I got a fair, how familiar you think you are with the deal or how much you love the deal. You just don't skip those steps. And they're not hard steps, but you do need to go through them.

Tracy Z (23:59):

Definitely. And there's things like making sure you have the original note and it's properly endorsed. And we talk about how to underwrite. Basically you're acting as an underwriter, right? Nobody's giving you financial advice. So you've got to understand this process and there's people that can help you and trainings like ours, but you're looking at the three PS as we call them. And that's the people, people making the payments or the person selling you the note, the property, what kind of security you have there. And then the people property and the paperwork. So that that's the paper like the original note and the deed of trust and the title report. So all of those things are really important. And you did a really good job on talking about due diligence. I like that. So number five, seek professional help.

Tracy Z (24:45):

And no, we're not talking about, go get a therapist. Although I've had a couple of deals, maybe they needed one, but seek professional help. Get a team around, have a title company, have an attorney, have a service, or have a financial advisor, have all, all of these people that understand this process, have a good IRA custodian. So have a good team of professionals around you because then you're not just relying on yourself. And you're also relying on the same checks and balances that a bank does when they do notes.

Fred Rewey (25:15):

The next one would be to spread the risk. And so what this is, just to say, you know, if you have a, say of $200,000 to invest you could buy one note and put all your money. In one note, I would rather have four separate notes than one note. I'd rather have four $50,000 notes. I may vary it in location. So I'm not going to put all four notes in one location. I may vary the location a bit, maybe on different sides of town, maybe in a completely different state, depending on what, you know, what my comfort zones are. But basically spread the risk around, you know, maybe some of it is a higher risk note, but not, they're not all higher risks notes. And then maybe once just a really nice, you know, a low risk note that, you know, going, you know what, I'm only earning 6% on it, but boy, I'm sitting in here at a 50 ITV on a great credit score payer. It's like, well, you know what? I'm not worried about this one. I can sleep at night.

Tracy Z (26:06):

Definitely. So tip number seven is to find creative solutions. And what are we talking about like that? Well, one of my most favorite creative solutions is a partial purchase and we've did a whole episode note investing 101 about partial purchases. And one of the great things is that you can lower your investment to value. You can lower the disk, which means you're lowering your risk. You can lower the discount to the seller of the note, meaning give them more money. So they, aren't taking such a large discount and you are buying the payments immediately in that time value of money that we talked about that are most valuable. And you can build in residual cashflow because in the future they might want to sell you. So that would be just one idea of how to find a creative solution. Other creative solutions can work like you were talking about earlier about reworking a note.

Fred Rewey (26:55):

I mean, you could go back and rework notes, you can go back to somebody and go, you know, you can, you could talk to them. I had a deal literally that I was trying to, you know, I was buying some very small notes and I was trying to get them to pay off early because they were very, very small notes. And I literally, , it was around football. It was, coming up on super bowl and I knew their hot button was a big screen TV. And I had said, you know, I'll tell you what, if you pay the note off in full well, I'll buy a big screen TV. Well, the discount was something like 4,000, $5,000 or whatever it was. And so by them paying it off early and I went and bought a $1,500 TV. It didn't matter. I still got this great return. So there's a lot of creative things you can really do.

Tracy Z (27:37):

I love that story. That's my favorite ones. And tip number eight is to tap into deal flow. And so how do you do that? So you've either need to network with people, right? That have deal flow, or you need to understand how to create notes, which is why we did the creating notes master class, or you need to know how to market, which is why we have the finding cash flow notes. So all of these things work in. Some people like to tap into deal flow off of the note listing platforms that we've talked about. We bought notes there as well. That actually that Texas note came up with some platforms. So I've used them as well when I've got some money to get deployed, because one thing is you don't want money sitting idle, and you want to keep it working because you got to keep it reinvested or your yield goes down.

Fred Rewey (28:21):

Number nine is learn from others. It sounds obvious, but here's the weird thing about this industry. So we have over 50 years combined experience in this industry. We've done this for a very long time. The essence of the industry has always been the same. Yes, there's, there's different things that we watch for. And we've learned some new techniques over the years and things like that. And you've certainly refined the marketing and certainly refine the fact that the sellers are much more aware they can sell now than it used to be. But you know, this isn't reinventing the wheel. You don't have to go out and create your own thing. I mean, everybody has done it. We've all been doing it the same way. We, find a note, we've been on a note, we purchased the note. We put the note in our IRA, or we put the note wherever we're going to put it. But basically the processes have been changed and you can learn from others. We created noteinvestor.com years ago, and there are hundreds of free articles on there. You can read whether you want to read about marketing, closing retirement accounts. There are a lot of great you know, like quest IRA and other places do these videos and conferences you can go to online. You don't even have to leave your house anymore. You know, there's some great information out.

Tracy Z (29:26):

And so that brings us to tip number 10, which is if you're going to do notes and IRAs, you need to use a self-directed IRA and you need to find a good self-directed IRA custodian. As I mentioned, there's a lot more options out there, quite a few good ones. And so equity trust, Quest trust, new view. I mean main street, we've got all our directory, our 2021 directory of note buyers and resources lists all the main ones that were nominated for best of notes, 2020. And you can even go to noteinvestor.com the homepage you'll see best to notes, 2020. They'll tell you some of those. So they have some great learning opportunities. Like you mentioned. I know Quest will be speaking on Friday where a sponsor at the Quest con, which is quest [inaudible] online conference for private lenders and seller financing is a type of private lending. So those are reasons you use a self-directed IRA. Custodian is one regular IRA. Custodians will say, Oh, you can't do that. You only can invest in stocks and bonds and mutual funds. But what they're saying is that you can't do that with us because we don't have, we're not set up to handle those kinds of investments. It's not the IRS that says that.

Fred Rewey (30:35):

Or they don't profit as much off of it.

Tracy Z (30:38):

That's probably the main reason why I was trying to be generous.

Fred Rewey (30:41):

I'm not losing any friends over at my stocks.

Tracy Z (30:43):

That's true. So you have to work with a self-directed IRA to get that account set up, and then they also help educate you on things like what's a prohibited transaction. So what are some things you can't do? What's a disqualified person. What, who are the people you can't do business with? It's normally your relatives, your above you and below you, your ascendance and descendants that you can't do deals within your IRA, but that leaves a whole open world of everybody else. And so they'll kind of guide you through that process and make sure you're well-educated in that area. And then if you get a little bit more advanced, some people like to set up an LLC or a trust that's owned by their self-directed IRA. So there's all kinds of cool strategies, but start with that custodian because they will help keep you on the right path.

Fred Rewey (31:27):

What I like about the custodians now versus say years ago is that to your point, they are much more helpful. You know, I mean, they are, they, you know, like I said, they, they have events that, you know, obviously our marketing events for them to have like a convention and things like that, but they are passing on information when they invite someone like us to speak at their, you know, they're trying to pass on information to their members, clients, they work for you, and they understand that. And they help you they're there, they help you along the way. So I really liked that they have an educational component as much as they can legally. But they have an environment that creates that information.

Tracy Z (32:01):

And many of them have IRA specialists that have actually taken all the IRS examinations did earn that designation. So they have that ability to provide that advice as well. Not the advice on what investment you make, because that's up to you, but just on the basics of how the IRAs operate. So I hope that you've enjoyed this session. Just as a reminder, you can go to noteinvestor.com. And that is our website where we share hundreds of articles. Like Fred mentioned, you'll also see resources there in the bookstore tab as well. And we do a lot of work with members. And so we welcome members. We welcome doing business with people. We've worked a lot lately with people who are real estate investors, who are wanting to understand note investing. I call it landlord versus lean Lord, which is what I'll be talking about on Friday at Quest. So we invite you to like share, subscribe, share it with somebody, hit the bell. We should have a bell when we do that bell noise. Okay. Well, thank you so much for joining us, everybody. Thank you until next time. Happy note investing!

[lunarr-rrose]

Behind the Scenes / Member Orientation - Note Investing 101

https://www.noteinvestor.com/101​

Ready to peek behind the curtain and see why the Note Investing Tools membership - which only opens twice a year - is the hottest ticket in the note world? 

On Tuesday, April 6th, 1:00 pm EST we are going to do a rare ‘walk-thru’ for new members. 

Who is this session for? 

Our guess is that you are one of two people...

1. You are already a new member. - The membership has hundreds of videos and downloads all geared to build your note business from the ground up. Where do you start? What turn-key tools can you implement today? This walk-through will show you everything. 

2. You are on the fence about becoming a member. - Assuming you are reading this when the doors are open and there are spots available (again, that only happens twice a year) you are going to get a rare walk-through of the membership. You get to see, first hand, what only members have access to. 

And, since this walk-through is LIVE, you can ask questions in real-time!

Even if you are not looking to join the membership - this will give you a great overview of what it takes to be a note investor - and what information you want access to - going forward. 

See you online. 

Timestamp: 

0:12​ - Introduction: Walk-Thru for New Members

2:05​ - The Library of Different Modules

6:55​ - Note Investing Tools (The Main Hub)

16:55​ - Member Webinars

18:50​ - Note Mastermind

19:48​ - Creating Notes Masterclass

20:47​ - How To Calculate Cash Flows

21:34​ - Finding Cash Flow Notes

22:35​ - Flipping Notes

24:00​ - Lead Funnels

25:29​ - Directory of Note Buyers

25:35​ - T-Value

25:59​ - Cash Flow Expos

28:44​ - www.noteinvestor.com/Member

Discovering Notes - Note Investing 101 - https://youtu.be/pjtPZBUTU4M​​

Profiting From Notes - Note Investing 101 - https://youtu.be/kGqZ1QJ_9lA​​

Marketing For Notes - Note Investing 101 - https://youtu.be/HaCnPztbNfE​​

A Day In The Life Of Notes - Note Investing 101 - https://youtu.be/IGqW2pdLkuE​

Ask Us Anything! - Note Investing 101 - https://youtu.be/XgkX2lEjbzA​

https://www.noteinvestor.com/101

---------------------------------------

Fred Rewey (00:04):

Welcome to the member "walk-thru" section of this. We're excited to walk you through the membership.

Tracy Z (00:19):

This is one of our favorite parts and this is a labor of love. Welcome! We're excited to have you here.

Fred Rewey (00:25):

If you're watching this, you are one of two groups right now. You are either in the membership and just joined. Congratulations! Or you’re on the waiting list because we only open up the doors twice a year to membership, once in the spring and once in the fall. If you're on the waiting list and you're getting to see this. Great! If you're in, then this is exactly what you have access to.

Tracy Z (00:48):

We're going to walk you through to the website. We're going to show you the best places to start because there's so much information. Sometimes people say, where do I start? 

We’ll take you through the 90-day action plan and the different modules where you can find things. And of course, where you can get a hold of us when you have questions.

Fred Rewey (01:04):

If there's one challenge we keep wrestling with, it's the comments. We get a lot. 

We have a lot of content. We have been in the industry for a very long time combined over 50 years. We are constantly generating new videos, new programs, new different tracks of education for this industry.  Trying to assemble those, where it's easy for everybody to grab has always been the challenge. That's why we're constantly working on better ways to do that. 

We found out the best way to do that is to start with a "walk-thru". Let’s just jump right into the membership and show you what you see. 

You'll see something like this when you log on to the membership. You'll get your login screen and you should have received via email your login URL, password, and name. Just in case you did not receive those infos, you can always reach out to us.

Tracy Z (01:57):

The login normally resides at www.noteinvestingtools.com/login That's pretty easy to find.

Fred Rewey (02:04):

This is your library. When you log in, this is what you’ll see. We've classified them into different modules. Typically, what you'll see is pretty much this order. 

The first top left one is Note Investing Tools, which is your hub for your membership. You can have different programs and different tracks. But only members have access to members and only members have access to everything. That's the first one we're going to jump into, in just a minute, but let's walk through the other modules.

Tracy Z (02:44):

Anytime you see a module, if you click that blue view product button, it'll take you in there.

The Note Investing Tools, when you log in, I agree with Fred, that's the best place to get started. 

The Note Investing Tools memberships that's where you'll find the help and the support desk and whatnot. 

The next one over are the Webinars. We have webinars twice a month. We have them normally at the second and fourth, Tuesday at 7:00 PM and those are recorded. We put them in the member area and in the Note Investing Tools with the most recent first. 

We categorized our webinars because there's so many webinars. We thought it would be easier if you could find them, not just sequentially, but by category. 

Tracy Z (03:41):

The next one is the Note Mastermind

Fred Rewey (03:45):

Note Masterminds. This is where we have the amped up version of a webinar. Where we are  more interactive. Once a month we get together via zoom. All of us do role play in different things, like that. There's also a forum exclusively for the members.

Tracy Z (04:00):

Yes. That's normally on the first Monday of the month.We also got some masterclasses. These are specialized trainings that you have access to. The one we released most recently was the Creating Notes Masterclass. That's for people who want to create notes using seller financing. 

Fred Rewey (04:18):

The next one is the How To Calculate Cash Flows master class. This is basically to make you a master on the calculations, both with the calculator and using T-value.

Tracy Z (04:30):

Then we have Finding Cash Flow Notes. This is the marketing track of how to find the different notes that are available for purchase.

Fred Rewey (04:40):

That's our original one. That was actually the one we started with our process.

Tracy Z (04:44):

And it's still great information.

Fred Rewey (04:46):

Then we created three basic modules that are quick start modules or quick information modules that are based on these three subjects. The first one is just planning your retirement and dealing with self-directed IRAs.

Tracy Z (05:07):

The next one is our top 10 sessions on flipping notes. If you're looking to find notes and flip them on or make a fee.

Fred Rewey (05:15):

The last one is top 10 investing in notes. By the way these three modules could change based on new content or content being needed more often.

Tracy Z (05:26):

We also did a special release of lead funnels. Fred did some deep dive into lead funnels and we'll talk a little bit more about that. Those are specialized marketing messages, both E-Books, emails and sequencing that you can use.

Fred Rewey (05:41):

Next we have the most recent, Directory of the Note Buyers. This is our list of different funders, private investors and industry providers where you can get information on where to sell notes.

Tracy Z (05:52):

One of the things that we partnered with is T- value. 

T- value amortization software is a third party provider. We have a special relationship with them. They enabled us to be an authorized reseller of their software. As a member, we buy you a licensed version of T value online. This was where you would go to request your copy of that.

Fred Rewey (06:15):

Going forward you have access to anything we create as far as classes and anything that we're a part of that we basically put on. There was a Wise Women Expo last year, 2020 and you can also see the most recent cashflow expo. All of these you have access to and there's no additional charge for that. As a member, you get anything we already created and anything that we will create going forward.

Tracy Z (06:39):

You'll see Cash Flow Expo 2019, 2020 and 2021 there as well. All those are available for you to watch.

Fred Rewey (06:48):

We will go back up to the top and kind of jumped in again. 

We covered the overview of what's in there and we got all these modules. 

Let's view the product for Note Investing Tools. First thing you'll see is this video. It's the “walk-thru” video that we're shooting right now. 

 These modules are laid off differently, depending on whether it's a module that you're going to be skipping around or a module that you're going to be watching video one, then video two, then video three. 

You'll see two different types of layouts as you're going through these modules. This one is meant to actually skip around for the most part, with the exception of the very first tab which is the 90 day plan. 

What we did is we created and put together all the different training that is out there. This is the  overview to the note industry to get a grasp of it, to understand it, to conduct it. This is a 12 week plan and you can, you can accelerate. You can go through them at different rates, but basically this is to give you an idea of what to do in the first ninety days.

Tracy Z (07:52):

If you click on any one of those, like if you clicked on week one, you'll see under the “play to watch the video”, underneath it there are links to additional resources. We already talked about your next steps, like setting up shop, creating a foundation, knowing your market. If you click on any of those, it'll take you to another video that deep dives into that.  It'll take you to different places in the various trainings that are specifically for that. 

If we head back to the hub. You can also see that there is  a “download” button. If there's a download button, those will show up too. 

If we go to the Mastering Partials, which is week six, you can see under the left-hand side, the downloads.

If you're on a tablet or a mobile phone, it might show down below, but on a desktop it shows on the left-hand side. There's also a place where you can leave comments. Those comments are public comments. If you have questions, it's a great place to ask questions because everybody can learn from each other's questions. Of course Fred and I also hop in there and answer them personally.

Fred Rewey (09:03):

The 90 days is a perfect place to start because like we said, it goes into the other training. If you want to learn specifically about partials, it may go into finding Cash flow notes to refer you to that information. 

It's a great place to start. The other thing you can do if you want to search anything is go to the “search bar” and search. If you are looking for partials, it'll tell you in this module, that there are 11 different ones that talk about partial. 

Example this is week six in the mastering partials, plus it also talks about a couple of webinars. You can go to any one of these, here's our raising private capital with Jeff Watson. If you click view on that, it'll take you right into where that is. You can deep dive right into any one of these. The search bar is a very good resource.

Fred Rewey (10:15):

The next tab is Webinars as Tracy mentioned, there are two different places where we keep Webinars. In The Note Investing Tools module they are all on the second tab where it says webinars. They are all in sequential order with the most recent being at the top. They go backwards. 

We just did a negotiation technique. It’s a blast because what we do is we negotiate like a pro. If you go back, these are all the webinars that you have to click to view all of them. There are 88 of these meaning you have 88 hours of all this information that talks about partials, creating winning offers, title due diligence. You name it, it's in here.

Tracy Z (11:07):

The great thing about these webinars is we do hold them live. We encourage people to attend these live webinars because then they can have their questions answered on the spot. It's a nice way to interact via chat and whatnot with other members. But if you can't make it, we totally understand. We record them and they are up in the member area the next day. You can always go back and refer to them. If you want to find the most recent one, it's always at the top when you click on webinars.

Fred Rewey (11:36):

The next one is Case Studies. This is a tab where you can find some examples of specific case studies. We also do case studies inside webinars. You can do something we called “deal roundups”. If you search for deal roundups in the webinars, you'll get more than these right here. But these are case studies where we break down very specific dollars, what the deals were or things like that.

Tracy Z (12:01):

When you go over to docs and templates you'll see it has a dropdown menu. Don't miss out on this because we've taken all of the documents and templates and put them in one place. The Marketing Templates is a really good one to start with because here you get examples of our direct mail letter postcard or an ebook, a funnel of emails for sellers, marketing images, (including social media images) the safe seller financing tips, or brochure, samples of ads and actual presentation that they can use.

Fred Rewey (12:36):

Any one of these, for example for our members, we wrote articles you can use and rewrite for your own use.  If you go to Note Articles and you scroll all the way down in the bottom, you will be able to download a bunch of note articles. If you were looking for postcards and you need a postcard sample, you'd be able to download right here. This is a not to be missed section because there are lots of different things in here. 

Tracy Z (13:12):

We created videos that you can use. You can put a bumper in the front and your contact information in the back. Or you can use the scripts to record your own. We had some different 2d and animated videos created. Anything in that marketing tab, you have full rights to use or repurpose. It's a great jumpstart for you. 

Sometimes it's hard to find images that are great for the note industry. If you click on Marketing Images we had some different ones that we created. There are 20 of them, they are not just specific to the note industry that show mortgage notes. They are also great to share on social media or use for your blog posts or that sort of thing. You can also download them. So next under docs and templates are the offers and quotes.

Fred Rewey (14:08):

These are worksheets that you can tap into.

Tracy Z (14:15):

We have the sample, the offer letter as well under the worksheet. We also have a sample option agreement that you can use to make offers to sellers and to tie up the deal.

Fred Rewey (14:26):

Then this is the all docs. We threw everything into one area. It's a zip file. These are very large files.

Tracy Z (14:36):

If you want the list, when you download that guide in the PDF, it'll show you the list of documents. There's various assignments and note endorsements and purchase agreements in there.

Fred Rewey (14:45):

Also the documents are available in Spanish.

Tracy Z (14:52):

We had some members request this because they were dealing with people that had notes to sell that primarily spoke Spanish. We had some members that speak Spanish and they translated the documents in Spanish.

Fred Rewey (14:59):

The next tab is Support and Schedule. There are times when you jump into the membership and you don't know what's going on, this would be the first place to go. 

Go to the Note Investing Tools module, which is the first top left one in your membership. Then go over to support and schedule. You're going to see immediately what's going on for the month. 

The first couple of things you see are the community. You can get into the Facebook group, help desk and coaching at any time. If you want to get help, you can click on this. Or at the very top, you've got something called the helpline, or you might see in the bottom, right? 

Not on this page, but you'll see a little icon that has a help person. If you click on that, it's going to open up something that looks like this. These tickets go straight to Tracy and I. When you fill this out, it will open up a ticket for us. It shows up on our side of the software. We can go in and answer. We can give you a download. We can punch you wherever you need to go. This is available to you. If you need help.

Tracy Z (15:52):

Look at that, it tracks our response time, not bad, average response time, three hour average response. Time is three hours. That includes when you do it in the middle of the night and we do the next morning. Usually it's even faster.

Fred Rewey (16:03):

I was going to say, “we'll get back to you by the next day”. But apparently we're a lot quicker than that. Once, but here's a big thing here also. And the webinars obviously, but this right here is what's going on for that month.

Tracy Z (16:17):

You see the note mastermind. We just had that last night the first Monday of the month, there is the zoom link for that. Then we have the links to the member webinars. We use a different system than zoom for that. Those are the links there as well. They are happening the second and fourth, Tuesday, we do 7:00 PM Eastern standard time.

Fred Rewey (16:38):

Here are some extras. Some things that we'll throw on there occasionally, but let's go back out of this one for a second. That's just one tab. That's the Note Investing Tools. That's your main hub. 

Then some of these are going to be the training, which we'll get to in a second. 

The Member Webinars, which I'll show you very quickly. We had seen in the last tab where we had them all in sequential order from the most recent, going back to the oldest, which is 88 of them. 

What we do now is we also put them in here by subject matter. We've come up with these 10 different areas. If you were looking for, “I wonder what the guest interviews were”, these are all guest interviews. The most recent, we did an interview with FINAC.  

If you go back to categories,  “well maybe today I want to learn more about marketing” so you click on marketing. These are the webinars that are specific to marketing, or at least we figured were mostly marketing.

Tracy Z (17:39):

If you're a little lost on where to start on marketing, I definitely suggest you go right there to that 21 day marketing challenge. That is a great place to start. We did a 21 day marketing challenge with our members at the beginning of the year, but it's a challenge that you can take any time and we're there in the support desk to help you with it.

Fred Rewey (18:04):

That's it basically for the webinars. Just understand that they're in two places.

Tracy Z (18:10):

Can you show me one more thing? You know, I always want one more thing. Could you click on that evaluating category. A lot of people also want to know more about how to underwrite and perform due diligence. This is a really great category. This is all of the webinars that we get into, how to analyze the deal, how to perform due diligence, how to price them different exit strategies. Not so much you have to worry about if you're referring it or flipping it to an institutional investor, but it’s really helpful if you're going to buy any of these for your own account.

Fred Rewey (18:47):

This is the note mastermind. This is what we created this year, which was a place that members can interact. We do have a Facebook group for members, but a lot of people aren't necessarily on that. This is the reason why we created its own entity here where people can do things. 

If you look at the topics, this is another place where you can find out what the most recent things are, where we're going to be as far as masterminds. There’s also a feed here where you can create comments. You can see the latest comments of people asking about deals or wanting to do deals or looking for things.

Tracy Z (19:31):

These are other members like the Facebook group, which people still are active on as well. The mastermind is a specific private community. That's just our current members. We've had a lot of fun with that. 

The next module is the Creating Notes Masterclass. If we could go into the view product for Creating Notes Masterclass, you'll see that this is a class and it goes into sequential and it has 36 lessons. You can track your progress after you watch one. It'll show that you've completed it. Then when you go to the building your team. Let's say for under setting the stage, you'll see that over this training, you can download the PDF and anything that goes along with that. This is a great class if you are looking to create notes using owner financing. We have some great interviews there with mortgage loan originators and people that are setting up buying and selling notes as their main primary business. It's a great deep dive into one specific subject. That's why we called it a master class, right?

Fred Rewey (20:48):

The next one is how to Calculate Cash Flows. This is the perfect class to make you a calculator genius. It's 62 sessions, although they're pretty small, they're like four, five or six minutes sessions each. But they literally walk you through keystroke for keystroke. How to both do it on T value and also on the financial calculator.

Tracy Z (21:08):

Each one has a little download that you can download and follow along with. We find that makes it a little bit easier. Those are also over on the right hand side. I'm available in there to answer questions. Or if you have any assistance that you want, you can also use different types of calculators. The keystrokes might be a little different, but the concepts are all the same. And of course you can use your free copy of T value because you have access to that.

Fred Rewey (21:34):

The next one is Finding Cash Flow Notes. This is the one that we're currently starting to break apart in different ways. This was our very first one. We are considering this a legacy product now. 90% of it is as applicable as it always has been. It's the same core material. Don't skip over it because it has a lot of  really good material to go through and learn about the industry. Learn about direct marketing and whatever it may be. There's some really good stuff in here.

Tracy Z (22:34):

Maybe just pop into one of those so they can see maybe the flipping notes.

Fred Rewey (22:38):

Let's just jump into flipping notes. If that's what you want to do, we’ve gone through all of the programs & webinars. Different one-offs and things like that. Here we put together the top 10 things you should be looking at if you're going to flip notes. If you're looking for a quick overview on flipping notes, this would be the place to start.

Tracy Z (23:07):

We always tried to, with our members, encourage them and give suggestions of how to make things a little bit easier to find. Let's just show them how that search bar works. Just make sure you're looking for the little magnifying glass or you're looking for the search up in the menu.

Fred Rewey (23:52):

Next one is the Lead Funnels. If you're looking at doing leads via online this is the place to go. 

If you have a website and somebody fills out a form let's just say, you're trying to get sellers directly. There's a seller direct funnel that we built and showed you how to do it. It's four web pages, two opt-in forms, and there are five email responses. If you have the same program we use, you can just import it. Otherwise what you do is you just download these pages and recreate them for yourself on your own site. We did these funnels for both seller direct and working with referral sources. They even include guides. I call them bribes.

Tracy Z (24:49):

I like to call them incentives or free gifts. It's something that you can offer to people so that they are motivated to give you their email. It's an ebook that's just ready to use. It comes with three different covers. 

Fred Rewey (25:04):

This is one for referral sources. You would be able to download whichever one of that. The contents are the same. But if you choose which one of these you want on your website or in your email or brochure. Then go online to claim it, whatever it may be. We wrote these for you.  You can modify these, you can take them and put your own name in there, whatever you want to do, but they're free for members to use.

Tracy Z (25:27):

We were pretty proud of that

Fred Rewey (25:30):

Directory, we talked about recently, this is where you get the latest copy of the note buyer directory and T value. As Tracy had mentioned, this is where we go to claim your access.

Tracy Z (25:41):

When you claim your access we send that information over to T value. As we mentioned, it's a fully licensed version of the product, even get their support with it as well. You just have to confirm that you want it and we sent them to you. It usually takes  24 to 48 hours of business, time to get back and give you the logins.

Fred Rewey (25:59):

Then you have the expos.

Tracy Z (26:01):

Well, there's a lot of great information there. The Expos, that was Fred’s idea, started back in 2019 before it was needed.

Fred Rewey (26:11):

This was 2021. This is the third year we did it. There were 35 speakers, 20 some odd sessions. This is day one. You can go and check out. Like, we were super excited to have Jeff Owens from the One Thing. Then we had Jeff Watson. All these people basically spoke and they recorded about an hour or 45 minutes. You could go and jump into any one of these and watch their sessions and then come back, take notes or do whatever you want because you have access.

Tracy Z (26:50):

It's pretty cool that you can see all the different ways that you can work with cash flows and notes. It's not all just specific to real estate notes. Some are business notes, some are mobile home notes. This one is a tax attorney and CPA. We had some real high caliber speakers that charged between $300 to $500 an hour. They are the real deal. You can watch those videos and download any of the items.

Fred Rewey (27:15):

Every one of them if applicable, comes with the slides. If they have slides then they have notes taken by  professional note takers. You can download the PDF or MP3s version of all of them. 

Tracy Z (27:36):

When in doubt, head back to my library, that's your hub. It's up in the top menu. On some of them, it says back to your library. This is where you always go to come back to home base, to figure out where to find something. If you're not sure, remember, just to go into Note Investing Tools and click on the support tab and you will get to us. You send us a ticket. If you want to talk with one of us, you can also schedule a conference call. You do that through the support desk. We send you the link, there’s a little calendar where you can pick a time that works for you. Then we will give you a call. 

Most of the people who use a support desk are when they're having troubles finding something.  Or if they have a deal that they want to talk about. It's more of a private conversation. They want to discuss one-on-one or sometimes they want to discuss their marketing plan. 

We are excited to have you here. We mean it when we say we're accessible and we want to see you succeed. These are your tools, training and support to take your note business to the next level.

Fred Rewey (28:41):

If you're a member, welcome! If you're not a member and the doors are open, you can go to www.noteinvestor.com/member. The doors are open twice a year. Get in right now and all that will become yours. It's a month-to-month membership. There's no long-term obligations. We're a hundred percent confident that we over-deliver. No worries there. And if it's doors aren't open, then there will be a place to get your name on the waiting list.

Tracy Z (29:07):

Absolutely. As we always say, Happy Note Investing!

[lunarr-rrose]

Ask Us Anything! - Note Investing 101

Ready for a speed round of note investing information?

On Tuesday, March 30th, 1:00 pm EST we are going to open the entire episode to your questions and it will all be done LIVE!

That’s right.

In addition to answering the most common questions, you can ask us anything about the note industry!

Marketing?

How you get paid?

Lifestyle? Closing Deals?

Evaluating Deals?

What makes the best note website?

How to use your self-directed IRA to buy notes?

YOU name it in this 30 min free for all speed round!

See you online!

Timestamp:

0:10​ - Introduction: Frequently Asked Questions

0:40​ - Disclaimer

1:35​ - Where can I find a listing of creative financing terms and how they should be used?

2:52​ - How big is the note business?

4:16​ - You have money to invest vs if you don’t have money.

5:43​ - How do you deal with the fair market value of the property knowing that seller-financed houses typically sell at the higher retail MLS listing price that changes your LTV?

7:50​ - How do you explain discount?

9:49​ -  Do you see the notespace eventually becoming over-saturated like wholesaling?

13:12​ - What do you typically want for a pay history on a newer originated seller-financed note?

14:12​ - What tools do you use to calculate the best way to create a partial sale on a note that you hold?

15:46​ - What is the difference between flipping a note and brokering a note and do you need a license in Florida?

17:05​ - Should I have a website?

17:45​ - Do you use any note evaluation software other than a calculator to reduce the time to do the note evaluation? What do you recommend?

18:28​ -  I thought I heard something about using these in an IRA?

21:08​ - What is Note Investing Membership?

23:58​ - When do you open the doors?

24:47​ - Do you sell us deals?

28:56​ - Difference between purchasing a previous training from membership.

30:34​ - The doors are open! - www.NoteInvestor/Member

31:09​ - What to do in your first 90 days?

Discovering Notes - Note Investing 101

https://youtu.be/pjtPZBUTU4M

Profiting From Notes - Note Investing 101

https://youtu.be/kGqZ1QJ_9lA

Marketing For Notes - Note Investing 101

https://youtu.be/HaCnPztbNfE​​

A Day In The Life Of Notes - Note Investing 101

https://youtu.be/IGqW2pdLkuE​

https://www.noteinvestor.com/101

-----------------------------------

Fred Rewey (00:11):

Hey everybody. Welcome to Fred and Tracy’s show. It's Note Investing 101. It's a mini-series we put together to kind of give everybody an understanding of the note industry and the note world. This is the “Ask Us Anything” episode. This is free for all of you to ask us anything you want, in this session.

Tracy Z (00:34):

We also have some most commonly asked questions because whenever we do this, we answer emails and phone calls. We typically get some of the same questions over and over. We have those to present as well. 

This is live! You can ask us anything that you want as well. Just a brief quick disclaimer. We are not attorneys or tax advisors or financial advisors. If you need any of those things, we encourage you to seek out that competent counsel and past performance. This isn't a guarantee of future results. This is information that we've gleaned from our 50 plus combined years of experience of doing this business. Note investing is a wonderful world for us. There are so many opportunities in the note investing world. It’s a way for the average investor to be the bank, if they will. 

Now let's kick us off with our first question.

Fred Rewey (01:23):

Thomas says, “ Do you know where I can find listing examples of creative financing terms? When should they be used like Assumable and Wrap?”

Tracy Z (01:46):

Absolutely. We do, Thomas, thanks for joining us. On our website www.noteinvestor.com, we actually did a video in a write-up on creating seller finance notes. It’s a brief overview of what's most attractive to a note investor. If somebody was going to buy the note, we find that the terms that are attractive to a note investor have the same kind of terms that make it a safer investment for the person that's carrying the note, that's handling the seller financing.  

We also have a full-blown Creating Notes Masterclass, where we go into all the transactions, how to negotiate the terms because we have the most favorable terms. Then we talk about wraps and partials and all of those great things.  

Generally investors like to see higher interest rates and lower LTVs and good credit scores, but when they meet those criteria, they might even actually qualify for bank financing. We really go into depth on the specifics of how you negotiate when the LTV isn't perfect or when the credit isn't perfect. When they want a lower interest rate, there are some things like shortening the term that you can do. That is a great question. Thanks, Thomas.

Fred Rewey (02:52):

Well, one of the questions is “How big is the note business?” 

Every year, we crunch numbers and summarize with the data. We have it, we're usually trailing a year because we can't get all the data immediately. 

Tracy Z (03:08):

Right now we're waiting as we speak the 2020 numbers should be coming in. Our data provider polls from the County records every year. In 2019, there were $23.9 billion with a B of seller finance notes that were created and over the last five years, because there's a trailing inventory. 

There's a lot of inventory out there, especially when you think about notes being created for 15, 20, 30 years. In the last five years, or it was over $100 billion of seller finance notes created on residential land and commercial. What's interesting about that is it doesn't include seconds. It doesn't include unrecorded transactions. It doesn't include business notes. When you add all those things in there, it is an even larger number. I tell everybody, we just need a small slice of the pie to work with. And there's plenty there.

Fred Rewey (03:57):

There's roughly just as a ballpark. It's roughly 6% of all real estate transactions that are actually privately done like that. If you're looking for a year to year and stuff like that, it's roughly it's plus or minus, depending on how it goes down, but it's roughly 6% of all real estate transactions. Even more when you start talking about business notes and things like that.

Tracy Z (04:15):

We had a question submitted. Tell me again, “What to do if you have money to invest versus if you don't have your own money?”

Fred Rewey (04:24):

Even if you do have money to invest in, you are buying your own notes. You're probably going to do both at some point. If you're just starting out and you don't have any of your own money, then you're going to probably flip notes. It's also a really good way to kind of cut your teeth and learn the process and not be investing your own money. With that, you're going to find a deal. You're going to get all the information. You're going to pass it onto a funding source. You're going to subtract your fee and offer something to the seller. Then they're going to help you close it. When you have your own money, you just take out the funding source and write the check yourself.

Do you want to talk about what happens if you're doing both?

Tracy Z (05:06):

I was going to add one thing, you can also use your self-directed retirement account to purchase, or you could, as Fred mentioned, you could do both. You could buy the note in full and then sell a partial to another investor. Their purchase of part of the payment stream would cover your purchase of the full. Then you can create yourself a residual income, some future cashflow. That would be a way to do a participation in a transaction without having your own money and using an outside investor, but keeping a piece of the note out into the future. That's one of our favorites. We love it.

Fred Rewey (05:42):

We love partials on all those seller finance notes. 

“How do you deal with the fair market value of the house/property, knowing that the seller finance houses typically sell higher retail, MLS listing prices that change your LTV?” 

Absolutely, it's an outstanding question. I can tell you as an investor or anybody buying notes, you're always going to go for the lower value. By the way, if you're looking at a note that says it sold five years ago, and someone thinks it went up in value. Maybe you get an appraisal that comes out a little bit lower for your ITV and LTV issues. As far as figuring out what you're willing to put in, you're always going to take the safer number between the two. You're going to take the lower number. If the property is sold for a hundred thousand, but it appraises for 80 and everybody feels pretty good about the appraisal at 80, then you're going to base your numbers off 80, not what it really sold for.

Tracy Z (06:32):

In the Creating Notes Masterclass, I suggest using as a rule of thumb when creating notes about a 10% variable. When you sell with owner financing, that's considered an amenity or a concession, a financing concession. When appraisers do adjustments, they may or may not take that into account. We usually say that if you're selling with seller financing, you can get about 10% more than the standard asking price than if somebody came in the full cash or conventional offer. With real estate prices appreciating like they have been usually depending on how long you wait that 10% gap will get covered up. But Fred is a hundred percent, right. If the BPO or appraisal comes in lower, most investors are going to use that lower amount. How much down payment that buyer has is important.

Tracy Z (07:23):

If you're in there, you definitely don't want to set a buyer up where they're underwater. If you're in that situation, then investors might look at offering a partial. They may say, “Oh, I'll buy the next five or 10 years of payments. When that performs well over the next year, then I'll go in and buy some more payments.”  There are ways to do that, but you're very smart for asking that question because you do want to keep an eye out for that. Both for selling the note and also for the buyer, the borrower, you want to make sure they're set up for success.

Fred Rewey (07:49):

“How do you explain discounts?”

Tracy Z (07:53):

Well, I'm going to give you that.

Fred Rewey (07:55):

We've done entire member webinars not only on what the discount is and, and how to explain it, but also how to position it. 

There are five different ways which I won't go into now, because that takes an hour to go through. Discount is the difference between what they wrote the note at interest rate wise and how much I want to make on it. 

If they wrote the note at 6% and I want to earn 12%, then that's where we're going to create the discount because we can't go back and change the seller's payments. We can't change their balance. I'm going to buy the same cashflow for less money and that's going to create whatever the interest rate is or whatever my interest rate requirement is to create that discount.

Fred Rewey (08:35):

Now that discount could be created because of the difference between the interest rates. It could be because I'm only willing to put in 80% of the value of the property. And it turns out, the numbers show, I could have paid more, but I'm like, well, this is, this is my ceiling. This is as much as I'm going to be able to put in. We have a tendency to tell sellers that look, there's several variables to it. It's going to be how long they've paid what interest rate you wrote it at and what the property's appraised for.

Tracy Z (09:00):

Another way to explain discount is if someone had come in and offered you cash at closing, would you have been willing to take a little bit less than what you sold the property for when you seller financed? Usually they'd be like, yeah, somebody's going to pay me cash. I would love that. What we're doing is we're essentially paying them cash. All cash now. For that privilege of getting all cash, now there is a little bit of a discount and sometimes we have some other strategies where we'll take the discount. 

We'll divide it by the number of months that are left in the amortization to show that it averaged out over time. It's just a little bit they're giving up. We have several ways to do that, depending on the reason the note is being discounted. So that could depend as Fred mentioned several situations. That is how we would explain that depending on the particulars of the note. 

Fred Rewey (09:48):

Charvonne asked, “do you see the note space eventually becoming oversaturated, like wholesaling?” It's a great question. If you were to ask me that 25 years ago, I would've said absolutely. I know what it's done for me, it's part of why we do this is to give back quite a bit. I was in a 500 square foot apartment doing these deals out of there as I learned the industry and things like that. I thought once everybody understands this and knows about this, everybody's going to do this. But I guess it's like everything else not many people are going to put in the time and learn and move forward. And a lot of people may think this will not get us rich quickly.

Fred Rewey (10:32):

It's a good return. But people always look for the next shiny object. Like, “ Oh, hey, we're on, we're on Forex Trading this week or on options trading this week, or now we're going running over here and we're doing something else.”  

We are flipping, we are not HGTV, I don't think it's any more mainstream today than it was back then from the standpoint of being over saturated. Do I think that there's competition? Sure. I think that the internet created us seeing each other as competitors, more than before. It used to be when you direct mailed somebody, they didn't even know they could sell. The only thing that's really changed is sellers are more aware they can sell their note than they were then, but I don't actually see it being over saturated anytime soon.

Tracy Z (11:24):

What I see is that there is some compression in pricing. It's more competitive, which is great if you're selling notes. So you have to really sharpen your pencil when you're buying the notes. 

If you feel like you're encountering too much competition, one solution to that is getting into the space where you're creating notes yourself, or you're helping sellers that are investors of real estate create notes. That is a way to carve out your own piece of the market that you're not going to bump into competition because not as many people are doing that. You're creating your own notes. You wouldn't compete against yourself to buy or sell notes. That is one way as I see some of the competition picking up that you can carve out your own little space in there. That's a great question.

Tracy Z (12:07):

When I got started 1988, everybody kept saying, “Oh, it's, there's too much competition.”I think maybe activity does breed activity and it becomes more commonplace. More people get involved and we have a bigger market and maybe the seller financing, the mom and pop investors will take over a piece of what the banks are doing. 

I also think there's one other reason that we're really strong  on the seller financing side of the business. That is because lenders are starting to restrict their lending criteria. They're requiring higher credit scores and bigger down payments. We see people that have had some hiccups in their income due to COVID and that sort of situation in the economy or in their regular paychecks. Because of that fewer what they call non QMS or non-qualified mortgages, loans are being made. That's really where seller financing fills the need. If you look at stats, we've been tracking them a long time, you’ll see that when they're set in a situation, the amount of seller financing goes up. So there's more opportunity to help people.

Fred Rewey (13:11):

Someone asked, “What do you typically want for a pay history on a newer originated seller financed note, six to 12 months or more, or do you consider the borrowers’ FICO score 750+ to 800 to be, to reduce your risk?”

Tracy Z (13:23):

Investors would love to have six to 12 months, that would be optimum and preferably verified through a third party servicer or some kind of verification that the payments were made. If they have a good credit score and a decent down payment, there are a lot of investors that will purchase that note with just one payment made. They do want the transaction to close and get recorded, and one payment made to the seller. 

What kind of notes are those? Well, there are investors out there and on the institutional side. 

If it's a 680 score and with a 10 to 20% down in the balances, over $80,000, that they'll look at those with one payment made in the 95 percent and up range. Now some notes are going to pay less. Some of those are going to come back and say, we'd like six to 12 months seasoning. That credit score and the down payment really do dictate how many months of seizing it's going to need. 

Fred Rewey (14:12):

Someone asked, “ what tools do you use to calculate the best way to create a partial sale? 

We use calculators. it's not rocket science. I mean, once you understand the cash flow aspect of it, you just find the different ways to break it. But the deciding factor on what or how to purchase a partial or what offer to make a partial  is your own ITV requirements, your own yield requirements. 

Tracy Z (14:41):

We also use something called a T- Value amortization schedule. Because as much as I love my financial calculator, what we find is that when you're buying and selling partials, someone would like to see a printed out amortization schedule. By using the T value amortization software, we're able to have a printed schedule and we can show the full schedule. We can still show the partial schedule and what's left over. Interestingly enough, we believe in that software so much that when people join our note investing tools membership, we actually give them a full online subscription to T Value. 

We are an authorized reseller of theirs, and they've allowed us to give that to our members. That's one of the benefits we have. We have a whole training class on how to use T Value in the note business. And so those are both tools that you can use. There's other types of amortization schedules out there. We really like it because it has a lot of flexibility and it's been proven to work really great for calculating IRR, which is what we do in the Note Investing world. 

Fred Rewey (15:46):

Randy asks, ‘what's the difference between flipping a note and brokering a note and do you need a license?’

Tracy Z (15:51):

Flipping and brokering notes pretty much the same, right?

Fred Rewey (15:55):

They're exactly the same. Much like we don't use the word ‘lending’ because we're not lenders. Brokering can misconstrue what you relate, what your function or relationship is in the transaction is that you don't represent the seller. 

You don't represent the funder. I think that was just a term that switched several years ago that just called it flipping plus also people were used to hearing about flipping houses. So it made sense to say flipping notes.

Tracy Z (16:26):

When we talk about four different states, it really depends on how you're transacting your business. Are you coming in on the secondary market and buying a note on the secondary market. If you're originating a loan, like not a seller financing deal, but actually lending money. Of course there are mortgage brokers licenses. 

We don't answer specific state questions, but we can direct you to a couple of good resources of links, the NMLS site, and also there's another state by state site. We'll follow up in the show notes and we can do that as well, just because for legal reasons, we aren't able to give specific advice in all 50 States.

Fred Rewey (17:03):

One of the questions we get a lot is, “Should I have a website?” 

Absolutely. I think even the simplest brochure website is important.

Tracy Z (17:14):

Yes. I think that it used to be, you had to have a brick and mortar business. Now, fortunately, it's very acceptable for you to work from home. I think you have to have a website because it's your presence out in the world. It shows that you're real, you're legitimate. We all do it. We go Google and look up a company or a person before we do business with them as you should. Definitely. That website is one of the things that is an indicator that you're for real. And fortunately they're not very expensive anymore.

Fred Rewey (17:43):

Someone asked and it's just a follow up question. Do you use any note evaluation software that may have been typed in before?

T Value is great for also when you start getting bizarre cash flows. You want to save them because the calculator, you don't can't really save anything. It's super helpful for that. It's our go-to for anything particular. When you start talking about things that get off the grid, or you want to retain things,

Tracy Z (18:03):

Check out noteunlimited.com. We're not getting anything out of plugging them, but they have some great evaluation software that shows a variety of exit strategies. Pulls in data from the different sites. I tend to use an Excel spreadsheet, still a lot to keep track of things. Fortunately their program and others out there. You upload and download the Excel spreadsheet as well.

Fred Rewey (18:28):

We get asked a lot about the retirement accounts. Because we mentioned that you can buy notes in a self-directed retirement account. A lot of people don't know you could do that. 

The answer is, yes, you can set up a special account for that. When you buy a note out of your self directed IRA, the money does not go to you. Actually, the payments have to go into your IRA. Don't get that check and cash it. I think you're going to just deposit into your IRA. But basically you use your self-directed IRA to fund a note and the payments go back in there. The great thing is there's no limit to what your IRA can make. 

You can get very creative on that. You can actually have a traditional IRA that you can convert over to one that you just did direct where all the payments go. You do a lot of this with quest and some of the other companies

Tracy Z (19:14):

I have been doing a self-directed retirement account, investing in notes since 1997. When I left the corporate world, ‘88 to ‘97, I bought notes for an institutional investor and ran their closing department and worked in their underwriting. Then when I went out on my own in ‘97, I rolled over my 401k into a self-directed retirement account and bought and sold notes out of there. 

I also do a lot of guest speaking for Quest and New View. You have lots of options. When I got started, I think there was one or two, and now there's probably 20 or 30 that are all really good at what they do. You can do a Roth, you can have a solo 401k, you can have SAPs, you can have HSA health savings accounts that invest in notes.

Tracy Z (20:00):

There's so many options out there and you can go through your custodian. The big thing is you have to educate yourself on the benefit of your IRA. That's why it has all these tax advantages. That means you have to know who the disqualified people are and to avoid what's called a prohibited transaction. 

Don't be writing loans to your family members, your spouse, your children, your parents. The IRA companies do a great job of explaining what to do. That's the main thing you've got to look for, and also not to take possession of the funds. As Fred mentioned, there's other ways you can do it. You can set up an LLC, that's wholly owned by your IRA. Some people do that. They have a little bit more control when you're first getting started with it. 

We suggest you go through your custodian, cause they'll direct you in the right way of the do's and the don'ts. Then when you get that down, then you might do something more advanced, like setting up a trust where your IRA has a beneficiary or setting up an LLC. 

Great questions. I love the IRAs. There's lots of great networking events as well on the IRA group.

Fred Rewey (21:07):

These questions today have to do with the membership because it is open. As I mentioned earlier, the membership only opens twice a year. It happens to be opening today and they'll run for a couple of days. 

First of all, what is the Note Investing membership? It's a private membership where Tracy and I teach. We'll give you the link in a little bit, but basically you get all of our training. All of the member webinars, which we do every other week. We have a Note Mastermind. It's everything, it's everything we've ever created. We figured there were several different components that you needed, but basically you must have the education. 

Tracy Z (21:49):

One of the things we added because we had the training before we had the membership.  One of the pieces that we felt was missing when we did the membership was one-on-one consulting. We have live webinars, which are like group coaching calls. Then people can also book one-on-one consults with us. They usually use those to go over a deal. It's a private conversation where they want some input on a deal. We can't give investment advice, but we can definitely say, here are the things I would ask. If I was buying that deal. Here's the things to look out for. And then a lot of people pick us, because Fred is our marketing genius. A lot of people schedule one-on-ones with Fred to go over their marketing plan just to tweak it to improve it.

Tracy Z (22:38):

I'm really proud of the coaching side. People are charged tens of thousands for coaching. Ours is very affordable. If we're going to do this, it has to be at a price point that if we were getting into the business, we'd be willing to pay because we're the skeptics, right?

We like to get a really good value for our money. We don't mind paying for something if it's good value, but we're not going to go drop 10 or 20 grand because we go buy a note. If we were going to do that.

Fred Rewey (23:03):

It's not a secret. We haven't raised the price and there's a reason why the doors are only open twice a year. It's $97 a month. There's no long-term commitments. The reason it's only twice a year and the reason we limit the number of people that are in there is because it's us. 

We don't outsource the help desk. We don't outsource anybody creating the videos. We don't outsource any of the new classes every year. We're adding different training. You added the Creating Notes Masterclass before that we had how to calculate cash flows and finding cash flow notes. We have many series, due diligence and all these other things. We've got some coming up. The members get access to everything in addition to the ongoing webinars.

Question. “When do you open the doors?”

They're opening today. Like I said, it's been 181 days since we last opened up the doors. We will keep the doors open for seven days. The fact of the matter is, is that as we've done this, every time we've opened up our doors, which has been two and a half years now. We have been able to accept less and less members because yes, some people leave and they go on and do something else or whatever it is, but a lot don't and we have a lot of members that are actually involved in other things. They still stay with us because there's value there. We're big on over-delivering. Like I said, some of this is for us giving back. The intent is to keep it on for seven days. If we have to close it a little bit sooner, or you're seeing us late, then I apologize, but I don't think you'd want it any other way. We make sure we have the number that we can handle.

Tracy Z (24:47):

Some people ask us, do you sell us deals? 

That's one of the things Fred and I talked at length about when we did this. We feel like if we're going to train and teach you we shouldn't sell you deals at the same time. When we evaluate a deal, we're comfortable saying, yeah, maybe here's what I would ask. We teach you how to go find the deals and we'll help you evaluate the deals without giving financial advice. We'll just get directly to the right vendors. People that we've had good experience with will help you crunch the numbers to make sure you didn't miss anything in your calculations. That's the kind of support we're doing, but we don't sell you the deals. There's lots of places as we talked about in the marketing class, that you can go find the deals.

Fred Rewey (25:33):

Just to add to what Tracy said we're not going to partner with you. If you say, “Hey, I'm looking for a partner to go into this deal with”, it's not going to happen. I mean we're Switzerland. 

We're going to continue to educate. We’re not trying to sell you a deal or partner with you on a deal or anything like that. We very much keep our world to what it is. Which is education and support and being able to show people what we've done. Like I said, it's a very big give back thing for us. We've been very fortunate. We've lived our lives all over the world and still been able to do our note business. We've lived in Guatemala for eight months. We've lived in Italy.

Tracy Z (26:10):

I mean, I'd rather be Italy than Switzerland.

Fred Rewey (26:17):

John says “ Fred and Tracy, you're legit, I've gotten a lot out of their memberships.”

Thank you, John. We really appreciate it. I actually, I don't know if it is like bad luck to say this, but I was realizing today because we were opening up the doors. I don't think we've ever had anybody complain about the membership, ever. We've had people like to leave to go on and do something different in their lives. Changes where they can't continue the membership. We have people literally apologizing for dropping out. Anybody that drops out and says, “Hey, look, you know, we'll keep a seat for you” or something like that. But I'm super proud of what we've built. 

You can talk to any of the members or anybody that's been a member and it's never been about not having provided that service. We are stupid in our over-delivering ability.

Tracy Z (27:01):

We enjoy it. We have what has become a Note investing family. We have a community and we have the Mastermind that we all get on a big zoom call and brainstorm different things. In addition to the group coaching calls, the training, the teachings that we just found, that was another element that people wanted to get to know each other, that was in the training as well. Those are optional. Some people are camera shy and that's okay. We don't put people on the spot. The membership with the Mastermind in that community has been really nice. We did run it off of Facebook. Now we've set up our own private community. Because some people don't want to have their business on Facebook. I don't blame them.  That's been a nice addition. We grow and expand as our members ask for things. You guys have given us great ideas.

Fred Rewey (27:53):

The Mastermind started this year and we're pretty excited about it. It's this upcoming Monday. What we're doing this Monday is we're  going to role play a lot of what we create. What we're doing comes from member requests and questions. 

You walk into a library that has several hundred videos ready to go. Matter of fact, any of the members that come in this next week can have access to all the old member webinars, which is 88 hours of member webinars. And they're all really, really good. There's a lot of great content.

Fred Rewey (28:32):

We get our ideas from members. This coming Mastermind, we're going to role play, buying a note. I'm going to pretend to be a note seller and people are going to gather the information. Tracy's going to be the funder for them and how they would buy and what they would pay. Then we're going to break it apart. Talk about, Oh, here's what I would have said differently. Here's the questions I would have asked.  We do some of that. 

Tracy Z (28:56):

Thomas had a good question. Other people ask this and we just want to answer it. 

“If you have purchased a prior training you still always own access to that. What if you want to add the membership?” 

We have had a lot of people do that. What you get different in the membership is you get the coaching, the one-on-one coaching, you get the coaching webinars, you get the Mastermind, you get all the archived information. We have a lot of additional materials as far as eBooks you can use and email scripts and things social media, content posts. Some people have purchased This is the easiest way for me to explain it. Because that's a really good question. It's like if you buy a movie, you own the movie for life. And that's basically what this is, when you buy a training. 

Tracy Z (29:47):

Then when you purchase a Netflix subscription, you have access to those things while your subscription is current, that's what the membership is. Some people add on the membership to the training because they want the one-on-one coaching and the support and the access to us. Sometimes they'll just do that for a few months. Like I said, there's no long-term commitments. If you call the Support desk to end it that day, you wouldn't get a future billing. Then you just go back to using your training. However you choose to do it. We did both options because some people like that affordable monthly option. Some people just want to purchase the training. Some people don't want the support. You have options.

Fred Rewey (30:18):

If you're a member, you get access to anything that we create in the future as well. That's something, even the cashflow expos and the wives expos, those we throw in. Which is why, again, we keep  the count pretty low on there. 

I guess we're just about out of time.

Let me give you the website where the doors are open right now. Just go to www.noteinvestor.com/member. We just opened up the doors as of 1:30. I'm talking about great timing. if you get there or you see this video late, and there's a waiting list, I apologize. I'm sorry. You didn't see this in time, but you know, our intent is to keep it up for seven days.

Fred Rewey (30:55):

I don't know that it'll be there. There's no long-term obligation. If that, if it's live and it says the doors are open and you can grab a seat then grab a seat. We're looking forward to helping you there. We have one thing right out of the gate that I would say to focus on would be the 90 day course. There's what to do in your first 90 days. 

Tracy Z (31:22):

It was because we have so much material and we've over-delivered in the material. It got a little hard for people. They would go, “Oh my goodness, where do I start? There's so many videos. There's all these four full blown training sessions. I have a 475 page manual. Where do I start?”

If you're new to the note investing world, that's just give you a 90 day quick start.  Here are the must read things to and things to do. Here's your action plan for the next 90 days. Then as you're doing the business. You're going to get these other questions that come in and you'll be able to go pull from the other training and dig deeper if you want to learn about hypothecation or you want to learn about partials.

Fred Rewey (32:00):

Just email us at info@noteinvestor.com and we'll respond to your question.

Tracy Z (32:14):

“Lending on a note versus buying the note.” There's pros and cons to each. It depends on the situation. We did a whole full-blown webinar on that because here's lots of different agreements out there. 

We have people that didn't graduate college like myself, and just really good with working with numbers and people and good at marketing. This is a good business for anyone who wants to work at it. That is looking to maybe add onto their existing real estate business, or to find an alternative way to invest. That's backed by real estate. They're concerned about the turmoil and the stock market. It's just an alternative way to diversify. It's a really great concept too, because when we talk about how to calculate cash flows in one of our training sessions, it really gives you the pieces and the tools you need to analyze any situation. Whether you're buying a car or paying off a credit card. 

I'm really proud of that training. .

Fred Rewey (33:12):

You should be. It's the training that I said that everybody needs, but no one cared about. And I was completely wrong because everybody needs that. And you did it. That was a labor of love.

Tracy Z (33:20):

One of our members came and he said, I had a mom who was a math teacher and I love my mom, but I had her as a math teacher. Because I lived in a small town and I couldn't do math. I hated math. All I could think of was I would freeze. Then he said, I finally love the calculator. I am now teaching other people how to use it based on your course. That was one of the biggest compliments. His mom's proud too. I'm sure.

Tracy Z (33:45):

We look forward to working with you. If the timing is right for you, we welcome you. If it's in the future, you can still hang out, be part of our family. Subscribe to our noteinvestor.com blog because we have lots of great information. We'll be publishing the new stats as well.  Just to remind you, if you are interested in the Membership it's www.noteinvestor.com/member. 

We really appreciate your time here today.

Tracy Z (34:25):

Happy Note Investing

[lunarr-rrose]

A Day In The Life Of Notes - Note Investing 101

https://www.noteinvestor.com/101

​ Ever wondered what it feels like to be participating in the note industry? In this webinar, we are going to walk you through a typical day of note buying as well as give you a few ideas of what to do next.

In this live session, we will be covering...

1. Setting Up Shop

2. Marketing

3. Gathering Information

4. Deal Analysis

5. Pricing

6. Making Offers

7. Working With Investors

Join us Thursday, March 25th for  "A Day In The Life Of Notes"…and bring your questions as the session is LIVE!

Timestamp:

0:10​ - Introduction: How To Start A Thriving Note Business.

0:40​ - What A Day In A Life Of Note Investor Look Like.

1:06​ - Disclaimer 

1:29​ - www.noteinvestor.com/101

1:44​ - Setting Up Shop

5:18​ - Can I use an LLC that is not in the state I live in?

6:27​ - Marketing

8:19​ - Gathering Information

8:32​ - Worksheet

11:40​ - Deal Analysis

16:07​ - Pricing

18:11​ - Making Offers

22:42​ - Working With Investors

23:28​ - Directory of Owner Financed Note Buyers and Service Providers

24:20​ - What is the timing of your offer

26:38​ - We Are Not Lenders

Discovering Notes - Note Investing 101

https://youtu.be/pjtPZBUTU4M​

Profiting From Notes - Note Investing 101

https://youtu.be/kGqZ1QJ_9lA

​ Marketing For Notes - Note Investing 101

https://youtu.be/HaCnPztbNfE​ https://www.noteinvestor.com/101

----------------------------------

Tracy Z (00:01):

Hello and welcome. This is Tracy Z. This is Fred Rewey. We are here for a Note Investing 101. We're talking about how to start a thriving note business. Today we thought it'd be fun to walk through a day in the life of a note buyer. If you've been joining us on this site, these sessions, thank you. We've done several already. If you've missed them, make sure you go back and watch the replays because we talked a little bit about marketing and opportunities for profits. And today we want to talk about what you need to do. What a day in the life of a note investor looks like.

Fred Rewey (00:45):

We covered marketing and we're crunching numbers. That’s why we thought it'd be really good to do “A day in a life”.

Fred Rewey (00:51):

What does a typical day, from starting your business to working with investors, look like? Or what does a typical week look like? We're going to start right out of the gate by setting up the shop.  Before we do that let’s put up a disclaimer. We're not attorneys. We are not giving you legal advice. We're not giving you tax advice. We're not pretending to be doctors on Facebook or LinkedIn or YouTube or wherever else we are.

Tracy Z (01:28):

Exactly. If you want to catch any of these, then please go to www.noteinvestor.com/101.

Tracy Z (01:35):

That’s noteinvestor.com/101 to receive notices when we go live and to watch any of the replays and other things we talk about here today.

Let’s start with setting up shop. I mean, that's kind of an obvious place. You only do this once, if you were just starting out in note investing, this would be where you would start.

Fred Rewey (01:55):

There are a couple things I think that you want to pay attention to. The most popular question is, do you have to set up an entire company for it? When I started a long time ago, I did not.            I created a DBA. At a very minimum, I think you want some sort of entity. Yes, that can be you. And yes, you can be private, but if you're talking about running it as a business, I think it's good to have some sort of company name.

Fred Rewey (02:15):

Now whether you want an DBA, an S-corp, a C Corp or whatever, that's really between you and your tax accountant of how you think you should set that up. Just to put it out there a minimum of DBA doesn't cost much at all.

Tracy Z (02:25):

Most people eventually will form some sort of entity like an LLC or an S-corp board. Fred mentioned the C Corp, most common being the LLC. Most will do that eventually.There's some tax benefits and asset protection benefits. If you're buying and investing in notes and you're using your self directed IRA, then you'll be taking a name with your custodian for the benefit of your IRA trust. The reason we talk about this is we don't want people to get slowed down. If you're referring notes, you could refer a note as a person, as Fred mentioned, DBA - Doing Business As, and it would just get reported to you as income personally.

Tracy Z (03:06):

We just want to talk about some different opportunities there, but don't let it hold you back. Once you have your entity that you want to do business as, then think about what you want to get for a business address. You don't need to have a brick and mortar business, but it is good to have a business address because you want to be able to put that on your website. You want to be able to receive mail and most people don't want to use their own personal home.  It's very acceptable to use ��a UPS store mailbox, or sometimes people use an executive suite. There's different opportunities there, but we do recommend getting some kind of address, even a PO box, that's not your personal address,

Fred Rewey (03:45):

I think you need to have a web presence. It's important. We talked about this in a previous episode, when we're looking for people or wanting to find credibility, if nothing else, and yes, websites can get you deals. Yes, you can put forms on there where they can submit deals to you. But a website's only as strong as your marketing out there. However, if you're doing any kind of marketing, if you're trying to get referrals  or if you're trying to outbound to sellers, they're going to look through a website. They're going to turn to your website for information. If there's no information on there, that's a problem they're going to move on to somebody else. Basically you need to have a website. We call it a ‘brochure website’.

Fred Rewey (04:26):

If you just want a basic website that shows who you are, what you do, how to get a hold of you. You can certainly do that. There's nothing wrong with that. You can add on a few bells and whistles, but at a very minimum you’re setting up shop. You're a DBA or starting out just as yourself and flipping notes. You need to have a presence office-wise. Which is nothing more than a laptop. You don't have to have office spaces. As Tracy said, you're going to need an address to send mail, typically, not your own home. And you need to have a web presence.

Tracy Z (04:53):

You also need to have a phone number that you feel comfortable sharing. Some people use their cell phone number. You can also use a service like ringcentral.com. Which we've been using  for 21 years. They have programs where they'll give you a business number. Then you can just have her being through to your cell phone.

I saw a question pop up. Somebody asked “Can I use an LLC that is not in the state I live in?”When we get to that fine tuning of that question, we're going to say to refer to your legal counsel. But certainly there are people that have set up LLCs in different States from where they live. You just have to keep in mind, what's  best for operating there and also for where you're going to buy the notes and transact the business.

Tracy Z (05:50):

I guess there's some benefits to certain States. They make it easier and less expensive to file an LLC. Definitely talk to somebody that's adept at that because there is a pretty reasonable amount of setup. Those are the main things that you need to do in setting up shop. There's one more thing you should check. That is where you're planning on doing business. There are laws that specifically relate to how you're operating and doing business. We want to make sure that if you're buying notes, collecting notes, and brokering notes, just do a double check on how your state treats that as well. Those are the things that you need to do for setting up shop.Then you're ready to start marketing.

Fred Rewey (06:31):

Typically in a day, you're going to spend at least 70% of your business in marketing. It  takes so long to analyze the deal. It takes so long to send the deal to somebody. To have it quoted or someone to close it for you. You're going to spend a lot of time marketing. As we talk about in the last episode, there's lots of different ways to market. You're probably going to have more than one method. We recommend that you at least have two.  Sample If you're doing direct mail and maybe also do a referral. Online at the same time network meetings. Whatever it may be, you need to do methods of marketing probably.

Tracy Z (07:04):

Yes, I definitely agree. Don't try to do them all at the start. Maybe you will add additional ones later. As Fred mentioned, if you start with two, maybe three that’s where you are really focusing on. Maybe reverse ad marketing as well. Remember, we did that whole session on marketing. We went through the different varieties of marketing and that just of course tip of the iceberg, But those were the most common methods. So pick a couple, stick to them, get them up and operating and then slowly add in others as you go.

Fred Rewey (07:31):

How you pick which ones to do were based on budget  and we did talk about that. If you go back to  www.noteinvestor.com/101 and you sign up, you can get access to the previous one we did, which is on marketing, where we actually analyzed them. Like I said, budget also comes into play of how you're going to do your marketing. Also like I said before, you always needed to be marketing.

Tracy Z (07:52):

You absolutely do. Once you get that set up and it's a marketing machine that's happening. You may not spend 70% of your time marketing, but you definitely will be in. We still set aside a good part of our time marketing because you're always looking for deals, sources of inventory, unless you're going to the listing sites. Like we mentioned, if you were trying to shortcut all of those methodologies, marketing is super important.

Fred Rewey (08:20):

Let's talk about gathering information.

Tracy Z (08:22):

Yes. You've somebody contacting you or emailing you or submitting the worksheet online. This is where you've got to get some information to know what to do with the deal.

Fred Rewey (08:33):

The worksheet is probably one of my favorite things. It's evolved over the years, but it's not changed much. It's basically content about the deal. It has the information of who you are. If you're going to flip this on to somebody else, otherwise you're going to skip a lot of that. Then just talk about the property.

What it looks like, what type of property it is. Then you're going to historical information. That's talking about the data sale, the selling price, and the down payment. Remember when we talked about in the previous episode about working with sellers and things like that, you're going to fill out all that information. Whether you're going to buy the deal you need to know that information.  Then if you're going to flip it onto a funder, then you absolutely need to have that information to find out how much a funder will pay for it.

Tracy Z (09:17):

That information is very important. Don’t go down that worksheet like a robot. This is an opportunity to really get to know the party, that's wanting to sell their note because they have a reason that they're doing that. This is your opportunity to build some rapport and really discuss the transactions. Don't ask the questions like it's some kind of interview process. They're really more conversational questions. You're trying to get to the crux of the matter. When you're dealing with what we call a mom and pop seller, or a seller finance has just done one or maybe two notes in their lifetime. You're trying to understand: what is their need? Are they wanting to solve a problem or they're trying to pay a bill. Maybe they want to move on to another investment and maybe they want to do something fun, like take a vacation or buy a boat. You're trying to understand what the need is because that will help you understand how to better serve them. How to meet that need and whether they need something like a full purchase. Or maybe they just need a partial purchase. When we went through profiting with notes and talked about the different opportunities, we looked at prop partials and fulls. This is the conversation where you'll see what option is going to best fit their needs.

Fred Rewey (10:25):

A lot of different ways to buy a note. I could look at any note and probably come up with 10 different ways to buy it. I would never offer that to someone trying to sell a note. “Hey, here's all 10 options”. It's like walking into a cheesecake factory. I'm completely confused. I don't know what to order. There's no way you can be good at cooking all of this stuff. So I'm just going to have a hamburger. One of the things you want to do is that you pick one or two ways to offer, to buy the note and you do that based on what their need is. That's what filling the worksheet is for me. That's what I love about the worksheet. Tracy knows this: I spent just as much time on the back of the worksheet as I did in the front of the worksheet.

Fred Rewey (10:59):

Now, if you've never seen the worksheet, there is not anything on the back. It's blank.  I would just write down little notes. They were going to Disneyland. They wanted to buy a boat. They always wanted to go. They were going to sail on the key West, whatever it may be. I wrote down all those notes because they became important later when I went to make an offer. You do need to know the need. You have a chance to build that rapport. You also have a chance to find out what the need is, why they're selling.

Tracy Z (11:39):

Once you've gathered the basic information, then you are ready to start doing some deal analysis. That's the next piece of what a day in the life of the note buyer looks like. The deal analysis is really doing some preliminary homework, the transaction. The first thing I like to do is just pull up Google and type in the address and just get a picture. Now I know that's not a current picture, but it gives me an idea for the property that is acting as security or collateral for the note. It also gives me an idea what the neighborhood looks like around it. The second thing I like to do is hop over to the County tax records. Fortunately, almost all counties are online now. You can type in the address and you can find out who the current owner is. When it lasts, how much taxes are and are those real estate taxes current? Because it's one of those things that if the buyer's in trouble or if they're having troubles keeping their real estate taxes current.

Fred Rewey (12:33):

I like to crunch the numbers. All that takes is basically a calculator. We have training where we actually went through all the numbers and showed you how to do it and stuff. You may want to get used to, take a course or take some videos on a financial calculator. It'll make you much more comfortable making offers. It's essential. If you're going to buy notes and hold them for yourself, you need to know what you're buying. You need to know. If you say, Hey, I want to earn a 12% yield on my money, on my investment. Then you need to know how to operate one of these. It's not that hard. I've said it a million times. I don't like math, but I like money.  We've made it real easy. When we talk about how to work with calculators, a lot of people out there can know how to do it. So you definitely need to know the calculator.

Tracy Z (13:24):

The basic numbers we're looking at is how much equity does the buyer have. That's called LTV or Loan To Value. We're looking at what maximum investment we make. Investment to value compared to the property value. We want to see if the buyer's balance is what they currently owe the unpaid principal balance. We want to know if that matches up where it should be in the amortization schedule. Are they paying ahead or maybe they've gotten behind. Those are the things that we're looking at first. Then we can say, well, based on the property type, the equity, the terms of the note, we can see what we might pay for a yield. That's how we start doing our basic deal analysis. We also like to go online and do some basic comp analysis. Now, some people are in the real estate world.

Tracy Z (14:07):

They might have access to the MLS, the rest of us just starting out. They were going to go and look. Things like Zillow. We do Redfin. We've got a couple of different sites that we use for that as well, even just realtor.com. The thing there though is we know that those aren't set in stone values, but we're trying to get an approximation of what things are selling for what supply and demand is. Because later in our formal due diligence, then we'll get a true broker's price opinion of BPO to substantiate it. Right now, we're just trying to get a basic idea. And at this stage, in this gathering information, deal analysis stage, then we also are going to want copies of the documents.

Fred Rewey (14:57):

We are. I want to say right here is a good dividing area because you may not be crunching the numbers. So I want to be very clear about this. If you are going to just flip the notes and I think it's good, by the way, for everybody to learn how to crunch the numbers, no matter what, but if you find a deal, there are always people that will crunch numbers. We do it for our members. We know funders on funding deals. At the very basic there's a split here. If you're flipping the note and you fill out that worksheet and we're going to talk about that in a few minutes about sending deals to funders. They will come back and tell you how much they're willing to pay for it.

Fred Rewey (15:34):

There is a little bit of a split, but as Tracy said, at some point, we're going to want to see the documents when you're talking about deal analysis. Because we're going to want to see how the note was written. What are the terms? Do they match what the seller told you on the phone or submitted via email? Because that happens a lot. They forget about something. Oh, I thought the note was at 8%. It turns out to be 2%, you know, or I forgot there was a balloon or whatever it may be. At some point we're going to want to look at documents. It's not a big deal. It can affect the deal pricing, but it's not a big deal to go find out what it is.

Tracy Z (16:03):

Now that you've done some basic deal analysis. You're ready to move into the next step. Which is pricing. This is where there'll be a difference on how you operate. As Fred mentioned, if you are buying the note you're going to determine what price you would pay. You're going to look at your maximum investment to value your yield and your discount. That'll end up being expressed as a percentage of the unpaid principal balance. If you were buying that note, then you get to decide  that's the beauty of the note business. Whether you'll do a full or partial. What return you want. If you're going to refe  it and flip it and earn a fee then for pricing. You're going to send it to the investor. You want to talk a little bit of how that looks?

Fred Rewey (16:40):

Next thing you do is fill out the worksheet. Fax or send the information to a funder, and the funder's going to look at it. They're going to take a look at what you filled out. They may come back with a couple of questions. But they're going to send you back how much they're willing to pay for the note. They may give you a full offer for note if they buy the whole thing. If you saw some of the other videos, you know, you can do partials. They say, “look we'll buy the whole note for this much”, or “we'll buy the next 10 years worth of payments for this much”. That's when you really want to know how to make a presentation. It helps to have somebody to, you know, talk you through what that looks like.

Fred Rewey (17:15):

Next  take that number and subtract something off for yourself. If I was a funder and say, “ Hey, I'm willing to pay $90,000 for this note”. It probably won't be a round number, but for this exercise, let's just say  I am willing to pay $90,000 for this note. You need to take something off for yourself and present that onto the seller. If Tracy was the seller and I said, “Hey, I'm willing to pay you right now for $90,000.” You might say, “Okay, I want to make $4,000 for myself. So you take $4,000 off. And now you offer Tracy $86,000. I offered $90,000 you take off 4,000 for yourself. That's going to be your fee.  Then you offer Tracy $86,000. Now, again, it's not going to be round numbers. Matter of fact, I'm famous for going down to 23 cents. You'll always see 23 cents on there or 27 cents on there on my offers. I always go down to the penny on that. But that's the way the process is going to look with the funders. If they accept now, you're going to go on for the documentation.

Tracy Z (18:11):

Now, this is a good time to think about when you're making that offer. This applies to whether you're going to flip the note or whether you're going to invest in the note. And what are the costs going to be to purchase that note. Who's going to pay them. It's easiest to negotiate a transaction with a seller of a note. If you can give them a net offer and you as the investor, or if you are flipping it to an investor, they pay the costs that is the easiest sale. Sometimes you might want to split some of the costs with the seller, or you may want to find out if there's an existing title and you can use that to back off some costs. Let's take just a second to talk about the normal cost. That's normally going to be some kind of BPO, which is not very much, right, $100 to $150.

Tracy Z (18:55):

There's going to be a title report or title policy that can vary greatly depending on if there's a title policy in place or not. That can go from just a simple title report, update of a hundred, to $150 to a full-blown title policy. Which could be up to a thousand or more because it's based on the balance of the note. I'm not trying to get too technical. If you're working with an investor on that, they will let you know whether they pay the costs or not. If you're flipping the note, there are investors out there that say they pay all the costs and they're giving you, what's called a retail quote. If they give you something called a wholesale quote, you've got to go, “Oh, wait, who's paying costs?” What are they going to be? If you're the investor, it's likely you're going to pay those costs. You've got to make sure you calculate those in your just accounting for them to make sure that you're getting enough discount and enough yield. That part of the processing is the pricing process, to just think about those costs. If you're flipping it and you're new at this, it's better to work with an investor. That'll pick up those costs than you or the seller. Don't have to worry about them.

Fred Rewey (19:53):

Recapping a little bit and making offers. What we are looking at is presenting the offer. We talked about filling out the worksheet. Now whether you're going to, you're going to crunch the numbers yourself on the calculator, or you're going to get a fund or you're going to present an offer. You're trying to create the best possible offer. As I said earlier, there's lots of different ways to present offers. You can come up with 20 of them. But we're not going to do that. We're probably only going to give them two options, a full and a partial.

Fred Rewey (20:24):

Maybe there's a third partial in our back pocket. You don't want to shotgun them with a whole bunch of offers. They just get confused. They say no. Also, make sure even if the person says no always follow up in writing. That's just good practice because a lot of times people take that letter, they'll put it away. And a month, two, or three months later, they changed their mind and you can rerun the numbers and find out what it's worth.

Tracy Z (20:53):

If possible, make sure you're always getting someone's email and phone number. Then you can email them, put them on an email list and continue to follow up to them with no cost. You could use some more modern ways of keeping in touch as well, depending on the sophistication or the age demographic of your seller. But everybody pretty much has cell phones now or an email.

Fred Rewey (21:16):

When they gave their number, we gave them free things. I call it a bribe. Tracy calls it an incentive. For someone to give you their email. But you're providing something of value to them. You don't want to over email them. But you do want to continually kind of check in. If you get somebody from, say you had a direct mail campaign, and that costs you a dollar for their letter and 50 cents for the postcard,  they eventually sign up for your email list. Well, guess what? It's costing you next to nothing to continue to hold that conversation or keep that rapport going. Because now you've switched them over to email. And that's very, very powerful and very cost effective.

Tracy Z (21:55):

The values of notes change depending on interest rate and property values. It's really good to get your note analyzed for its fair market value at least once a year. Notes really are at a premium. People are getting really good pricing on notes because interest rates are low. So the cost of funds are low. Real estate values are up. It’s really a good time to sell a note because of those factors. It's good to let those people know that as well, or if their circumstances change that you're always there.

Tracy Z (22:37):

You always are being of service and you're helping them. It's never an adversarial relationship. Let's say they say yes. That's a good thing. Now what do we do? We're going to talk about working with funders. As the funder, then you'll go through this process on your own if you're flipping it. This is working with the investors. You might be worrying, thinking, “Oh, I don't have funders. I don't have the money. What am I going to do?” Well, we want to let you know that they are very readily available. We've got a note buyers directory that we put available on our website. That note buyers directory has been updated for 2021. We update it every year. And there are lots of people that will buy those notes and pay a fee for them. Even if you're buying it for yourself, sometimes you like to get a second opinion. What the note might be worth. You want to see what the liquidity is and you might even send it to them to get pricing.

Fred Rewey (23:29):

Go to www.noteinvestor.com and just look in the resource library in the bookstore, you can see the funder directly.

Fred Rewey (23:38):

We update that every year. There's not only funders in there. There's also an industry provider and there's some other things in there as well.

Tracy Z (23:47):

Exactly. So we also do the Best of Notes every year. People vote who their favorite BPO company is. Which is the broker's price opinion. What’s their favorite title company is. Who’s their favorite processing company  or self directed IRA. There's a business note buyer, because you can buy notes that are secured by real estate. But there are also companies that will buy notes that are just secured by business assets. There's even more seller financing on business only deals. There are also real estate deals. So this does not just apply to real estate.

Fred Rewey (24:19):

Charles had a question here. What's the timing of your offer? How soon? I'm going to answer that two ways Charles. Cause I'm not sure if you're asking how soon after they create the note or how soon after I fill out the worksheets. Let me answer that both ways. As the second one being how soon after I collect the information on the worksheet. Typically the next day. The worst case is two days. But I want to get back to them as soon as possible. Sometimes it's a matter of hours if I talk to them in the morning. if I'm going to buy the note and I crunch the numbers, I don't do it immediately on the phone with them. I actually take a pause. I gather the information, I get off the phone with them. I take a look at the numbers, rerun my numbers or talk to Tracy.

Fred Rewey (24:57):

We decided that if we're going to purchase something we make sure we didn't miss anything. Maybe do a little bit of research and then go back and make a presentation. If I'm flipping the note onto a funder. And by the way, we still flip notes. If I've got the lead, I might as well make some money off of it. We'll fill that out, send it onto a funder. Maybe the funder gets back to me late afternoon. Maybe that evening, I go ahead and I submit an offer to the seller. Or maybe the next day I submit it, but probably not much longer than about 24 hours. If you're talking about how soon after the note is created, you want to talk about that?

Tracy Z (25:37):

There are companies that will buy a seller's finance note as soon as one payment has been made and the deed of trust or mortgage has been recorded. There's a wet funding or a dry funding. The ink does need to have been dry to the deed of trust or mortgage recorded. One payment collected that payment could be collected at closing. As quickly as that there are institutional investors. They will pay up to 97% of the unpaid principal balance, on certain quality notes. They will also buy lots that are not 97 cents on the dollar. They will pay that though, if it meets their criteria with just one payment. The more seasoning that it has, the more valuable that note is. We like to see notes that have more seasoning. But the other qualities are good. The equity and the credit and the property type it's possible, one payment made.

Fred Rewey (26:38):

I think one point to make right now that is  really important is that you have to understand we are not lenders. We don't loan money. The note has to be done, created and established. A lot of times a payment needs to be made, or some people are even requiring more payments.  Then we will purchase an existing note. We do not lend the money. We're not simultaneously funding and lending the transaction. Our money is not being used to buy a property or anything like that. That's an important distinction that sometimes people make a mistake.  We are not lenders. That's not what we're doing. Their lending strategies are different from this.

Tracy Z (27:14):

If you're lending money to owner occupied buyers, there's a whole lot of regulation out there. We're looking at buying an existing seller finance note on the secondary market. A big distinction. When you are working with an investor or you are the investor yourself, this is when the due diligence comes in, you are truly getting copies of all the documents, ordering a title, ordering a BPO, checking to taxes and insurance, and getting a payment history. Knowing whether they're paying a service or paying the seller and verifying that. Knowing the properties insured, this is a normal checklist, normal transaction checklist that we make available for free on our website. That you go through the process of verifying those things. If you're buying the note, if you're flipping the note that investor's going to do that process, they may ask you to help gather some of those items that they will want to do the check of the due diligence items.

Tracy Z (28:07):

You've gone through due diligence and you're ready to go to funding. At closing, then if you're sending it to a funder, they'll prepare that package. They're going to prepare a purchase agreement. They're going to prepare an assignment, a note endorsement, some what are called hello and goodbye letters. To let the buyer know where to make their payment. They can do that through the title company, wired, the funds in their seller, sends their documents in there, including that original note. That's very important to track down before closing. They will fund into escrow and the title company or escrow company will disperse the money to the seller. That funding source will pay your fee as well. If you are buying the note yourself, then that fee you're not having to pay. Maybe you're paying a fee because somebody referred it to you. You will have to fund those funds in there through working with the self directed IRA. They'll fund those funds in there with your direction. That's very exciting. Then those documents get recorded and servicing gets transferred over. That is typically the day in the life of a new buyer.

Tracy Z (29:09):

I think the most exciting part is when we help people get the money they need. And we get to make a profit. Whether that's going to be flipping it and making an income. Now we're collecting payments and we're getting that interest income. One thing we don't always talk about a lot is if you buy that note and you are getting a return of the payment every month, you've got to think about how you're going to reinvest that money.

Fred Rewey (29:34):

I think that the other issue here that I think is important is that this whole day in the life thing, where we talked about, you know, marketing and gathering information, understand that you can do this from anywhere. We have. Last year we went on the road for three and a half months, four months, and just out of a trailer camper trailer and found a Wi-Fi where we could and still ran our business. We were in Guatemala for eight months and still ran our business. We were in Italy for a long time and still ran our business and came back. Understand that for us, one of the things that attracted us to this industry is flexibility. We don't work for anybody else. I don't have to., We don't have to commute. I'm not worried about traffic. I'm not worried about getting into work at nine o'clock.

Fred Rewey (30:19):

I golf typically on Wednesdays. It's not a big secret. I typically take off Wednesdays in the morning and I go golfing. Or if a friend calls me and says, “Hey, you want to go golf on Thursday or you want to go do something else.” We have that flexibility.That's part of what I love about this industry. In addition to creativeness, and doing all the other stuff, the ability that we can just kind of make our own schedule.

Tracy Z (30:40):

And if you are somebody who wants to invest in notes, it gives you an alternative to the stock market. It is a way to have assets backed by real estate that don't require you to have tenants. You get to have owners in the property that pay the maintenance, the taxes, and the insurance, and you get to collect the payment, via the interest income.

Tracy Z (30:57):

If you are somebody who fixes and flips properties, the real estate themselves, it gives you another avenue. Because it takes a lot of time and energy to find a wholesale deal, fix it up, flip it. It's not as easy as they make it look like on HGTV. And I love those shows as much as anybody. But if you are buying a note, secured by that real estate, then you are able to do it with much less time and energy invested. And so you're the bank, right? The bank is working to make the interest count. They're making it off their advertised spread. Whether you're an investor or you're doing it for median income, this business can be a really great opportunity for you. You have to run it like a business. It truly is a business. The amount of time you want to invest in it as well as up to you, but you will see those results in return.

Fred Rewey (31:42):

Well, thank you for joining us. Appreciate you hanging out with us.Go to www.noteinvestor.com/101 if you've missed any of the previous episodes. This was just us putting together a mini series on the basics of note investing. We hope you're finding them helpful. We might actually do a couple more episodes coming up here. If there's any subjects you want to talk about, send us an email. You can go to note investor.com to see our contact information. Thank you so much for joining us.

Tracy Z (32:14):

And happy note investing!

[lunarr-rrose]

Marketing For Notes - Note Investing 101

Wondering how to find real estate notes?

In this session we take marketing head-on by covering (and grading) the five most common methods for attracting notes:

Direct Mail

Ads

Online / Internet Marketing

Referral Marketing / Networking / MeetUps

Creating Your Own Notes

We’ll also cover an often overlooked technique we call REVERSE Ad Marketing.

This is a great strategy for a smaller marketing budget or for anyone wanting to take action immediately.

Which note marketing method has the ‘best bang for the buck?”

Join us Tuesday, March 23rd to start "Marketing for Notes"…and bring your questions as the session is LIVE!

Discovering Notes - Note Investing 101

https://youtu.be/pjtPZBUTU4M​

Profiting From Notes - Note Investing 101

https://youtu.be/kGqZ1QJ_9lA

​ https://www.NoteInvestor.com/101

Timestamp:

0:08​ - Introduction: Marketing For Notes

0:41​ - Disclaimer

1:37​ - www.noteinvestor.com/101

2:13​ - Main Area or Sources of Deals

2:43​ - Top Five Ways To Find Notes

2:55​ - Direct Mail

9:41​ - Ads

13:15​ - Online/ Internet Marketing

18:46​ - Referral Marketing/ Networking/ Meet-Ups

22:48​ - Do you use SEO for your website?

24:23​ - How would you rate Online Networking? Do you find that effective as well?

25:05​ - Where is the best place to buy a list of note sellers and what criteria do you use?

26:54​ - Creating Notes

28:46​ - Reverse Ad Marketing

32:12​ - Sites for Buying Notes

32:46​ - www.noteinvestor.com - Best of 2020

----------------------------------------------

Fred Rewey (00:00):

Hey everybody. Welcome to note investing 101. Which is kind of our mini-series. I'm Fred Rewey.

Tracy Z (00:16):

I'm Tracy Z. We're glad to have you here today. We're going to talk about marketing for notes. That's one of the things people always ask us, right? How do I find notes?

Fred Rewey (00:26):

It's kinda like, you know, cooking without food. I mean, you need to have the other part of it. 

Tracy Z (00:32):

Before we start that.  We're supposed to do a little bit of housekeeping. We always jump ahead of ourselves.

Fred Rewey (00:38):

Last episode we even forgot it. We need a disclaimer because it's the internet. People do weird things. Here you go.

Tracy Z (00:46):

We just want to let you know, we're not trying to sell you a security. We're not attorneys. We don't offer legal or financial or investment advice, but definitely use the services of those providers. Past performance is no guarantee of future results. All investments have risk. We are checking to you for informational purposes. Things that we've learned from doing note investing for 50 combined years. I started in 1988. You were early 90's.

Fred Rewey (01:12):

We're not attorneys, but we're glad to share the information that we've had with the combined over 50 years experience. If you missed any of the other ones, you can still catch the replays before we take them down. This one is on marketing. We're going to talk about marketing for notes.

Tracy Z (01:32):

Exactly. Marketing for notes. If you want any of the handouts or things that we're talking about go to note investor.com/101. You can sign up to get the replays. Also to get the five ways to cash in on cashflow notes and the 21 tips. Also information about all the things that we offer. We encourage you to do that. 

How do you find notes, as Fred mentioned, you need food to cook. To do all these cool strategies that we've been talking about, you need to have deals. Deal sourcing is very important. As we talked about on our very first investing in notes introduction, there are main areas or sources of deals.  You've got your non-performing notes, which are more like bank notes and hedge funds. You've got your seller finance notes. We're going to talk a lot about marketing for seller finance notes today. That's where a seller sells the property. Let the buyer make payments over time and then decides to sell those notes. Then you've got creating your own notes. We'll talk about that as a marketing method as well today. 

Which one do you want to kick us off?

Fred Rewey (02:37):

We're going to go over the top five.  We may actually try to sneak in a few extras before the end of the show, but we're going to talk about the top five ways that people market and find notes. Spoiler alert at the very end we are going to tell you where you can  go online and  see them. But it's going to be at a slightly different price. 

Let's do direct mail. It's one of the longest methods for a while. I mean it's pre-internet. It's still valid. People still get stuff in the mail. What we're going to do is we're going to break down each one of these  different areas and we're going to give it an overall grade. 

We're going to talk about how effective it is. If it's a good cost or not. How much time it takes to do it. If there's a lot of competition in it. We have these little cards where we can give them grades and we don't always agree by the way, just so you know.

Tracy Z (03:30):

Direct mail is something we love to hate and why do I say that? Well, when you're receiving it? What do you do so often with a piece of direct mail? You just throw it in the circular file. Well, if it's something that really intrigues or interests you, yes, but most of us were just sort or throw it away. That is the challenge with direct mail. The positive with direct mail in our market is at least it's about 6% of most real estate transactions. If we're going to send a direct mail to somebody who's taken back a note, we can actually buy a list of people that sold with seller financing we can target. If we were just to send a direct mail to every person, every household in a zip code, that would be a horrible marketing method because less than 6% of those would hold a note. If you look at the averages, obviously you've got a target, your marketing message. You just can't blast it out. You can't do shotgun marketing in the note business. You really have to think about whether I'm going to fine tune and target my marketing method.That has a lot to do with whether you have good results or not. With direct mail, you can buy a list of people that sold property and took back owner financing.

Fred Rewey (04:47):

What you do is you basically buy the list. To know who they are like Tracy said. If you shotgun market, then 96%, 95%, 94%, well it's based on the area. But it's not gonna be applied, you're going to get the list. Then basically you're going to either mail them a postcard or a letter. Our method is normally typically the first round to mail them a letter. The second round is to then mail and postcards afterwards. You're not going to get a response immediately. Some people will respond, but  it's a numbers game. 

Now let's talk about the fact. It's cost. If we're talking about direct mail, is it effective? We're going to decide if it's highly effective, medium effective, or it's not very effective. For me direct mail, I would say  it's medium effectiveness. 

Tracy Z (05:40):

But why is it medium effectiveness? You're thinking, well, why wouldn't, if I know I'm mailing to somebody who has a note, why wouldn't it be higher effectiveness? Well, not everybody who receives it needs to sell their note. So oftentimes we had it where they file it away. Cause we always put a little message on there, you know, if you're not ready to sell your note, now save this for future reference when you might need it. a lot of times you will file the way or they'll just throw it away. That is why, as Fred mentioned, you can't just mail to somebody once and think it's going to be effective because it won't be. We  usually start with the letter and then the postcard. We do every three to four months cycle when  we are mailing them. When you talk about traditional marketing, you talk about touch points. Someone may be interested in selling and in note marketing as well.

Fred Rewey (06:31):

There's a category we're not covering, which is basically timing. We can't effectuate the timing here. Basically we are mailing a letter or a postcard hoping to hit them at the right time. Which is why we have to do multiple. That's a medium for us. Cost. It's going to be high. It's expensive as the postage stamp keeps going up in price or just buying supplies, names are very reasonably priced.

Tracy Z (06:55):

You can get them between 12 cents, 15 cents. It depends on the number of names you buy, but somewhere between 12 and 18 cents a name. That part is cheap but if you think about mailing a letter when you add in the cost of the name, print, the letter, envelope and the cost of the stamp it's about a buck. It's about a dollar on a letter and a postcard runs about 44 to 45 cents. We still like to put old school stamps on our letters. But we don't mind using the presort postage page like a sort of mailing house on the postcards. We don't find that makes a big difference, but we do find the hand sign letters. Number 10 window envelope with a real stamp is worth a little bit of extra on the letters.

Fred Rewey (07:41):

Time-Wise, it's not a time killer. It's not hard. A lot of times you can buy the list, upload the list to a house, upload your letter, do a mail merge. I would say time, in a worst case, it's a medium. You can outsource a lot of it. You can automate a lot of it. I wouldn't say it's a high maintenance method by any means.

Tracy Z (08:05):

The competition, it just like cost. That is high. You're not going to be the only person who bought that list of names. Remember the names come from County recording information. There's lots of other people who mail as well. They don't always mail consistently. The consistent, direct mail person in the note investing business is the one that usually wins out. If you are going to just mail, once don't bother, in direct mail, it's not going to work,

Fred Rewey (08:33):

We never really put a number on it. I would venture to say that you probably need to be playing with something at no less than probably four to 5,000 names. That's your list size and you're mailing them three to four times a year.

Tracy Z (08:47):

We normally say, if you're going to start out, at least start out ideally with a thousand a month at the minimum 500. Then get them in rotation every four months. You'll have that higher number at the end of the year that Fred mentioned. When you put it all together,  I'm going to give a B.

Tracy Z (09:11):

I would say to B to a C.

Fred Rewey (09:13):

It's close to. It's a B minus. With little C showing there. So we're gonna say B or C. 

Tracy Z (09:22):

We'd love to hate it. We don't suggest people start out here. This is somebody who has some longevity and they have some funds to invest. But the good thing is, is it does get your marketing up and going, that's one of the positives. So we've got  B or C. We'll call it a B minus or a C plus. 

 All right. So what's the next one?

Fred Rewey (09:42):

We're going to talk about ads, but we're talking about offline ads. We're not going to talk about online ads right now because we're going to get into that, I think on the next one. 

Tracy Z (09:53):

We'll start with offline.

Fred Rewey (09:54):

How do you give it a grade? 

Tracy Z (10:05):

Offline ads are traditional ads. They are the dying newspapers. They are the nickel Nicks, the penny savers, they are the local newspapers. There's just not that many people that buy a newspaper. Most people go online to read their news. Normally ads used to be a really effective way. 

Fred Rewey (10:36):

Display ads are basically like a quarter page of it or a big box in the middle of the classifieds. Those were never really effective. What was effective was the lines where you got like 12 words and  placed it in there and you say,  “are you receiving payments?”  “Would you like to get a lump sum of cash?” or “Call this number toll free.” 

There are a couple of things and you can put that in different sections depending on what you were testing. Put it in the need of money or it in the real estate section. You can mix it up. You were looking at like Tracy said, the free papers and things like that. 

Tracy Z (11:24):

That’s if you're going to run an ad, that's offline. The places that we find that still work are in a rural area.  Where they have either a local, small newspaper or they have those green sheets, the penny savers, the nickel Knicks. It's called something different depending on what part of the country you're in. We buy mortgages, deeds addresses and real estate contracts. “Call now for a free quote and free offer”. For that, for those local ads, let's go ahead and talk about effectivity, costs and time competition

Fred Rewey (12:11):

I'd say they're pretty effective. I'd say a medium plus as far as being effective the cost is usually very low or should be low. Time is super low. You do the ad once and it just sits there. If you're paying it, like $10 a week for an ad or something like that, it sits there for an awfully long time. You don't have to do a lot of deals out of that. Competition is probably a medium. I haven't looked in one of those papers for a little while recently just to see what's going on,  but it's usually medium. You're not going to be the only ad there. 

Tracy Z (12:43):

What do you get for an overall grade? I'm going with a C .

Fred Rewey (12:44):

I'm going with a B.

Tracy Z (12:47):

Ads are really hard to group into one thing. Which is why Fred and I were doing the bantering back and forth because that's just one kind of ad. You have free ads online. Well, who wouldn't take a free ad. They're not super effective, but they don’t cost much.

What about Pay-per-click? Which would we'll get into on the online section as well. Pay-per-click as an ad online. That can be very effective, but also expensive. 

Let's go to the online category

Fred Rewey (13:17):

Let's talk about Online. Earlier we talked about direct mail. Let me make a comparison. This is important here. The direct mail, we did get a list of names and we are able to mail the people that specifically we know that have carried back a note. Sometimes we've got the list names. The advantage of online is I'm going to advertise based specifically on terms that they type in at that moment. I will advertise on Google  the keywords, where can I sell my mortgage note. The timing is perfect because they're specifically looking for how they can sell their mortgage note. The downside is it's going to cost me a lot more for that lead. If someone's already on the internet, you're definitely not the only game in town when they type that in. They're going to see five ads right out of the gate. Then they're going to see organic search below that. There's a chance that the competition's pretty heavy on that, but from a targeted standpoint, they're there.

Tracy Z (14:17):

In addition to the ads, then you've got your websites, you have social media. It's a very broad spectrum. We probably should break down. Do you want to break it down overall and then break down some of those other areas?

Fred Rewey (14:29):

Let's talk about a couple of areas, let's talk about websites. We talked about ads a little bit. Pay-Per-Click websites are phenomenal.

Tracy Z (14:33):

I love websites. I don't even know how you could do business without a website. A website is a storefront. It's what a storefront used to be. You've got to have a website. What's the first thing you do?  When you go search for somebody, you go online and you search for a website. Also if somebody is marketed, you and we see this all the time we're doing some rehab work on a house.  We'll pop over to Facebook marketplace to see if we can find someone  that might specialize in that area.  What's the first thing I do? I want to go see if they're legit, if they've got a website. Everybody does it. Everybody checks to see if you have a website.

Fred Rewey (15:09):

The other thing is you're not glued to your computer or glued to your job. You're going to go to bed at 10:30 at night. You're not going to wake up before 4:00 AM. But your website's working for you 24 seven. You'd be surprised at the number of people that are actually going to your website at 12 o'clock or two in the morning, cause they're stressed. That's when they're trying to find their solutions and your websites working for you, they're reading about you, they're submitting a form. Maybe putting a form in there telling you about their notes that they want to sell and submitting it automatically online. We are huge fans of websites, both from a credibility standpoint and from a kind of working for you standpoint.

Tracy Z (15:47):

Completely full disclosure, we got so good at figuring out how to build a website for the note buyer industry.  We actually created a little division that helps people build their websites that our daughter runs for us for the note business. There's really some things you want in there and you want good blog articles. You want an online quote request form. You want to answer the frequently asked questions. We have that on websites. If I had to only do this online category on websites, it would probably resonate. 

The challenge with websites though, is that it's not like you build it and they will come. You have to actually market your website. Just building a website in and of itself, isn't enough. You still have to market through these other methods to get traffic or visitors or potential clients to your website.  There's strategies like search engine optimization. Adding content through content marketing. Using social media. All of those don't end up with the immediate bang for your buck but they do establish your website. 

Do we want to talk about effective cost, time and competition?

Fred Rewey (16:59):

I would say online is highly effective.  Like what you said, it's not going to just market itself, but you can market that and say it's highly effective. 

Cost is great. You can build a website for less than 500 bucks. You can build your own website if you really want. Just make sure you have a checklist of things you should have on your website. There's lots of templates out there, particularly WordPress. You can do it yourself. Cost per click is high. 

Overall experience it's certainly efficient. 

Time, I would say, is kind of a medium. Particularly if you're doing what you need to do there. But the nice thing is there's flexibility. You can be anywhere as long as you can get the internet.

Tracy Z (17:44):

Competition it's definitely high. There's lots of people out there. That's the one thing that the internet has done. We've done this business before, during and after the internet and that's okay. You start in 1988, nobody had a website then. We built our first website in the mid nineties for our company.

The problem with the internet is that there is high competition because lots of other people have access to the internet as well, but it makes it so much easier to do business. 

Overall, I strongly recommend the A category. Do we agree on this? We love the internet. Only a B probably because if we were talking about some of the things like taking more of your time and content marketing or social media marketing or things like that.

Fred Rewey (18:45):

That's all right. Let's talk about referrals and networking.

Tracy Z (18:48):

This is the other one we talked about where our main sources of business come from. It's definitely our website, referral marketing and network marketing.

Fred Rewey (18:55):

Referral marketing is basically as opposed to marketing for notes, where you are specifically going for the note holder or the end user that is going to sell you the notes. You're actually looking for a middle person. You're looking for the people that know people that have deals. In some cases they're creators. They're rehabbing houses and they can create notes.  You're not really looking for the one-off mom and pop to go through there. In referral marketing, that could be just via your website. You can have an outbound, direct mail campaign and email campaign. You can be networking at meetings. You can do meetups and any of those things.

Tracy Z (19:36):

If you're wondering where to start, think about the professionals that interact in a seller finance transaction. Think about real estate attorneys, not just any attorneys, but real estate attorneys. Probate attorneys can also be good ones. Title companies are great referrals. Other servicing companies, sometimes a mortgage loan originator will see that somebody has received payments on a note. Maybe they need to get that soul to qualify or to get income for a bank loan. Those tend to be some of the main ones.

Fred Rewey (20:15):

The referrals networking part is it's anybody that sees someone else's money or potential notes. It's a much slower build. If you're looking for a CPA and let's just say, you know, your market through a hundred different CPAs, but you get that one that responds and understands it, they may send you four deals a year or six deals a year. That's very much worth your time in that effort. 

Tracy Z (20:58):

In addition to CPAs, I wanted to make sure we talked about the real estate investor clubs, because the REAs are really big for referrals and network marketing. 

Fred Rewey (21:11):

Referrals effective, highly effective. Yes. It can be.  I don't mean this in an insulting way. If you're dealing with a real estate agent, a lot of them are like. “You know what? It's a hot market right now. We're selling.” I don't need to do this. Sometimes you have to go through a lot of people. But it is a very effective form because when you do get somebody, it can be multiple deals.

Tracy Z (21:32):

Our cost is low, super low. Yes. The time?

Fred Rewey (21:36):

Time is very high. It's probably the one of the highest time-wise as far as what you're doing in the marketing. There's some shortcuts you can have but it is always going to be high for time.

Tracy Z (21:45):

The competition, you might be surprised, but I would rate it somewhere between low to medium. How about you?

Fred Rewey (21:50):

It's pretty low. If you're talking about a networking meetup. Which doesn't require a lot of effort from people other than just show up at a meeting and have coffee and donuts. Then that's going to be high. If you're talking about someone outbounding to other people that aren't at the chamber meetings then I'm going to say it’s a pretty low competition.

Tracy Z (22:09):

I think what you really want to focus on is if you're going to do meetups or networking, you've got to put yourself in a place where people will be in part of real estate notes and creating notes. A meet up at a general chamber meeting is going to have much lower results than going to a meet up for a real estate investor club.  A lot of people we've worked with, over the years have done it and started their own meetups. They did a little meetup in their own area and they would do it in person. Now most of them are doing it online because of COVID environment. But establishing your own meetup can be another method. 

Overall grade. I think we agree on this one.

Fred Rewey (22:45):

I definitely give it an A.

Before we move on to the next category. Someone just put a question on there. 

“Do you use SEO for your website?” 

Yes, absolutely. It's essential.

Tracy Z (22:57):

For anybody who might not know SEO is search engine optimization. All websites should be built on search engine optimization. The thing that people don't realize about SEO,  (we could have a whole episode on this) is that you have the game of SEO. It’s providing new, unique, relevant content that establishes you as an authority and post-it regularly. Then you use certain things with tags. There's lots of ways you can do SEO. It's not just a stuff or bunch of keywords on there that doesn't work anymore. It's really about good website maintenance. You've got to do at least a weekly post on your websites and students every day.

Fred Rewey (23:43):

One important thing to say about SEO (this is to save somebody some hassle) is that somebody is promising to get you at the very top of the rankings the next day, because they can fix your SEO. 

You hear about keyword stuffing. If you just put notes behind the scene over and over and over again It shows up that game has long since played out. It doesn't happen anymore. Don't fall for that. If you're looking for a good shortcut and you're running your own website (you're using WordPress there's a plugin by Yoast) when you do your post to kind of give the red out like Greenlight thing and tell you what to do on there. I would definitely look into that as well.

Tracy Z (24:22):

We had another question too. 

“How would you rate online networking? Do you find it to be effective as well? Like LinkedIn groups and Facebook groups?” 

Absolutely.

Fred Rewey (24:32):

That's our daughter chiming in here. If anybody didn't get that. It's why I didn't ask that question.

Tracy Z (24:40):

Well, it's a good question. Yes, definitely online networking is a wonderful way. We find that LinkedIn groups, as Mikayla mentioned, and the Facebook groups specific to note investing are good. You can spend a lot of wasted time just on Facebook in general. If you are specifically targeting those groups, that can be a great way to do online networking.Thanks for bringing that up.

Fred Rewey (25:04):

Thomas, I'm going to give you an abbreviated answer to your question.  

“Where's the best place to buy a list of notes?  What criteria do you use?”

That's a whole webinar in itself. Places like advanced seller data or advanced data services.

Tracy Z (25:19):

It's ASDS. Advanced Seller Data Services.  

It's notesellerlist.com. That's a whole lot easier thing to say. That's why I had to think about it.  Notesellerlists.com. We've been using him for list providers a lot. 

If you want to know other ones, go to noteinvestor.com, go to our homepage. You'll see this cool little placard that says “Best of Notes 2020”. If you go there, you'll see advanced seller data services in three other lists. Providers that are known for providing that. We give you that information right there on our website at noteinvestor.com. We have some cool articles about that as well. Those great questions.

Tracy Z (26:05):

We're not skirting the criteria. That's just a big animal. That could be a whole webinar, basically if you're buying the notes yourself, what range of notes you can pull? Like I want to buy notes that are under 50. I want to buy notes that are only in these States. You can choose all that upfront.

Tracy Z (26:20):

We acknowledge, this is just a crash course of marketing. We work with people in our group and we take this topic and  do an hour webinar on it. We provide  sample letters and sample postcards and things that have been tested. These are really in depth subjects. 

This is definitely a high level. We just want to get you thinking of where you could find notes. 

Next, we've got the creating notes.

Fred Rewey (26:49):

Let’s talk about creating notes. Creating notes is a big category. Do you want to talk about that a little bit? You did an entire course about that.

Tracy Z (27:04):

Talk about deep dive. Creating your own notes is either creating notes on property you own. We work with landlords. A lot that are wanting to convert, maybe not all, but some of their portfolio, they want to be lein lords instead of landlords. They'll sell a property. They have a principal and interest payments. They have no income and interest income instead of rental income.  They've got owners in their properties instead of renters. That is one way to create your own note. You don't have any competition on that. We have other people that use seller financing to buy properties, to create a note, then sell a seller financing. Wow! Huge concept, very advanced, but definitely worthwhile with other people having gotten really good at this. We do this as well and they help other people create notes. That can be sold for are very highly marketable with one payment made. Because lots of the note investors we work with will buy a note after one payment is made. He created a note, then the way that they'll buy it,that's a whole category again on its own. But I love creating your own notes.  

This one is definitely effective. I would say that it's highly effective,

Fred Rewey (28:13):

You're controlling all aspects of it. The cost is low. 

For time it's high because you're having to create the vehicle that even creates the notes.  You either have a property or you're marketing for a property that things like that competition

Tracy Z (28:27):

Probably. Well, you cannot compete against yourself to sell.

Fred Rewey (28:31):

I'd say it's low. Overall grade?

Tracy Z (28:36):

Well, because of the time it takes, I would give it A to B.

Fred Rewey (28:41):

I'm going to give it an A. 

Next let’s talk about reverse ad marketing. This is something that's often overlooked. It's also, as we talk about the different budgets, as far as costs, this is a very low cost item. But a high time item. 

Do you want to talk about it a little bit?

Tracy Z (29:04):

Reverse ad marketing is somebody else who has already placed the ad. You don't have any expense. You're responding to the ad. You can do this using online methods. You can do this with Craigslist or Facebook. You could do this. We're picking up one of those local papers or free nickel links, penny saver, green saver, types of papers. You're looking for anything that says property for sale. The owner will finance the lease and option with a down payment, easy terms. If you go to Craigslist or go to Facebook marketplace, booked for owner financing, sellers will finance any of those lease options. Any of those terms, you would see somebody selling property. Offering seller financing. If you have access to the MLS, you'd see it there. You might even see it on Zillow, depending on who was in the comments.

Tracy Z (29:57):

What you're going to do is you're going to outbound the market to them. You're going to call them up. You can do it via email. You could do it through text messaging. The most traditional way is to pick up the phone and call. You're going to say something like, “Hi, this is Tracy. I noticed your ad in the paper, offering property for sale with owner financing. Our company specializes in buying owner finance notes.” 

Sometimes they'll say,  “you've let them know” and sometimes they'll say, “Are you trying to list my property? Like your real estate agent?”

Those might be some of the objections, but you just explained to them. “No, we're not looking to buy the property, your list, your property. We help people create notes.” 

We find that many people who create a note would prefer cash after closing, but they aren't sure what a note buyer is looking for.

Tracy Z (30:44):

We find that the same things that make a note more valuable to a note buyer also make them safer for you. We have this helpful handbook that has seven tips to save seller financing. We can send that via email or we can text or mail it to them. We just ask them if this is something they like to receive.  We ask them if they want to know a little bit about what makes a note marketable to a note investor. That's a great way to get some follow up. It takes some time and energy but it's a great way for you to get comfortable talking about notes.

Fred Rewey (31:22):

There's no cost. It's just time and it's a good way to get in there. As far as you know effective, I'd say medium on the effectiveness. A lot of people don't have an interest at that moment. Or they don't want to hear it, or they don't know what it is. But still it's no cost. It's a phone call. 

Time is high. You're going to go through  a little competition, very little competition. 

Overall grade, I would say it's probably B. 

Fred Rewey (32:04):

If you're willing to sacrifice price, how much you're getting on a note. If you're, (this is for somebody that wants to purchase and own notes themselves), if you're willing to sacrifice your return a little bit or pay not as good of a price, (it's like a wholesale versus retail type thing),  there are sites where people actually list notes. Go to the site, look at the note, look at all the parameters. Decide if that's what you want. You can look for the criteria going. Sample, I want them only in the States and I want them to be this dollar amount. You're going to pay a little bit more for that note. Your return is going to be a little bit lower than if you go direct, but you also want to have a cost associated with going direct there.

Tracy Z (32:46):

I'm going to send you to noteinvestor.com and click on the best of notes tab. You'll see who is nominated for and who the best note listing sites. I will send you there and you'll see who they are, who they are. 

Fred Rewey (33:06):

Look for noteinvestor.com and go to the best of 2020. You'll see a lot of categories there, the best of notes including the top people and top sites for that.

Tracy Z (33:19):

We also provide all that information. We put out a directory every year of note buyers.  

That information is in there as well. The reason that we're mentioning this to you and Fred talked about is that some of these methods are great if you want to get directly to the source. They take more time and money. You have to decide what marketing method is best? It really depends on the time that it takes and the time you have available to commit. The expense that it takes on the dollars, you have to invest in it. If you're just somebody who wants to buy one or two notes and your self-directed IRA company, that's great. That might be a great place for you to start as the note listing sites, because you aren't looking to spend a ton of time and dollars marketing.

Tracy Z (34:02):

You just want an alternative place to put some of your retirement money. That could be a good place. Just realize that you're going to pay more for it. You're not going to get the lower price. You're paying retail. As Fred mentioned, not wholesale. If you're somebody who's going to refer notes, want to make a fee, or you want to do some of those really exciting partial deals like we talked about, then you're going to want to spend the time and the energy to go after that wholesale. Some of those methods, we just talked about building your website, doing the referrals, doing the direct mail, doing some ad that's where you're going to get the better pricing. What we give them is a grade, but what is right for you may not be right for the next person. So really think about what your strengths are. What are your weaknesses and what kind of time and dollars do you have to invest on the marketing side? But there are places you can just go finance for something that is new. 

Fred Rewey (34:53):

Hey thank you so much! Thanks for letting us run a little bit over on this.  If you have missed any of the previous ones, they're still online right now. Go to noteinvestor.com/101, you will be able to get access to the ones we've already done. Including a replay of this one tomorrow. If we do any in the future, anyone's come up and you'll get notified about when those are going to be there as well. Please continue to submit the questions and ideas for sessions. We're going to do a few more of these. This is just kind of a mini crash course.  Everybody can kind of understand the industry a little bit better. We've covered marketing. We've covered calculations. We've covered the general and industry. We've got a couple more ideas and some other ones we want to do.

Tracy Z (35:34):

As always, thank you so much! Your time is valuable and we appreciate you spending some here today with us. As we always end. Happy note investing!

[lunarr-rrose]

Profiting From Notes - Note Investing 101

https://noteinvestor.com/101/

​ In this episode of Note Investing 101, we will be breaking down the numbers.

How to “flip” a note using none of your own money.

Our favorite ‘retirement’ strategies using notes.

The difference between buying a full vs a partial - and why it matters.

What are the best ways to own notes?

Why YOU get to decide what you will pay for a deal.

And much more.

Timestamp:

0:11​ - Introduction: Show Me the Money!

2:20​ - How do we Profit with Notes?

2:24​ - 4 Profit Strategies

4:01​ - Flipping Notes

8:59​ - Purchasing Notes

12:05​ - Partial Participation

20:26​ - What was the return for this investor?

22:45​ - www.noteinvestor.com/101

23:18​ - Creating Notes

26:37​ - So the 2K that you put in, where again did you get that to use on this deal?

27:57​ - Is it a good idea to price a note only on the UPB unpaid balance?

29:23​ - How do you determine the discount pricing?

31:31​ - Where are the best places to find buyers and sellers of notes?

31:41​ - Next Episode: Marketing For Notes

32:55​ - www.noteinvestor.com/101

About Fred & Tracy:

Our goal is to separate the myths from reality when it comes to seller financing and investing in private mortgage notes.

There are simple truths surrounding owner-financed notes that should be revealed.

Too many people leave money on the table through lack of knowledge. Worse yet, others prey on their lack of information.

Whether a note seller, buyer, broker, investor, real estate agent, or cash flow consultant, we can all benefit from the knowledge and straightforward answers.

The note or paper business is a legitimate industry that many people use to liquidate what may be their most valued asset.

It has been providing my full-time income since 1988 and Fred Rewey, the co-founder, has been at it for over 25 years.

In fact, we Tracy met through the note business, became business partners, and married in 1997.

It has provided them a good life and financial independence for their family.

What is the best way to handle a seller-financed transaction? Where do you go for the best price?

How do you find qualified professionals and avoid the less than reputable? How can you make money in the note business?

We will answer these questions drawing from our 50 years of combined experience, sometimes gained through the school of hard knocks.

We have bought and sold our own properties using seller financing rather than bank loans.

www.NoteInvestor.com

#NoteInvestor​ #MortgageNotes​ #RealEstate

------------------------------------------------------

Fred Rewey:

Hey everybody! Welcome to another episode of Note Investing 101. I'm Fred Rewey.

Tracy Z:

I'm Tracy Z.

Fred Rewey:

Tracy Z. And welcome. In this episode, what we're going to concentrate on is profiting from notes, AKA shows me the money.

Tracy Z:

That's the best part of the industry. You get to help people and make a profit at the same time. We've been doing this, as we mentioned in the last episode for a combined 50 years, I started in 1988. Fred, you started in the early nineties and we met along the way. We are business partners. We're also life partners. We're married. We have a daughter who also works for us. We're really excited to share with you some different strategies for profiting with notes. 

Fred Rewey:

We're going to cover four deals. We're going to go over four, very common, I guess, deep dives into numbers.

Tracy Z:

Yeah. I love the numbers. And as you say you don't like Math, but you like money.

Fred Rewey:

Exactly. 

Tracy Z:

We promise that we have something in here for everybody. We try to make it all very digestible because the note business can be as simple or as hard as you want to make it. We started out with the very basics. How do we profit with notes? Those four profit strategies that Fred mentioned: the first one is Flipping Notes.

Fred Rewey:

There are many ways you could flip a note. If you don't have your own money to buy the note. It's too big of a note, you're just starting out, or your funds are tied up. Maybe you're buying notes with your own money, like out of your retirement account, but it's a note that you don't want to personally hold, but it came across your desk. We might as well flip it on to somebody that is interested in it. And make some money on it.

Tracy Z:

That's flipping with notes, it's great for immediate income now. And then, we're going to talk about Purchasing Notes. So, flipping notes or wholesaling notes is great for making fees or immediate income, but purchasing notes is how you generate a portfolio for long-term passive income. That's how you get the interest income. That's how you get to step in the role of a bank. A Private bank. We'll talk about the benefits of purchasing notes and how that works.

Fred Rewey:

Next is Partial Participation. And if you've heard us talk about partials and our eyes kind of light up, it's like the coolest win-win for everybody. It's a way that you can minimize your risk. It's a way that you can get more money to the seller. It's a way that you can increase your returns. So we're going to do an example of that, and this is a really, really powerful strategy.

Tracy Z:

The last thing we're going to talk about is: Creating Notes. So you might want to use seller financing to buy property, to sell a property, sell the property and create a note. We'll have an example that combines a couple of different strategies for creating notes. 

Fred Rewey:

The  Notes Flipping strategy.

Tracy Z:

This is a property in Tampa, Florida, and it had sold for 237,640. It had a nice down payment of  98,640. The seller carried back a balance of 139,000, which’s called the original note amount. The original balance would have been the unpaid principal balance. The note balance at the time this note was created. And it was written at 6.5%. If I was writing a land note, I would have made it a higher interest rate.

Tracy Z:

When we were approached with this note, they'd already sold and already created it. This was what we were presented and the payments were $878.58 a month. It was only going five years. It had monthly payments, but those monthly payments wouldn't have paid it off in five years. There's something called a balloon. Not a lot of notes have balloons, but some notes do. If they do it just means there's going to be a big payment at the end. That the monthly payments don't pay it off. In a normal deal, monthly payments paid off the note.

Fred Rewey:

When we saw the note, it had a balance of 138,000 and only one payment had been made so far. We certainly could make an offer on this to keep for ourselves. It's a really good down payment. As Tracy said, I'd like to see a higher interest rate for us. Personally, a balloon doing five years on raw land is a pretty big size note to not have a single-family residence on. There is also no seasoning. Seasoning is that they've only lived in it or not lived in it, but they've only made one payment. This is one we're going to look at flipping.

Fred Rewey:

What we're going to get to see is, how much would an investor pay? If you remember the last episode we talked about how much our investor is willing to pay for this note. The investor said, ‘look, I will buy this note with the balance of 138,874. I will pay $120,141.27 for this note’.  We have to subtract a fee for ourselves. We take off about $5,000 and we offer the seller 115,141.27 for their note.

Tracy Z:

We always do the quote to the penny. Do you want to talk a little bit about why that strategy is?

Fred Rewey:

I'm really big about not creating what I call newspaper negotiations. We know the investor is going to pay 120. I know I'm going to offer something less than that. If I offer the seller 115,000 for their note, they're likely to counter back with, well, you know, okay, I want 120, or if I say 116, then, they say 119 and we go back and forth like kind of like when you're negotiating and buying something out of a newspaper or a Craigslist Ad or something like that. I always find that the key thing I try to do when I'm making an offer note is established what is the fair market value is.

Fred Rewey:

This is what your note is worth. I have found by putting a penny on it, literally going all the way down to the penny. Making the seller an offer in this case of $115,141.27. It's when you looking at it as a seller and you know, you don't know the Math behind it or the calculation, but you're looking at it. You're thinking, wow! This is a very precise offer. There has to be Math involved behind the scenes. And there is, but it must be down to the penny. People aren't going to count on the goal. Well, what about 118,243.95? They don't typically come back. I will always make an offer down to the penny and you'd be surprised, how much it makes a difference.

Tracy Z:

You can tell Fred's offers because they ended 23 and mine usually end in 27. This is one that we received. We got the quote from the note funder, we took off the 5,000. We offered it to the seller. They accepted it. At closing, we received a $5,000 referral fee. That's Flipping A Note. Some people call it wholesaling a note, some people call it brokering a note. We tend to stay away from the brokering term because people get confused and think you're brokering something else. We usually call it Flipping or Wholesaling a Note.

Fred Rewey: 

One thing I want to point out before we move on because we're going to get the partials here in a minute is and this came up in our last episode, too, where people talk about the discounts. The discount to sell the person that's selling $138,000 balance for 115,000, that is the note discount. If they could have sold it for all cashback, then they may have accepted that discount. They may have sold the property for a lower price. If someone was a cash buyer what typically has happened in a situation like this is the situation changed. This person needs 115,000 or a hundred thousand to go invest in another property and move on. That's why they're willing to take that discount. But hold on to that thought, because you're seeing 138,000 go down to 115,000, which that just depends on why they're selling because you're going to see a better way to handle this.

Tracy Z:

Exactly. All right. So this next example is going to be Purchasing A Note. We're still talking about a full purchase, you want to start us off on this one?

Fred Rewey:

This is a mobile home. It's a 1983, double-wide mobile home on a lot in Florida. The original sales price was only $20,000 with a down payment of 2000. The original balance of the note was $18,000. When they write up the note of the 18,000, they did an 8%, which is a pretty decent interest rate for five years. It's not very overly long-term and it's $364.98 per month.

Tracy Z:

Sometimes when we're doing these examples, we like to show some smaller deals. What works on a $100,000 note or a $20,000 note works on a $250,000 note or $500,000 note. But for a lot of people getting started, I think, especially if they're looking at purchasing a note for their own investment, sometimes I'd like to see the real numbers that are within their achievement. If you've got a larger investment portfolio, then you can just add a couple of zeros, right?

Fred Rewey:

This is a great example if you have a self-directed IRA where you can actually put your money into a Retirement Account. Then you can decide what to purchase in a lot of cases and notes being one of them. This would be if you have a smaller IRA,

Tracy Z:

This is what we did with this one. It came to us when 14 payments had already been made. It had a nice amount of seasoning as we call it 14 payments. Cause it was paying down quickly as Fred said. It was only a 16-month amortization, pay down to $14,417.63. There were 46 monthly payments left at 364.98, no balloon. It really paid off in that amount of time. In this situation, we offered to make a full purchase of all 46 payments for $8,650 because it's a lower older mobile home. The seller accepted and this went into our IRA. This was a yield to the IRA of about 39%. That's a great return. Remember yield is IRR, Internal Rate of Return, a little bit different than ROI. If you use a time value of money calculation as we do, which is the standard calculation, you don't have to be afraid of it. There's a nice software program that runs that. That's a great return on investment to your IRA.

Fred Rewey:

Just so everybody understands, we didn't change the interest rate of the person that's making the payments. What we're doing is we're buying an existing cashflow. In this case of 46 payments of 364.98. We're paying less than the current balance. For every dollar we pay less than the current balance, our yield, our return goes up. In this case, if we pay $8,650 for this, we get a 39% return.

Tracy Z:

The payer, the buyer, and the person buying and making those payments, still pay the 8%.Their terms never changed because those are set in stone by the promissory note. What we can do is pay less than the unpaid principal balance and by doing so, the yield goes up. Now, we get to talk about the fun one, right?

Fred Rewey:

Yeah. This is the partial.

Tracy Z:

We literally like this. The Partial Participation, one way to participate in partials is to buy all the payments and then sell some of the payments and keep something in the future. We call it a Buy Full and Sell Short. This is how it works. You've got a full purchase from the note seller. You buy all the remaining payments from the note seller. You sell some of the payments to an investor like an institutional investor.  You can either buy it and sell it or you can do a double closing or the investor funds the seller. Then you, the note pro, get to retain the payments often into the future. After those first few payments are received by the investor.

Fred Rewey:

Let me do a weird analogy here, just so that everybody gets involved.

Fred Rewey:

This is the way I see it, Buy Full, Sell Short. If I buy a Snickers bar for a dollar and I break it in half. I sold Tracy half of it for a dollar, then she just paid for my Snickers bar and I got half a Snickers bar free. Right? I paid a dollar for a whole Snickers bar, broke it in half, gave her half of it, charged her a dollar.

Tracy Z:

You did give it to me. Didn't charge me a dollar.

Fred Rewey:

I charged you a dollar, now my half is free. That's what we're about to do with the note.

Tracy Z:

That's a very good analogy.

Fred Rewey:

I just made it up. Mostly, because I really wanted the Snickers bar.

Tracy Z:

That's what we're going to do with this deal.

Fred Rewey:

Yup. This property is a commercial and this is a church. This is not something we were necessarily wanting to own outright ourselves for a whole lot of reasons.

Tracy Z:

Who wants to foreclose on a church someday? Not that you thought you'd have to, but you wouldn't want to.

Fred Rewey:

The sale price was $135,000. You wanna start this one-off?

Tracy Z:

Sure. It's $135,000. It was actually like a retail building that was being used as a church. They put a $10,000 down payment. The seller finance balance was $125,000. The buyer was paying on the note, a 10% interest rate payable in 360 payments. It was written for 30 years. What do you more traditionally see? Right? At $1,096.96. Every month, the buyer sent $1,096.96 to the seller. They're going to do that for 30 years. When we were approached with the payments or to buy this note, it looked like this.

Fred Rewey:

There are 54 months that have already been made. The remaining balance was $121,000. You can see at 10% interest, it doesn't go down very fast. They've been making payments for 54 months and it only went from $125,000 down to $121,000. So, there were 306 months remaining.

Tracy Z:

This is how it looked when it came to us.  There were 306 payments, that's the whole Snickers bar in Fred's analogy. The whole Snickers bar is 306 payments. This is what we negotiated. The seller sold all 306 payments for $92,804. That's what we negotiated for them to receive.  We had an investor that was willing to buy just 186 payments. Half the Snickers bar for the purchase price of $95,046. They actually paid more for the 186 payments. Then we negotiated to buy all 364.

Fred Rewey:

The reason being by the way is that due to time value those payments way out there aren't worth as much. That's partly because it's not dollar for dollar. It doesn't stay equal. As the payments get farther and farther away, they become worthless than today's dollars. That's why we're able to sell the next 186 for $95,000 and all 306 for less than that.

Tracy Z:

What we did was we made a fee at closing. We have a certain amount of costs and overheads. We made a fee of $2,242 at closing, less than expenses. Cause we did have to pay for BPO and a title on this one for this particular investor. We made the difference between the two at closing, but what did we do? This is the really cool, special part. This is the reveal. Not only did we make some money at closing. We kept 120 payments, 10 years of payments of $1,096.96. We bought a full, we sold a partial. We made some money on that and we retained them future rights to pay 10 years of payments down the road. That investor got the first 186 payments approximately 15 and a half years. And then we got the last 10 years of payments.

Tracy Z:

I mean, that's the beauty of partials. It can be split up in different numbers. There's no limitation to that. It really just depends on the note and the term and what the investor will invest. This is the beauty of buying the whole Snickers bar and selling off part of it for the same amount of money and keeping some on the end. When you buy full and you sell short, this is how the documents look. You've got the note holder. The seller that sells it to the note pro with an assignment, a note endorsement, and a full purchase agreement. 

Fred Rewey:

This is where we sell the note professionally. We sell to the investor with a partial. We're buying a full with the full purchase agreement, what we're selling is a partial with a partial person agreement.

Tracy Z:

The investor on those partials will want a full assignment and endorsement typically because they don't want to split up the note ownership. They want to have control. You're right to the future payments is in the future. When that investor made whole on their partial, then they will assign it back over and endorse it back over. This is about what people say, but what about if it quits paying or what if it pays off early? Those are great questions. Sometimes they just pay along exactly the way they are supposed to. Sometimes they stop making payments. In that situation, that will be dictated by that purchase agreement. It normally says that the investor bought those first 186 payments. In this example, they're kind of like a first lien holder.

Tracy Z:

They have the first right to go in and collect what they're due. Then if there's something left over in the event of foreclosure, then we on the end would receive that. Because of that, you don't want to stake a whole bunch of dollars invested on the tail end of a partial. You really want to turn some of your profit into that in our opinion. That's normally how we like to structure those. The partial agreement outlines that. The other thing that happens hopefully more often, and usually than our experience is that, it pays off early. The buyer decides to sell it and they pay it off or they're able to refinance and pay it off. That's what happened on this deal.

Fred Rewey:

In this particular case, it wasn't really payoff. They paid for a period of time and then they actually paid off early. The numbers on this is that basically 12 years went by on the church note. They were making the payments according to plan. Then they decided to pay off the note. At the time when they went to pay off the note, the full balance they owed was $96,915. But remember, we broke apart that Snickers bar. There's a percentage of that is owed to the person that bought the first set of payments.  There's a percentage of that Snickers bar that we left on the table that we were going to get in the future, but it does have a value. The partial balance paid off for $39,346.18. That was how much was left on their Snickers bar.

Tracy Z:

That's how much the investor received. There's three balances going on here at any time, right? There's full balance at the buyers. There's the partial balance that the investors receive and then what's left over is on the end. That's what we receive.

Fred Rewey:

Basically, we're getting the today's value of what the back end of those payments would be, which is the remainder. We were the remainder. We were the tail end of that note. We got a check for $57,569.28.

Tracy Z:

This came through a third party service. When that buyer wanted their payoff statement, that servicer sent him the payoff statement for $96,915.46. That buyer sent in the payment to the servicing agent and they collected it. They knew we had a partial tail end. They got a payoff statement for the partial, from the investor for $39,346.18, and sent them their check. Then they send us the difference

Fred Rewey:

Without doing the path. Somebody sent in the question. They want to know what's the return for their investor on their investment? Do you know what their return was on the very beginning? Not counting the payoff.

Tracy Z:

Not counting the payoff. I believe they wanted an 11% yield. We could back it up. And if I remember right, it was 11% yield. Now, whenever it pays off early, either for that investor or for us on the tail end. We actually, our yields all go up because we based our calculations on it. Going much further out into the future. Like Fred mentioned payments now worth more money. When it pays off early and you bought at a discount, your yield actually goes up both for the investor and for us.

Fred Rewey:

A lot of people ask, what's our yield? Well, here's where it gets a little strange. In order to have a return on your money. You had to put in money. If I invest this, here's how much I'm getting back. Here's my return. Well, think about this deal. We got just over $2,000 upfront and we got back at holding the back in the notes of which we ended up getting 57,000. There was no investment. It's an error five and a lot of calculators because we actually, all we invested was our time.

Tracy Z:

That's very true. And marketing dollars. I guess you could count that as an investment.

Fred Rewey:

That's really high.

Tracy Z:

Absolutely. Sometimes people say, Whoa! I want to do this in my self-directed retirement account. Normally with the self-directed retirement account, they do suggest that you actually take the title and invest the money, then sell the partial. This one we did outside of a self-directed retirement account. We did it through our company.

Fred Rewey:

I think it's cool. Yeah. We can run it or you can email us what we can run it for sure.

Tracy Z:

For example, we  have a blog on our www.NoteInvestor.com/101 website that goes over the exact numbers. We have  spreadsheets that show how the amortizations work. If you went to www.NoteInvestor.com/101 and you clicked on our blog or articles in each search church note, you would find that or partial early payoff. I love the number part. I really love understanding how compounding interest works.  That's why this works is because of compounding interest

Fred Rewey:

Which reminds me before I forget, if you want to see more of these videos or be notified of these videos, go to www.NoteInvestor.com/101. Put your name and email in and then you'll get notified when we do. Like, we're doing a set of these videos, we're doing a series of videos on different subjects. We will actually be doing one, which reminded me of it, is we're going to do a future one on retirement self-directed requirements.Things that we do out of there. But we have one more of these to go through before we sign off.

Tracy Z:

This is a strategy of Creating Notes. Iit depends on the environment of the real estate market, whether this works then I'll and I see it working in different real estate markets. It usually works when you're dealing with land, mobile home and land or properties that are under a hundred to $150,000.On my opinion, there's always opportunity to do this when you're in a rock and real estate market and interest rates are 2 or 3%. There's not an incentive for the buyer to have owner financing. Things don't always work. Not every deal is a seller financing deal. People ask me that all the time. I said, well, if every deal is a seller financing deal, there wouldn't only be about 6% on average or seller financing, right? This doesn't work for all deals, but when it does, it's a beautiful thing.

Tracy Z:

This combines a couple of strategies. We don't teach tax deed investing. Over the years we've liked all kinds of different strategies. This was a property that our IRA picked up through a tax deed sale. I believe it was in Arkansas. Some states are tax lien, some are tax deeds. We actually were able to pick this little house up for $710 at the county for a tax deed. How do you take a little $710 property and turn it into a bigger profit? Well, you can only sell it for so much. In this kind of a price market the way, to that, would be tough to get any kind of bank financing on this property. What we did was, we advertised it for sale for 60 months. The owner will finance easy terms for $254.96.

Fred Rewey:

We're basically creating a note.

Tracy Z:

We're going to create a note because the IRA owned it.  It could have been you personally. It could have been your company but you own this piece of property. Now you're going to maximize your profits by offering easy terms. This is what it sold for, $14,000. The down payment was $2,000. Automatically we already have covered our $710 purchase price plus some costs. Then we carried back 12,000 and the interest rate was 10%. A typical small dollar deal, but the typical owner finance deal. Guess what that return was? If you put into your calculator $710 and then you get back 2000 and then you also get 60 months at two $254.96. It's like a whopping 430% return. Now, are all deals like that? No, as a reminder of the disclaimer, results vary, there's always a risk and investment. We're not attorneys or legal advisors. We always encourage you to do that. We're not offering to sell you a note or security. But these are on occasion. The kinds of deals you see. On average the return we see is 7 to 10%. Not every deal is a home run but there are deals that come along that you can have those kinds of home runs. T

This is the portion that we do a little Q and A.

Fred Rewey:

 So we're gonna get out of here. I have a couple of questions that I can see that popped over to us. One of the questions from Purnell is.  The 2K that you put in, where did you get that to use on this deal? Well, we actually didn't put in 2K I'm trying to think, unless he's talking about a different deal.

Tracy Z:

Purnell, which deal are you talking about, the church none or that Arkansas tax deed? Let's see.

Fred Rewey:

It came in before that, it has to be the church note. That was how much we actually made upfront. We took a look. We sold, you know, we bought a full, sold a partial. We were able to sell the partial for a couple thousand more than we had to pay the seller. That actually money went into our pocket on that.

Tracy Z:

If you did need to put money in the deal, we didn't need to on that deal. We have done other deals where we have put money in the deal. If you're doing it in your IRA, the money would come out of your IRA. If you were doing it in your company, the money would come out of your company. If you were doing it personally, the money would come out of your checking account. We do recommend not giving legal advice, but we do recommend that you form some kind of business entity because there's definitely some tax advantages to having an LLC or an S Corp or something like that.Or doing it in a tax deferred or tax-free retirement account. We do deals in our company. We do them in our IRA. We partner with other companies. We actually made $2,000 at closing. We didn't have to put that in and we made those payments on the back end as well.

Fred Rewey:

 Someone asked, is it a good idea to price a note only on the (UPB) unpaid balance? We're going to have to do an episode on that because that gets a little confusing for everybody. Yes, generally, you know, you don't want to base it on anything.  It's usually whatever's lowest either the balance or the value. If you're doing percentages of LTV's and ITV's based on that, you're going to go lower. But yes, it's price only on the unpaid balance. Just sort everybody else follows along is that you've got the unpaid balance then there's also the legal balance.

Tracy Z:

Which is a non-performing note.

Fred Rewey:

Non-performing, which we'll talk about in a different one. But yes, you would definitely go off that.

Tracy Z:

When we run our numbers for what we pay, we have this waterfall of what we do. We say, what is the amount we're investing compared to the property's value? That's the investment to value? What is the amount we're paying compared to the unpaid principal balance? That's the cents on the dollar? What is our yield for that cash flow as what pays, according to the note. What is our return? Then we also look at what's our dollar discount. As Fred talked about in the first episode, get a 10% note and you want a 10%, you could theoretically pay a hundred cents of the UPB or the Unpaid Principal Balance. We want to discount because we have time and energy and overhead costs. That's kind of the main thing that we look at when we decide what to pay on a note. That would be a great feature episode as well. “How to place notes”.

Fred Rewey:

Sarah asks a question, how do you determine the discount pricing? It's a great question. It varies typically. Like we mentioned, I think another episode you're talking somewhere between  three and 5% or three and 6%, the discount.

Fred Rewey:

That is the fee. That was the fee. Discounts all over the board, I'll tell you this in a nutshell: the discount really is the difference between what they wrote the note at and what I want to get as a return. If they wrote the note at eight and I want a 10% return, then there's a certain discount in there. If I want an 11% return, the discount gets greater. If I want a 12% return, the discount gets greater. There are other factors that have to do with that. The discount could be due to how much equity is in the property or some other parameters, but the discount is largely determined by the calculator on there would you say.

Tracy Z:

The risk usually sets the investment to value and the yield requirement. When you apply that yield requirement, to the cash flow, like Fred is talking about that, determines what the discount is. There's kind of a one, two, three, four step in pricing that comes up with that final number. When you take the balance minus the pay price, that is the dollar discount. We try not to focus on the discount so much, especially with sellers. Well, and even with your pricing a note, sometimes people say, Oh, I like this big discount, but of course we do, but there's a lot. You don't want to get drunk on yield or drunk on discount. There's lots of good bread and butter deals that we've done where the discount might've only been $1,500. We're getting a 9 or 10% return on a really low loan to value. Maybe there is a 40% loan to value. That's a great little note for retirement account,

Fred Rewey:

I know that was good on the fly. Where are the best places to find buyers and sellers of notes?

Tracy Z:

That's a great question, because that is going to be the topic of our next video is “Marketing For Notes”.

Fred Rewey:

Oka!. We're going to do that.

Tracy Z:

We're going to talk about marketing for notes. We're going to take our five top preferences.

Fred Rewey:

We're going to take the five, most common marketing methods. We're going to grade them. We're going to tell you what they are. We're going to tell you what we think about them and we're going to give them an old school, like grade school, grade of ABC.

Tracy Z:

We're going to get back the whiteboard,

Fred Rewey:

Again if you want to see more of these videos.. We don't have an exact number, but we basically wanted to take on a different subject on each of them. 

Thank you for your feedback. Thank you for your ideas.

Tracy Z:

I would like to do a deep dive on the partials as well. I think working with funders would be a fun one to do, How to use your retirement account. We've got a few in the Note Investing 101 series. If you want to know where, and when the next video is going to appear.Next one is going to be coming up. We will send you an email. All you have to do is go to www.NoteInvestor.com/101. Put in your name and your email.  It'll put you into the notification of when the next live session is. It will also give you a free download. The Five Ways To Cash In and Cash Flow notes where we detail these deals that we had here.  You can see those in the eBook format. We also have 21 Tips for Note Investing. If you're looking to buy and sell notes yourself, those are some really great tips that we've learned over the years. I think these are best for people that are getting started out. The things they definitely must have.

Go to www.NoteInvestor.com/101, you'll  get those things. We really appreciate you spending some time here with us today. We love talking about the note business and we hope you love it as much as we do.

Tracy Z and Fred Rewey:

Happy Note Investing!

[lunarr-rrose]

Discovering Notes - Note Investing 101

https://www.NoteInvestor.com/101

In this first episode of Note Investing 101, we will be starting at the beginning.

Why so many people choose notes instead of real estate or renters.

Just how big is the real estate note industry? (Spoiler Alert: It is in the BILLIONS).

Who the note players are and how you get to profit from it.

How to refer a note for profit using other people’s money.

The difference between performing and non-performing notes which one is right for you?

How to CREATE your own notes. And much more.

Timestamp:

0:05​ - Introduction: How To Get a Note Business Up and Going in 90 Days

1:27​ - Who Is this Note Industry For?

3:18​ - Disclaimer

3:55​ - Why us? Why Should You Listen to Us?

7:00​ - www.noteinvestor.com

7:57​ - Personal Profit Series

8:21​ - How We Used the Note Business for Ourselves

9:05​ - 3 Main Areas of Opportunity for Deal Sourcing

11:03​ - Seller Finance Notes

11:40​ - How Big Is A Seller Carry Market?

13:10​ - A Decade of Seller Financing Usage

14:26​ - Seller Financing Transaction

23:40​ - Let’s Talk About the Numbers

31:00​ - Is there a Usury Concern?

32:45​ - Do you use a Title Company?

33:58​ - Would the group be paying $94,150?

34:46​ - Why would the original seller now only take $90K?

36:14​ - Partial Purchase

36:45​ - www.noteinvestor.com/101

About Fred Rewey and Tracy Z

Our goal is to separate the myths from reality when it comes to seller financing and investing in private mortgage notes.

There are simple truths surrounding owner-financed notes that should be revealed.

Too many people leave money on the table through lack of knowledge. Worse yet, others prey on their lack of information.

Whether a note seller, buyer, broker, investor, real estate agent, or cash flow consultant, we can all benefit from the knowledge and straightforward answers.

The note or paper business is a legitimate industry that many people use to liquidate what may be their most valued asset.

It has been providing my full-time income since 1988 and Fred Rewey, the co-founder, has been at it for over 25 years.

In fact, Fred and Tracy met through the note business, became business partners, and married in 1997.

It has provided them a good life and financial independence for their family.

What is the best way to handle a seller-financed transaction? Where do you go for the best price?

How do you find qualified professionals and avoid the less than reputable? How can you make money in the note business?

We will answer these questions drawing from our 50 years of combined experience, sometimes gained through the school of hard knocks.

We have bought and sold our own properties using seller financing rather than bank loans.

https://www.NoteInvestor.com/101

​ #NoteInvestor​ #MortgageNotes​ #RealEstateInvesting

----------------------------------------------------

Tracy Z:

Hello and welcome! This is Tracy Z.

Fred Rewey:

This is Fred Rewey.

Tracy Z:

And we are excited to be here for Note Investing 101 series. We're going to talk about how to get a note business up and going in 90 days. So, welcome everyone. We see people logging in. People saying they're excited to be here and looking forward to learning about notes. We are very, thanks. We are too someone else from Colorado. Nice to see a whole climb on the beach somewhere. We're in Florida, we're not currently on the beach, but Scott who's our producers in Hawaii. We know he's on a beach, so welcome everybody. We understand. We used to live in snow. So, we understand that. So, we are here today to talk about notes.

Fred Rewey:

Yeah. And we're live. Actually, this is the physical part. So, we do these occasionally and we used to record them and put them up or something.

Fred Rewey:

So, we decided to create an entire set of videos, kind of like a crash course, if you will. That's why we're calling it Notes 101. So, we have the ideas to show you how to build a business. If you're new, then you're in the exact right place. Cause we're going to start at the very, very beginning. And some of you have seen these little guys before, but we're gonna bring these out and start at the very, very beginning. If you're experienced, then you're going to get something out of some of the later episodes, as well as maybe a couple of things along the way as well. But, it's important that whether you're here to get started or whether you want to get your business to the next level, we hope to accomplish that and share a lot of information with you.

Tracy Z:

So we're going to talk, just to get started. Who is this industry for? So Fred and I have been buying and selling real estate notes for over 50 combined years. And we see this applying to three main groups is people who want full or part-time income either now or in the future.

Fred Rewey:

So, we're also talking about real estate without tenants. We're going to talk about this a little bit later, but you know, everybody loves real estate certainly right now. And you know, it's like Mark Twain said, Mark Twain said to basically buy land, they stopped making it, something like that. See if this wasn't live, I would have prepared for that. And I know, I mean, I think he's the one that said that, but basically, hey there's only one downside to having tenants. You know, it's great when they're paying your bills, but then you have the phone calls in the middle of the night and everything else like that. So, this is the advantage of being able to invest kind of in real estate and get all the benefits of real estate without having the headaches of the clogged toilets and the roof and the repairs and things like that.

Tracy Z:

Right. Right. Definitely. Well, the three T's tenants, toilets and trash. Sometimes they call it termites or whatever they all are all headaches.

Tracy Z:

So, we're going to talk about having a real estate backed-asset, which is a known mortgage, a deed of trust. And so you have an asset that you're familiar with. Yet, as Fred mentioned, you're the bank and banks don't get calls at 2:00 AM for stopped up toilets or lockouts or kids flushing something down the toilet. So, the third group that might be here are people who are just looking to diversify their portfolio. So, we work with a lot of people who have self-directed retirement accounts and they're looking for something besides the stock market or besides physical assets, like real estate. And so real estate notes can be an alternative investment form for a self-directed retirement account and it can be done in and outside of a retirement account. It kind of depends on what your purpose is for the income. And we'll talk about that today.

Fred Rewey:

Yeah. So as, you know, I guess real quick before you're going too far though, we do want to have a, we have to do a disclaimer. So, just because we're not, we're not investors, we're not telling you what to do with your money. Here's the fine print. We're not attorneys, we're not giving you legal or financial advice. I know you've seen this, don't eat yellow snow, whatever it is. So, you know, just saying, I don't know what it is, but basically just understand that, you know, obviously you have to do your own dollars. We have to say that because usually, that's when we have all the weird warning labels to somebody at some point that's something they weren't supposed to. So just be aware,

Tracy Z:

We're not trying to sell you an investment or an asset or a security. We're just here to talk about deals that have worked for us over the years.

Fred Rewey:

Yeah. And which leads me to where I was going was, which is the, why us? Why would you be listening to us? And as Tracy mentioned earlier, we have over 50 years combined experience in the industry. We've done this for a very, very long time. Early in the nineties, late eighties, nineties, I was actually in a 500 square foot apartment. And I was taking some night classes by a gentleman by the name of John Richards, who's well known in the instance since passed away, but well known in the note industry. And in that class, we were learning to buy real estate. But one week, he taught me the financial calculator and he purchased notes and he taught me that. And I thought it was the coolest thing ever. I, you want me to say a lot? I don't like math, but I do like money. And so he taught us, taught me how to do that. He taught the entire class and I was hooked. So, I actually started my business in a 500 square foot apartment. I spent a ton of money on a computer, which, you know, now computers cost, you know, nothing by comparison back then and a fax machine. And not even like a really nice fax machine. That was well, yeah know it wasn't like the regular papers that roll, that like the thermal paper that would to fall behind the desk.

Fred Rewey:

It's not, look it's not important. I did learn that by the way, again, 500 square foot apartment. I did learn that the fax machine with thermal paper should not be in the kitchen where you have a stove. Cause then basically it turns the roll, all black. But anyway, so that's where I started. And then, I actually joined up with another investor and was one of the largest investors in the country. Then I went to the other side and joined a funding team where I met Tracy. And then we left it all. How many years ago? 25 years ago.

Tracy Z:

Yes. So, what's interesting about your story that I really like is that you learn about this taking a real estate class in college. Don't you wish that they taught this sort of information in all classes? I mean, you just were fortunate that the person teaching the class knew about real estate notes.

Fred Rewey:

Well, schools don't teach you real, or they don't teach you money and they don't teach you relationships. And they're probably the two biggest things in your life. Ours were together, which is really weird.

Tracy Z:

So, yeah, as Fred mentioned, we come out a little bit differently, but we met through the note business. So, he started out on the side of flipping notes and I started out on the institutional investor side. So, I had a real estate and closing background worked for an attorney and a small company that had a title company. And it was really, I learned about seller financing because it was a small rural area. And I moved to what was called the big city of Spokane. And that was in 1988. And I went to work for a gentleman, that had already been buying and selling seller finance notes for 30 years. So, they had started in the forties and fifties. So, I got started in 1988 and I was the person doing all the paperwork and understanding the due diligence and helping them expand their portfolio so that they were buying $20 million a month from people like Fred and that group that would bring the notes to us.

Tracy Z:

And so we came up from an institutional investor side and from that side, we also were securitizing notes and putting them on, usually it could be sold into wall street. And so we were taking that seller finance paper and trying to turn it into something that will look more like what the bank taper was. And so, then for the night I met through the note business and in 1997, we started our own company together. And we also started the NoteInvestor.com blog, which is really was a labor of love, right? It's not going to hold over a hundred articles on that.

Fred Rewey:

There's a ton of information. If you go to www.NoteInvestor.com , there's a ton of information there. And it's grown over the years. It became, well, you know, one of the most what's that? What's not an affinity site. What's that called?

Tracy Z:

Authorities.

Fred Rewey:

Authority site. Thank you. Yeah, there's an authority. It's an authority site on that. And we, wouldn't always been very giving with the information same as these videos and you'll see going forward. We don't hold anything back. I mean, I think at this point in our lives and what what's happened to us and we've been fortunate to do is it's a matter of giving back. So, we created NoteInvestor.com a couple of years back, we created CashFlowExpo.com , Which I noticed several people here that were at Cash Flow Expo, where we had, we brought together a bunch of speakers that we're not selling anything. We're just passing on information, paying it forward, if you will. And then, you are largely behind the creating the Personal Profit series.

Tracy Z:

Yeah. So, we have a Personal Profit series manual it's a 475 page manual. It's for all the detailed people like to see the documents and how the due diligence works. And we also did a calculator class. So, it teaches people how to use financial calculator. I noticed that somebody said in the comments, it kind of caught on my eye that they take in that class. Well, thanks for being here as well. But today what we really want to talk about is, how we have used the note business for ourselves. So, we've seen it from the institutional side and how, and then we started our own company and we bought and sold notes and retirement accounts. We've used lines of credits. We've flipped some notes or rehab, some notes and some are for profit. And so we're here to talk about that because we think it might be valuable to you to see how we've done it. And because we stand three decades of doing this, we've seen this work in good economies and slow economies and crazy economies, 2008. So, we've seen it through all different cycles. And so, today we want to talk about where's the opportunity. And then we want to hone in on the seller financing side as well. So, there are three main areas of opportunity for deal sourcing, in my opinion, if you want to buy yourself notes. And so the first one would be

Fred Rewey:

Seller financing and that's the deal we're going to talk about. And that's sort of traditional deal. That's probably where there's more often than not. And we're going to go through an example of that. And you're going to have that down cold here in just a minute with our little magnet people.

Tracy Z:

Yeah. And so, that's where we got our start. That's where in eighties, we were [inaudible] They also could be the form of re-performing notes. You usually see a lot of those on the note listing sites that you might've seen, like notes direct or paper stack. Although, they sometimes also have seller finance notes as well. But what's interesting is until the 2008 subprime lending crash. Non-performing notes, wasn't really something we dealt with. We had all, we found our inventory were seller finance notes. So, there are still non-performing notes out there today. We're going to talk primarily about performing notes. We can say the non-performing notes maybe for a future session. And then, the third thing that we want to talk about is the creating outside.

Fred Rewey:

Yeah. And that's basically where instead of going out and trying to find notes, you're actually creating notes you're, and this is really attractive to people that are used to flipping properties or people that have properties they want to sell.

Tracy Z:

Yes. And so in creating notes, in addition to doing that with property, do you want to buy or sell. And also you could actually originate a loan as a private lender to another investor. So, that's something else popular. So, those are the three main areas of deals sourcing. People always wonder where these deals come from, seller finance notes, non-performing or re-performing, and then also the create your own notes. So, we are excited to have you here. So, what we'd like to do now is kind of hone in on the seller finance notes. So, in general seller financing is about 6% of all real estate transactions. Now, that can be more or less. Some States have less. It's not as familiar. Some States have more, but that's just an average. So, we've actually got some cool stats that we're going to bring up on the screen to show you just how big it is, because this always surprises people.

Fred Rewey:

Well, I think it's one of the things that people talk about, where they haven't heard of it. You know, they haven't heard, is that, well, sick, if you think of all real estate transactions, 6% plus or mining is a really big number. So, the first thing we want to show you, graphically up here is just how big, how much money we're really talking here. And the answer to this from last year, because where it's trailing year and gathering information is 23.9 billion with a B. So, that's 113.8 billion in the last five years. So, it's really, really big market, much bigger than people think it is.

Tracy Z:

Yeah. So, you think you just need a little slice of the pie. So, in addition to there being 113 billion plus in the last five years, this is made up of a lot of different things. This is made up of residential, commercial, land. And so we can look at that slide that shows us the stats on that. We've got the residential made up about 39%. And when you're talking about the dollars land made of about 25%, commercial made up 18%, and then we had this little bit that was unknown and it pretty much all comes out about similar ratios on that. That just meant that the county where this data was obtained from, didn't identify easily with the property was. So, where did this data come from? Well, this is public records data. So, whenever you buy or sell property, a deed gets recorded. And whenever you get a loan, a mortgage or a deed of trust gets recorded. And so this data that shows that the person that sold the property also to get the mortgage or the deed of trust. So, this comes from public records. We work with a company to get this data and they've been tracking it for us for quite some time.

Fred Rewey:

Yeah. So, we have a graph that shows the tracking of it. Scott, if you could put that up there. Yeah. So this actually gives you a decade of seller financing usage. This is how much, and you can see that it went up, obviously back in 2013, 2014, you can see where it kind of hit the highest position there. And if you'd look, take a look that, and you look at interest rates, you know, and you can see where these corresponding go back. You can see lately it's come down, but it's still a huge, huge number. It doesn't matter to us as long as there's always inventory, which there is. So, in this case, and I think what's going to happen now is you're going to start seeing it up tick back up pretty soon here.

Tracy Z:

Yeah. So, financing fills a need when the lenders start to restrict their criteria and they want a higher down payment, a higher credit score than fewer people qualify for traditional bank financing. And so in those situations, we see that the percentage of seller financing goes up or if their credits and hits because they've had some slow pays. Unfortunately, we can't deny what's happened in last year. Wow! It's been a crazy year. So we hope we find people well and healthy and also trying to think, how can they help people in the future? And this is one of the ways I believe is that, seller financing is going to help some people get back on their feet that have been hit and hit a little bit hard by life. So let's, you know, that, so those are all the numbers and now we're going to go to the board and we're going to kind of show them a transaction, how that might look, right?

Fred Rewey:

Yeah. So we're going to take a step back. And those of you that are, have been in the industry for a while, just kind of bear with us for just a second. This is, we always find this, the easiest way to explain to the people and the purpose of this series is to not leave anybody behind. So, we're starting at the very basics. And then as you see, as the series progresses and we do more of these videos, you're going to see that we get more and more advanced, but we do want to start at the very, very beginning. So, basically what we're doing with is a house, there you go. This is high tech. We spent all our money on this camera, so that's not true, but it makes for a good story. So, this is the way a typical transaction would work without any type of notes situation. And what we call this guy?

Tracy Z:

Sam, the seller.

Fred Rewey:

Sam, the seller. There we go. It is the Dr. Seuss of home sales. So, Sam the seller who's much bigger than the house, by the way. Sam, the seller just wants to sell his house and somebody comes along to buy the house.

Tracy Z:

And we'll call her Barb, the buyer. And what traditionally happens, right? Is Barb, the buyer goes and gets,

Fred Rewey:

Yeah. So, she's going to borrow money from a bank to pay Sam. So, Oh, I want some money. Well, first let's say the bank has the money. So, she's going to get a loan from the bank. And then the bank is going to send the money to Sam the seller. And then, she gets the house and is not, and then he's going to go away with his money and she's going to continue to make payments to the bank.

Tracy Z:

Yeah, Traditionally 30 years.

Fred Rewey:

Yes.

Tracy Z:

That's, you know, we start here because everybody understands this. So, if you bought or sold real estate or bought or sold a home? You understand that, if you don't have the money to pay cash, you borrowed the money from the bank, the seller gets their money and then they just, the buyer just makes things to the bank. So, in seller financing, it's just a little bit different. So, in that situation, we still have Sam the seller and we'll still have Barb, the buyer.

Fred Rewey:

So, there's a couple of reasons this happens. Well, it depends what happens in the environment, but this could have been a property that was harder to sell for some reason. Sam could have been insisting on getting a higher sale price. He might've really liked Barb, but Barb didn't qualify at the bank. So she, you know, maybe she went to get a bank loan and doesn't qualify, maybe heaven forbid she's self-employed and doesn't qualify. You're going to see a lot of people come out of here that are really good people to have a single life circumstance like what's happened in the last year, that all of a sudden don't qualify for bank loans. And even as low as the interest rates are, they're just not going to be able to get loans or in some areas it's very common. Like, you know, we said 6% is a plus or minus national average, but in some States it's a much higher percentage because this is a normal way of doing it. He may also simply want to carry back a note cause it's a good return for him. And we're going to talk about that in a minute. So, in that particular case, he's going to carry back a note and you want to talk about how he does that?

Tracy Z:

Yeah. So, in this particular case to Sam, the seller sells to Barb, the buyer. Now, she's still going to hit her deed. So she closing, will get a deed and, so she'll still get her deed. But what she's going to sign, is a lien over to Sam, the seller. And so in this case, she's going to have a lien and that's going to be secured either. The lien is evidenced by a promissory note and most all States. But what might change is that instead of a promissory note, that's always the last of my pitch. So, in some States it's a deed of trust. That is what secures the promissory note. And in some States it's a mortgage, but basically the lien is what's recorded either the mortgage or the deed of trust in the County. So, Barb the buyer gets the deed and she signs a note back to Sam, the seller.

Tracy Z:

And then they put a lien on the real estate that says, if I don't honor my promise to pay, you can take the property back. So in this situation, then what happens is, instead of there being a bank, remember we took the bank away, Sam, the seller becomes the bank. And every month Barb, the buyer, sends the payments to Sam, the seller, and hopefully they use a third-party servicing agent to collect those payments every month. Because they'll keep packing principal and interest and do the collections. And that's what makes it so passive. It's kind of like, think of the servicing company as a property manager for your note. We're not managing the property, right? They're managing the note. But the great news is, is that they usually are available for 20 to $30 a month. So less than a traditional property manager. So, every month Barb, the buyer makes the payments to Sam, the seller and they, she put some money down and he stays in the picture. Right?

Fred Rewey:

Yep. So to pause for just a second, because I think this is an important distinction. I'm going to lose the paperwork just briefly, just to understand that all happens behind the scenes. And it's no different than if this was me and this was Tracy. And I said, Hey, do you want to buy my house? And Tracy's going to pay me so much a month to own my house. We're going to do all the paperwork to protect Tracy. We're going to do all of the paperwork, protect me. But as long as she mails me payments every month, she will eventually own the house. And we have paperwork in the back that, which happens if she doesn't mail me and things like that. But that's essentially what we're doing. We're removing the bank. I'm happy because maybe I didn't want all the money in a lump sum, or because I'm going to create an interest rate and say, Hey, Tracy, you're going to pay me 8% a month on that. And so now I'm going to earn money while I have the note. So we're going to talk about buying those in a second, why this is very important, but this is how essentially this person created their own note. We talked a little bit about creating those. This could have been a rental property that he no longer wants to run out inside. Do you know what I'm going to sell it? And then he sells it to Barb and now Barb is going to make payments to him. But the important distinction is there's no bank involved.

Tracy Z:

Yes. Now, sometimes Sam, the seller might still owe money to a bank. And we can talk about that in a more advanced strategy, because this can be done without owning properties free and clear. But in this particular instance, he sold it to Barb, Barb makes payments to Sam, the seller. So now, okay. So, there Sam, the seller. So how, where we come in, how can we get involved?

Fred Rewey:

Well, I think we'd do the numbers.

Tracy Z:

Oh, I thought we were going to show how to flip a note and bring it in investor.

Fred Rewey:

Yes.

Tracy Z:

Yes. You want to do that and then go to the numbers?

Fred Rewey:

Okay. Yeah.

Tracy Z:

So, there's a couple of ways that you can participate in industry. And so, let's say Sam, the seller is getting payments every month because he sold to the Barb, the buyer, and he likes being the bank. He has all the rights of the bank, but he would like to get some cash.

Tracy Z:

He's tired of a small, monthly payment trickling every month. So people market including Fred and I, and you can too. We market to these people and we get our own pictures on there. We party, we say, are you receiving payments on property sold? We pay cash today, sell all or part of your payments and you receive a lump sum of cash. And so we market to people like Sam, the seller, and they contact us and ask a quote. And in that situation, we can either buy the note and earn a great yield, or we can flip the note to another investor and earn a fee. So if we were to come into this situation and buy the notes, say in our retirement account, then Sam, the seller would get his cash. So, he gets his cash from us.

Fred Rewey:

He goes away.

Tracy Z:

And we get an assignment of his interest. And we now get the payments from the part of the buyer. So, in that situation, we're happy. We're an investor, we're learning a great return. We have the same position as a bank, as far as like, if Barb does not make the payments, then we are able to foreclose and take the property back, but Barb's paying along great. And we're receiving payments, but if we don't have money to buy the note, or we don't want to buy that note and we another option.

Fred Rewey:

Yeah. So, what we can do is actually flip that note over to a group of funders. And so, and we're going to show you the numbers in a second. So if we have our own money, then we are basically going to pay Sam, the seller to step in and take over his position. And we're going to take his place. We're going to give him cash, whatever we agree on. And then we're going to receive the payments. If we don't have our own money, then we are going to flip the deal to an investor simultaneously. So that, they put up more than the money. So we agree on a price. They put up more than enough money to pay for Sam plus something else for me, for the flipping on that. So we're going to use their money to buy Sam's note. And then what happens when this is all done? Is Sam walks with his money. We walk with every little money we made. The funding source is the one that's going to get the payments.

Tracy Z:

Yep.

Fred Rewey:

Hope that made sense. If not, where you're going to see this over and over again, because we will be talking about the same type thing.

Tracy Z:

Excellent. All right. So, let's go to the numbers now, like, so we'll take it away our magnet people.

Fred Rewey:

All right. So we're going to look at the numbers and this is where it really gets kind of fun. And this is the exciting part because, and you're going to see why this industry is so flexible and yes, we are putting a piece of paper over a chalkboard. I don't want to hear anything about that because it's just too hard to read if we don't.

Tracy Z:

Yeah. Okay.

Fred Rewey:

All right. So let's talk and I'm going to use some round numbers and we have a tendency to always use these round numbers. So interest rate aside, and, you know, maybe the properties cost more or less than your area. Maybe the interest rates are more or less depending on what's going on the market, but I'm just going to use this number. And we're going to say the sales price is $120,000. I'm just going to put SP this is the sale price of the home. This is what they've agreed to purchase for. There's going to be some sort of down payment. What do you think she wants to pay for down payments? So there's going to be a down payment of $20,000. Is that a good down payment?

Tracy Z:

Yeah. I like to see personally 20% or more, but yeah, that would be a little bit less than 20%. It's what about 18%?

Fred Rewey:

Yeah, I think it's a pretty solid down payment. Yeah. I think that's a really good amount of money. You know, and in the last year, by the way, and I did see some interesting numbers the other day. There's a lot more people having cash. This down payment is not surprising right now because a lot of people haven't been able to eat out at Olive Garden and all this other stuff people were talking about and they started to have a lot more cash. So, that means after the down payment, we're going to create a note of a hundred thousand dollars. That's going to be the note. That's the amount. So it was $120,000 sale price, $20,000 down payment. We have a hundred thousand dollar note. So, we're going to do that over. How long are we going to give her to pet? Let's do a traditional 30 years. Okay. So it's going to be a 30 year note, which is 360 payments. So we're going to say 360, and we call that N for number of payments, and we're going to do an interest rate. I'm going to do 10%.

Tracy Z:

And I know you're all thinking, this is shocking. Who's paying 10%, but we find a lot of seller finance notes that are in the eight, nine, 10% range.

Fred Rewey:

I mean, you know, as an aside, you know, this number's all negotiable. So I could all, if I really didn't want to carry back a note, and this was my hot button and go, you know, I want 10%, if you don't want to pay me to 10%, go get a bank loan or go find another way to do it. So, but this never could be whatever we agree on, but let's just say for the purpose of the example, we've done 360 months, which is 30 years traditional mortgage at 10%. So the payments on that are actually going to be 877.57. That's how much Barb is going to mail, Sam. I'm really bad at names. But I'm good at numbers.

Fred Rewey:

I don't have a vested interest in this magnet people, I don't know, they're not going to be around. So, $877 every month to Sam, the seller. And that's the note, that's the cash flow. That's what we're looking to buy. Now, let's say Tracy comes along and Tracy is this group here. Tracy is the investor. And she wants to buy it for herself. Let's not talk about flipping or anything right now. She wants to buy it for herself. What do you want to earn on your money?

Tracy Z:

I would like to get 11% return.

Fred Rewey:

Okay.

Tracy Z:

Yeah.

Fred Rewey:

So Tracy wants to get earned 11% on her money. Now we're going to, there's a whole lot of reasons this wouldn't happen because we always have some sort discount, goes some costs. But let me say this. If Tracy wanted to earn 10% on her money, and she came in at the exact moment, this all started, she could pay him a hundred thousand dollars. She would receive the 877.57 and a 360 payments. And she would be earning 10% on her money. But this is where the magic of the industry comes. She doesn't want to earn 10%. She wants to earn 11% on her money. Now we cannot go back to her tomorrow. Thank you. We can't go back to Barb and change the numbers. So what do we do?

Tracy Z:

So, we understand the time value of money. And we put it in our financial calculator. And we say, if I have a hundred thousand payable at 877.57 for 360 months, and I want her 11%, what's the present value of that cashflow. And that is the amount that we would pay. So in this case, it turns out to be approximately

Fred Rewey:

92,150.

Tracy Z:

Yes. So I wanted to earn 11%. I could pay Sam, the seller, 92,150. He would get his 92,150. He would sign an assignment of mortgage or assignment of deed of trust. And you would endorse the promissory note. I would get the original promissory note. I record an assignment and he gets money and go away. And then Barb, the buyer would make things too. So, that would be how that transaction,

Fred Rewey:

So, the way we get the money is, is we're paying less money. We're paying 92,150 for a hundred thousand dollars. So that's the discount. So we're paying less money for the same cashflow. So, the cashflow is always the cashflow and somebody changes it, but it doesn't change. So it's always going to be 360 payments of 877.57 that cannot change or will not change unless we agree on something. And that's a whole different scenario, but that is what, so basically that's a hundred thousand dollars. If we pay less for it, then the yield is going to go up. The return is going to is going to go up.

Tracy Z:

So in that case, we could buy that a retirement account. If we leveraged it, if we had costs of funds say 5%, and we're making 11, we've got arbitrage of 6%. Those are different ways as an investor that you can do it. But let's say you find this note and you don't have the funds available right now to buy it, but you still want to do the deal. There is opportunity. So, let's look at flipping a note or wholesaling a note.

Fred Rewey:

So what we would do is, is we would actually contact the funder. And we would ask the funder, we'd say, Hey, this note is for sale. How much are you willing to pay for this note? And they would give us a quote and let's just say they chose. They wanted to earn, okay. So they said, okay, so we're going to pay, we're going to pay 92,150. Now, Tracy, you don't have 92,150 right now. So you're going to flip the note on to these people, but you're going to get paid for finding the notes so much. Do you want to make

Tracy Z:

I would be happy making, I mean, it would be a low fee, but yet be happy making that 2000. Okay.

Fred Rewey:

So we're going to take off the funder, came back and gave us this amount. We're going to take off $2,000 for ourselves and that's going to give us,

Tracy Z:

90,150 to pay them. So at closing, we signed an option, agree with Sam. And then at closing, that's assigned to the funder. They know this all transparent. They know exactly what's happening. It follows their due diligence procedures. They ordered the title, they ordered a BPO or some kind of valuation of the property. They do their check on the payer, the three P's as we call them the payer, the property and the paperwork. And then at closing they'll wire 90,150 to Sam, the seller. And they'll wire the difference, the $2,000 referral fee to us. And in this case the funder is paying all the costs associated with that. So that's just a net fee. So on transactions like that, we see on average, the average tree is about three to 6% of this amount the funders and investing. Now, sometimes it's more on smaller deals, a higher percentage. Sometimes it's less on bigger deals as far as the percentage, but that is how you can make a referral fee in the industry if you don't have funds to invest on your own.

Fred Rewey:

Yep. So let's see if we have any questions here. I'm gonna look at the board here. Ron, is there a usury concern? It's a great question.

Tracy Z:

So, there are different usury rates in different States. So you do have to check that out. There's also, if you're creating notes, there's something called Dodd-Frank and high-cost QM, more Qualified Mortgages. So, what we recommend in those cases is that you work with an MLO a Licensed Mortgage Loan originator in that understand seller financing. And we have some that if you're going to create a note, if you're brand new, the seller creating that, then we recommend that you do that to create the note, just to make sure the buyer qualifies, but as you an investor discounting the note, that's not usurious, you're not making a loan, you're not charging them interest. You it's just like buying a property at a discount. So if you're buying a note, at a discounts just like buying a piece of property at a discount or usury would come in is what the interest rate is being charged on the note.

Tracy Z:

That's where usury potentially could come in. And that's where you would use an MLO. We do all above board. There are some exemptions to Dodd-Frank and using an MLO if you're doing a one seller finance transaction in 12 months, but I recommend you just go ahead and use it anyways, because it just paperwork and paper set up just like a banquet qualifies and you get to choose the underwriting as far as what score and down payment, those sorts of things that they would have. And that's been a big change in our industry since 2014 and we all adapted a little bit, but I think at the end of the day, it probably made the paper better quality.

Fred Rewey:

Yeah. And again, this only applies if you're creating notes, which will go into another video. If you're not creating notes, if you're just buying notes, then that's not [inaudible].

Tracy Z:

You're just buying at a lower price and that's not usurious because you're not charging anyone interest. You're just discounting it.

Fred Rewey:

Yep. Darryl said, do you use a title company? Absolutely. Yeah. That's what we do the closing through. So we close it similar to a real estate transaction, except it's just different paperwork, but basically you're what I mean, how else would you say it,

Tracy Z:

If your mind there's, we always use a title company. There's two different types of title. There's a title report and there is a title insurance policy or commitment for insurance. If you're working with seller finance transaction, then we definitely suggest getting title insurance because you want to make sure you're coming in after the fact that the note was created properly. If you're creating note, you want to make sure that is also done properly. If you're buying that bank paper that we talked about and that title policy called the lender's title policy already exists, then you might be able to just get a title update because that lender's policy will often go to your benefit to this successors and assigns. That would be definitely a more advanced topic, but the title is where I learned the business. So I love, look, you have follow-up questions on that. We can all definitely discuss that, but we do involve the title company, whether you get title insurance or title report will vary on the type of paper you're buying and whether or not a title policy parties.

Fred Rewey:

Yep. And one more question that we're going to stop for this video cause we've got some, you know, we've got to save stuff for other videos. Theresa said, would the group be paying 94,150? No. And let me explain why such a great question. It's a common one. So before this exists, what we're doing is we're actually finding out how much will the funder paid for this note? And the funder said 92,150. So it's an important thing. And a lot of people have made this mistake before you don't add your fee, you subtract it from what they're going to pay. So if they're offering 92,150, we have to take something off of that to offer Sam the seller, to cover our fee and how we do that? And we say, okay, we want to make 2000.

Fred Rewey:

So, we're going to take $2,000 off of the 92,150. Now, the net we have the offer Sam, would be the 90,150, and that's how we would be able to do it. I'm going to do a follow-up question. She had a up question. Why would the seller only take $90,000? And it's a great question. A lot of times when the Sam, the seller worlds first make the transaction, they think that they're going to be happy for 30 years. They're going to be happy collecting 877.57 a month. And that's just the way it's going to go for the rest of their lives. In reality, and usually in either a short period or two to three, three to four year on average, something changes in their life. It could be good. It could be bad. It could be, they're going to send their kid to college. It could be something medical. It could be, they just need to sell it to do something different. So a lot of times, you know, now this 877 a month is just not going to cut it. Maybe Sam wants to buy a boat. Maybe he wants to invest in a business. Maybe he wants to buy another house. It could be anything, but this is not enough money. And he can't just walk into, you know, bank

Fred Rewey:

And say, Hey, I got this note and I, you know, sell it to you because most banks won't even have a clue or won't even touch it. So, that's why it goes to a market to investors like us and why we buy at a discount. And in reality, if someone would have walked up to Sam at the time and said, Hey, you know what, you know, we take, we sell this for 110,720 cash. He would have taken it. So as long as the discount makes sense in everybody's world, he's going to get $90,000 cash now, as opposed to waiting over 30 years to collect his money. So, there's a lot of different means. And we'll talk about that in another episode, why the discounts are and how they show up.

Tracy Z:

yeah. And we also are going to talk about in an upcoming episode. In fact, the next episode, something called The Partial Purchase.

Tracy Z:

And the reason we talk about The Partial Purchases, we can give them full face value without them taking a discount. If they're willing to take some money now and some money in the future, and that's how we structure a partial purchase. So that's a great setup.

Fred Rewey:

The coolest thing about this industry.

Tracy Z:

Honestly, we love partials. We're partial to partials. They're one of our favorite things. And so, we are so appreciative that you joined us in this session. And we want to remind you that if you go to www.NoteInvestor.com/101 , right? So, www.NoteInvestor.com/101 that you will one get. Oh, this is how you know it's live.

Tracy Z:

So, if you go to www.NoteInvestor.com/101 , You will put in your email and we'll give you a free copy of Our Five Ways to Cash in on CashFlow notes. And we'll give you a free eBook on 21 Tips for Note Investing. And then we will also send you the link to the next session. So, our next session will be coming up.

Fred Rewey:

And replay. If you missed any of the sections,

Tracy Z:

And our next one, we're going to talk four, we're gonna go through, four or five different deals of how you make money on them. And we are also going to talk about those partials.

Fred Rewey:

That's it? So, hit follow, like whatever the little buttons are. Share. I don't know what any of the things are on there, but thank you for joining us. Oh, there we go.

Fred Rewey:

Wait, put it back up there. Like share and subscribe, hit the bell. See, I didn't even know that. I'd say things like we have a producer. We have somebody that knows what's going on here.

Tracy Z:

So, we appreciate you being here. The Note Investing world has been good to us and we enjoy sharing it with others. And as you saw, there's 23.9 billion a year. So, there's lots of, to go around. And it's just a way for private investors to be able to make the money like the banks do.

Fred Rewey:

And we'll see you on the next video.

Tracy Z:

Happy Note Investing!

[lunarr-rrose]

Fernando’s Year-End Self-Storage Review & Predictions for 2021

https://u109893.h.reiblackbook.com/generic11/the-storage-stud/fernandos-year-end-self-storage-review-predictions-for-2021/

Welcome to the final video of the year by the Storage Stud.

For Fernando, this is a very interesting year for self-storage space. He always knew that storage space is a recession resilient asset. When you look at the past recessions that we went through, the numbers are fantastic for self-storage.

In addition to self-storage for being one of the most recession resilient assets, it also produces some of the highest returns that we have seen for the last 30 to 40 years.

Also, one of the things that Fernando and his team noticed in their portfolio of properties that they owned is that the occupancy rates are going up during the recession. He thinks that one reason for this is people were either downsizing or moving back in with their support network, like family and friends, and then placing their possessions in storage.

They also notice an increase in sales of commercial clients. They got rid of their office space and other expenses for warehousing and placing them into self-storage.

While in predictions, for Fernando it looks like the lending business is looking to place loans in their asset class self-storage.

Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,

Find out more at

https://www.TheStorageStud.com​

https://titanwealthgroup.com/​

Listen to our Podcast:

https://thestoragestud.podbean.com/

----------------------------------------------------

Hello! Everyone. Welcome to the final video of the year. I wanted to do something a little special, kind of do a year-end review for 2020, and then some predictions for 2021. It's been a very interesting year in the self-storage space. I have to admit, you know, we always knew self-storage was a recession resilient asset. When you looked at the last three recessions that we've gone through, the numbers are fantastic. I mean, lowest default rates across all asset classes. And those were numbers that were reported directly from banks. You know, we had trapped data. We had, Wells Fargo data, CMBS loan data as well. One of the things that was very interesting to notice is although self-storage is one of the most recession, resilient assets as well. It also produces some of the highest returns that we've seen over those 30, 40 years as well. Well and above multifamily and single family.

One of the things that we noticed in our personal portfolio of the properties that we own, where that occupancy rates were actually going up, not going down during the recession. I think one of the reasons for that is that people were either downsizing or moving back in with, you know, their support network, be it parents or friends or children, and then taking their possessions and going and storing those things. We also noticed an uptick in commercial clients as well, getting rid of office space, getting rid of, you know, superfluous expenses for warehousing, and then shifting that over to a self-storage unit that they had a little bit more flexibility on. The second thing that we noticed is that our delinquency rates actually stayed level and in some areas actually dropped. And that one was a little bit harder to explain, but where I think it's coming from is the fact that, you know, when you have a $3,500 mortgage or a call it $2,000, monthly rent, it's a lot easier to pay your $85 a month storage unit costs than it is to pay that 2000 or $3,500 cost per month to, for housing.

So, I think it's just one of those things where people were kind of segregating costs and trying to figure out what they had available to them with, you know, storage. We were not subject to the same restrictions that a lot of these multifamily and single family owners were subject to, in most states and in most counties across the United States, the local municipalities put a ban on evictions or foreclosures. And that we didn't see that on our assets. So, you know, because self-storage is a non habitation investment or non habitation real estate. It's, there's not this negative stigma of, Oh, I'm putting someone out on the streets and they're going to be cold. You know, for us, it's, you know, storage is us, it's a superfluous expense. And if you really don't need it, you don't need it. And if you decide not to pay your storage bill, like, you know, there may be an auction that could happen.

We did not proceed with any auctions during this time just because we know people are struggling. But we did reach out to every one of our tenants to try to see what we can do to help them, see if there's a way that we can modify the rents, maybe take less payments today and then put them on the backend tomorrow. Or in some cases we even forgave rents, just to keep people in that had showed a good history of paying on time. And that we're going through a temporary situation. So, it's been very interesting on that front, how our delinquencies that stayed the same or actually dropped in some situations. And then, the last thing that was very interesting to us was demand for storage, went through the roof and with that, our street rates went up as well.

So, in many of our properties, especially in the Midwest and some in the called, Mid East and Southeast our street rates actually went up in some areas substantially. Anywhere between, you know, two to 5% and in some areas all the way up to 20%, just because we just, there's no storage available in those markets. It's get to the point where, you know, we're building additional buildings on some of our properties. And within one to two weeks of us getting certificate of occupancy on that building, that entire building is full. It's completely rented out. We're noticing this in our North Carolina property, where we just doubled the size of the facility and those units are renting out quickly. Now, we're thinking about tripling the size of the facility, adding another three or four buildings onto that same plot of land. And then now we're even looking for additional parcels of undeveloped land to continue to expand each of our facilities.

We have a facility down in Central Illinois where our closest competitor right down the street you can get to her facility with a golf cart, you know, in a couple of minutes she wanted to sell and she just wanted to be out. So, we were able to pick it up at a pretty decent price. I think it was very fair. We paid appraised value, which is no problem. The value to us was the fact that we're doubling the size of our holdings in that market and dominating the entire West side of that city. So, there's gonna be a lot of economies of scale there and planning on continuing to build up that portfolio. We're now looking at tearing down a few houses we have on some of that land that's been vacant. And just putting up additional storage units because these things are just renting out so quickly.

The very odd piece for me has been the responses from sellers. And I have to put them in kind of two buckets. The first bucket is the properties that were brought to market through professional means or through real estate brokers that are specialized in self-storage because self-storage is doing so well during the pandemic. And in historically in recessions, a lot of the big money, the REITs in the hedge funds, they have been driving prices through the roof. I'm getting listings on deals that I would normally pick up for anywhere between a seven to a 10% cap rate. They're coming to market at three and a half to 4% cap rate. I think that's just absolutely ridiculous, but there's people that have the money that are willing to pay those prices. So, more power to those brokers. There was a recent sale where Blackstone purchased simply self-storage or simply, I think it's simply safe for simply self-storage.

And they paid a 4% cap rate on the entire portfolio to the tune of like 1.3 or $1.6 billion. So, if Blackstone thinks it's a safe investment, that's a good sign for us. It's also a bad sign because now it means that the market's going to start getting more and more crowded, which is all right. It's a very fragmented market to begin with. On the flip side, though, we've noticed a lot of sellers that are not going through traditional or professional means let's call them, you know, these mom and pop owners, reaching out because they just want some cash. They don't know what's going to happen in the pandemic, and they want to sell an asset that maybe they've been running as a hobby. We've been picking up these deals for just fantastic prices. And it's just so counterintuitive to me because, you know, you have one of the best assets to hold during a pandemic during a recession, and you're trying to sell it for easy cash now.

I'm holding everything. Right? I'm trying to make sure that we're building up these cashflow machine. Adding, I think last year we added 10 or nine or 10 new facilities to our portfolio. As of today, December 30th, 2020, we have seven self-storage facilities under contract currently, with the goal to add about another 20 facilities next year. So- really starting to pick up a lot of steam on the self-storage front. The, it's just been fantastic. The other thing that was very interesting to me was the response from lenders. When most lenders were shutting their doors, not answering their phones, you know, dealing with the PPP loans and you know, dealing with hotel and retail loans going completely defunct, office space has been getting crushed recently. These banks are trying to flock now to assets that balance out their books assets that historically have the lowest default rate across most of the assets that they land on.

So, we're getting fantastic rates given to us. I mean, we're doing a ground up construction project of a class A facility, right? So, $13 million build, it's 140,000 square feet. We are going to market to get a loan, right when the PPP loans were issued. So, now all the banks are calling all their barrowers and saying, Hey, we don't have time to work on your real estate loans because we have to fulfill these PPP loans. But, for storage is the exact opposite. I got some of the best rates I've ever seen on ground up construction. Typically, as far as the risk continuum goes, you know, you have stabilized cash flowing assets on one side, that's the safest thing you can do when it comes to self-storage. And then on, the other side, the risk, your thing is to build giant ground up construction, brand new construction.

Usually the banks will see this as something that's a little bit more risky than giving a loan on a stabilized portfolio of self-storage facilities. But, on these ground up construction loans, we got a 4% rate interest only for three years. And then, it converted to a amortizing loan. We got another three years with a 25 year amortization, again at 4% which for a ground up construction loan is just fantastic during the PPP, during the pandemic, it was just insane. And then now, we're getting a bunch of historically heavy multifamily, heavy office lenders, heavy retail lenders reaching and finding us on YouTube, finding us on LinkedIn, bigger pockets on Facebook and reaching out saying, Hey, Fernando, you got any loans for me? We're looking for cashflow in self-storage. I had an individual from Morgan Stanley gave me a call offering me just amazing debt non-recourse debt, 10 year balloon, 25 to 30 year amortization option to go 10 years interest only if I wanted to with rates spanning from 3.3 to 3.7%.

And again, this is non-recourse. So, it seems that the lenders are really looking to place loans in our asset class, in self storage. So really excited about that and trying to lock up as much long-term debt as I can. Don't know how long this low interest rate environment is going to last. I think probably another two, three years, the way that we're seeing it right now. Any type of variable rate debt that I have, I'm looking at hedging. So, creating a hedging strategy that basically creates a fixed rate debt with me, by using the loan itself and then the hedging strategy as well. So, it's just been very interesting and I think it's exciting because it's going to be really good couple of years for self-storage here coming out. Same thing with on the buyer side, you know, our turnkey buyers, our REIT buyers or hedge fund buyers or private equity fund buyers.

They are offering prices. I have never seen before. You know we had a deal that we decided, or I guess we underwrote with an exit at 17.6 million. The appraisal came back at 19.4 million. So, just crazy difference there. And I think that's just because of the recent sales that have been happening, have been driving the cap rates down the market caps on these regrade assets, these larger facilities, you know, 80 to 150,000 square foot facilities is REITs are really just trying to place their capital somewhere. So, it's not burning a hole in their pocket and, you know, losing value to inflation. And what have you. So, it's been really exciting last couple of years in the self-storage space. And now everybody that, you know, told me I was crazy, or, you know, for selling all my multifamily, selling all my single family.

Now they're calling me back asking how they get involved in self-storage. So, it's been an interesting change of events. As far as the future goes specifically 2021, we're going to try to add another 20 assets to our books. We've started focusing on ground up development projects, as well as conversion and adaptive reuse projects. I think there's a huge opportunity here for self-storage developers. You have all these big box stores, they have all these retail stores that are defaulting on a mortgage that is trying to get out from underneath their mortgage. A lot of malls, Kmarts, circuit cities, best buys these type of area. These types of retail and big box stores are having a tough time and we're coming in and we're scooping up the shells. These buildings, the envelope for, you know, anywhere between seven to 12 bucks, a square foot putting in another 35 to $50, a square foot in adaptive reuse, conversion, or renovation.

And now we have a self-storage facility that I put up for 60 to 65 bucks a foot, when to build one new it would cost me $90 a foot to do. So, it's been very interesting. We really liked this strategy going forward, and we're purposely trying to find those deals very aggressively. Another thing that we have in store for 2021 is taking advantage of incentive programs. So, commercial pace has been a big one that we've been looking at historical tax credits, solar credits. We have a couple of big deals that we're looking at offsetting the utility to expenses by putting a solar array on the roof. And then doing a lot more syndications. It seems like we have a lot of equity investors that before were comfortable being in the stock market, the bond market. Now, you know, fleeing from those areas because of the volatility and wanting to put their money into something that's a little bit more stable you know, a physical asset that they can go and touch, something that hedges against inflation.

You know, one of the biggest issues that we're facing right now from the monetary and fiscal side is we're pumping buckets and buckets of buckets of funny money into this economy. It's monopoly money, right? It's Fiat currency. So, what happens then is that heavily devalues the purchase power of the dollar. And because of that, if you're in cash, if you're a saver, you're going to get hit pretty bad, but if you're in real estate or self-storage, specifically, that's a hedge against that inflationary pressure, because as the dollar drops and you need more dollars to buy the same assets, if you own those assets, that means you have something that will travel with inflation, the price will travel with inflation. And then, in addition to all the other types of appreciation that we're getting, you know, forced appreciation, the cap rate compression in the market, low debt, super low interest rate debt, we're trying to lock up long-term. Specifically types of debt that will be assumable. I think that's going to be a huge market in the next five to 10 years. Once inflation starts going up and interest rates are going up again, you know, those holding these 3% and 4% debt that's assumable, all of a sudden their property is now worth 10, 20, 30% more than their competitors property that does not have assumable debt. Where the investor is going to have to go take, you know, a six or 7% loan. So, that's kind of what we're looking forward to in 2021,

Really excited. We're really excited about all the partnerships we're doing. Then, just fantastic with you know, with the social media stuff that we're doing and the videos I have to thank my good friend, Scott Paton. He's been the one that's been kind of on my tail to put content out there to tell people what we're doing. And because of that, we've had equity investors find us and invest in our deals. We've had a multifamily and single family guys. I want to learn self-storage space and partner with us. We've had wholesalers bringing us deals. We've had brokers finding pocket listings and sending us those deals. It's just been a fantastic 2020 for our storage company or self-storage companies. So, I'm hoping you guys all have a happy new year and looking forward to seeing you in 2021, make sure to like, and subscribe and click the little bell for notifications.

Feel free to drop some comments below. Any questions or any topics you'd like to cover. And then, if you'd like to reach out to me personally, feel free to hit me up on any social media channels. It's at The Storage Stud you can go to our website, www.TheStorageStud.com And if you're looking for investment opportunities, or if you're looking for wholesale deals, we also wholesale self-storage facilities that are a little bit too smaller, too small for us, you know, kind of starter facilities. We wholesale those to other investors that are looking to get started, but without too much risk you know, feel free to reach out. So here's to wrap it up 2020 and Seeing you in 2021. Thanks guys!

[lunarr-rrose]

62 - How long does a fix and flip take?

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/62-how-long-does-a-fix-and-flip-take/

A fix and flip usually take two or three months to a year, depending on how much work a property needs.

Not only is there the closing of the property which some investors can do quickly; usually faster than a retail buyer or someone who is using a real estate agent. There is also the time needed for the title agent to get everything coordinated with closing.

After getting permits and approval, we also need to get subcontractors. Then we can start the actual rehab.

Rehab can take two weeks if it is just a simple cosmetic turnover rehab. If there is much to be done then it may take 30 to 90 days to complete. It is also possible to take longer than that depending on the situation. Nevertheless, the more skilled the fix and flipper is, the shorter the rehab will take.

Once the rehab is done, then comes the marketing. This all depends on the kind of market.

Some fix and flipper use staging, this is when you put accents and decorations to help buyers see the potential of the property. Though in some markets they would want to see the property empty so as not to influence their decision in buying.

If there is a buyer and it locks up the property as soon as it is listed. It usually takes 30 to 45 days for a bank to issue a standard mortgage to an owner-occupant, even if they are pre-approved. The new owner would also want to do inspections, have it appraised and the banks needed to have all this information.

To find out more about this, you can visit our website at:

https://www.effortlesshomebuyers.com/

Real estate is a people business, and you, as our client, are what’s most important to us.

Whether you’re trying to sell, buy, rent, or repair your credit so that you can do any of those, real estate can be a confusing, overwhelming, and disappointing endeavor.

However, it really doesn’t have to be painful. When you have the right education and honest people on your team, real estate becomes something that’s working for you.

We’re here to simplify your life, so you can spend less time worrying about real estate and more time living. As experienced real estate professionals, we buy and sell property across the nation with the primary intent of creating positive outcomes for people in predicaments.

Our job is to make your life easier, and because we are investors, we have the flexibility to offer you multiple solutions when buying and selling property.

Find out more at

https://titanwealthgroup.com/

Listen to our Podcast:

https://thestoragestud.podbean.com/e/61-what-profit-do-fix-and-flippers-typically-make/

------------------------------------

Hi, this is Steven with Effortless Home Buyers. At Effortless Home Buyers we work with both sellers as well as a large investor group. So we often get the question, how long does a fix and flip even take? Because often we have investors that may not have invested in a fix and flip before, or we have sellers that haven't worked with an investor before. So this question is, in fix and flip it typically takes a couple months why I say that is because not only is there the closing of property which investors were able to close rather quickly quicker than what a typical retail buyer or an owner occupants, someone using a real estate agent is able to do, but there is time that has to be done with the title agent and getting everything coordinated with closing. So from the moment that a purchase agreement signed a fix and flip has whatever the time it takes to close, which could be anywhere from seven days to sixty days.

And then from there, we have to get a permits, we have to get approval, we have to get subcontractors with their bids accepted. We have to buy supplies and then we have to conduct the actual rehab. Now, most of the rehabs that we do are in the light to mid range, but however, we do some very heavy rehab sometime. So rehab can take as little as two weeks if it's just a kind of turnover, cosmetic rehab, or we're doing paints, cleaning, maybe updating some finishes here and there, doing some light landscaping, that sort of thing. As soon as we start diving into the more bread and butter of rehabs, you're going to be looking at anywhere from 30 to 90 days to complete a rehab. If it's something that's a larger project, where in additions being built, where gutting a home. It can take longer than that.

The more skilled they fix and flipper is the shorter that a rehab and take because they can coordinate, and it's almost like an intricate dance amongst these subcontractors where people will be able to do things at the same time, but they won't be stepping over each other and getting in the way and having to redo things. You don't want to be you know, putting in brand new floors and then painting just to find out that some paint got out on your brand new floors. So once the property has been rehabbed, then there is also the marketing and staging portion of things, depending on the market, depending on the strategy of that fix and flipper, they may be putting a what's called a staging scenario in place. So staging is when you put furniture and accents and decorations around the house to help potential buyers see the potential of the property, see how the property looks once it's all lived in. Now, staging can be helpful in some markets and it helps make a rather empty space and make it look like a home. In some other markets though, people like to see it where it's empty, be able to paint their own canvas and not have influence their decisions with when they buy the property.

Staging can take a little bit of time but typically not too long, that can be probably anywhere from a week to two weeks to have it fully staged and ready to go, you take your photography and then you're going to be listing on the market. When you're listening on the market, depending on how hot the market is, it can take a rather short period of time, or it can take a longer period of time. But even if it's a very hot market where somebody already pre-approved with their loan and locks up the property, as soon as it's listed, banks usually take a little bit of time to be able to close. We typically factor in about 30 to 45 days for a bank to be able to issue a standard mortgage to an owner-occupant, even if they're already pre-approved. Now sometimes we're delightfully surprised with how quick it can go, but looking at 30 or 45 days is pretty typical.

And it can often go longer than that as well, because that owner, the potential owner, the new owner, they're going to be wanting to do things like inspections. They're going to want to have it appraised, and the bank going to need to have all this information in order to do their things. And then there's closing and scheduling the coordination, there's coordinating and scheduling the closing. So when we look at how long does it take to fix and flip a property, we're typically going to be expecting at least three months, if not all the way up to a year, depending on how much work a property means. If a property is something that needs that large gut rehab, then a year could be the problems in closing the property, rehab the property, marketing the property and selling property to the end buyer.

[lunarr-rrose]

61 - What profit do fix and flippers typically make?

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/61-what-profit-do-fix-and-flippers-typically-make/

This question has a lot of different factors.

For instance, every investor has different values that they are trying to reach in terms of the return of investment.

When a fix and flipper is doing many projects per year, they may be able to accept lower profit returns because they are hitting their mark so many times per year.

While there are some who are doing one or two projects per year, they may be looking for a much higher return of investment because they have to make their entire income on those two projects.

To find out more about this, you can visit our website at:

https://www.effortlesshomebuyers.com/

Real estate is a people business, and you, as our client, are what’s most important to us.

Whether you’re trying to sell, buy, rent, or repair your credit so that you can do any of those, real estate can be a confusing, overwhelming, and disappointing endeavor.

However, it really doesn’t have to be painful. When you have the right education and honest people on your team, real estate becomes something that’s working for you.

We’re here to simplify your life, so you can spend less time worrying about real estate and more time living. As experienced real estate professionals, we buy and sell property across the nation with the primary intent of creating positive outcomes for people in predicaments.

Our job is to make your life easier, and because we are investors, we have the flexibility to offer you multiple solutions when buying and selling property.

Find out more at

https://titanwealthgroup.com/

Listen to our Podcast:

https://thestoragestud.podbean.com/e/61-what-profit-do-fix-and-flippers-typically-make/

--------------------------------------------------

Hi, this is Steven with Effortless Home Buyers. One of the most common questions we get from our clients is what is the profit that a fix and flipper typically makes? So this question has a lot of different moving parts to it. For instance, every investor has different values that they're trying to hit in terms of the return on investment they're trying to make. Some fix and flippers because they're doing so many projects per year, they're able to accept lower profit returns because they're hitting that mark so many times per year. With some of that's only doing one or two projects per year, they may be looking for a much higher return on investment because they have to make their entire income or their entire return on investment on just those two properties per year. So with the fix and flipper, they're going to be looking at what is the After Repaired Value and then walking back the cost they're going to take for it to get to that After Repaired Value .

And then in between what they're able to actually get the property under contract for what they need to buy the property at, those expenses and the ARV that's where their private lives, that little spread in between. So a fix and flip is typically going to be looking for anywhere from 15% to 30% return on investment. Of course they would love for it to be much higher than that. But one of the most common things that fix and flippers have to keep in mind is that things go wrong when doing rehabs of properties. You start opening up walls and you find out that there's a little bit more work than you had originally planned for. So fix and flippers do have to factor that in with their expenses and they typically have kind of a contingency cost associated with what they're budgeting out for a project. So while they shoot for maybe a 30% return on investment, they often have to settle within their mind that they may be actually making less than that around maybe a 20% return on investment and with how long it takes for a property to be rehabbed and then marketed, and then eventually sold by selling it to a owner occupant that return on investment can often be pretty low depending on how long it takes to capture that return on investment.

So the short answer is that fix and flippers are typically looking for double digit returns. Upwards of 15%, I would say an average of around 25% would be pretty standard for most markets, but depending on how long it takes for a property to be rehabbed and sold on the market, they may be looking for higher so that when it's split up over a series of time, that they're actually looking at something that's a solid investment.

[lunarr-rrose]

60 - What discount to market value do investors buy at?

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/60-what-discount-to-market-value-do-investors-buy-at/

The discount to market value that investors are looking for is dependent on an investor to investor basis. Some institutional investors may only need a small discount to market values because they are buying it in a big volume.

It’s not just what the property is worth with the discount to it. Investors will also look at what is the discount after the repair value because the market value of a property in its current condition could be different after it’s been repaired.

https://www.effortlesshomebuyers.com/

Real estate is a people business, and you, as our client, are what’s most important to us.

Whether you’re trying to sell, buy, rent, or repair your credit so that you can do any of those, real estate can be a confusing, overwhelming, and disappointing endeavor.

However, it really doesn’t have to be painful. When you have the right education and honest people on your team, real estate becomes something that’s working for you.

We’re here to simplify your life, so you can spend less time worrying about real estate and more time living. As experienced real estate professionals, we buy and sell property across the nation with the primary intent of creating positive outcomes for people in predicaments.

Our job is to make your life easier, and because we are investors, we have the flexibility to offer you multiple solutions when buying and selling property.

Listen to our podcast:

https://thestoragestud.podbean.com/e/60-what-discount-to-market-value-do-investors-buy-at/

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Hi, this is Steven with Effortless Home Buyers. One of the most common questions that we get from clients that we work with is what discount to market value do investors buy at? It's a great question because often people think that if I sell to an investor, I'm going to have to sell at a discount. And while that's not always the case, investors do try to buy where they can introduce value to the property in order for it to become a solid investment. So the discounts of market value that investors are typically looking for is dependent on an investor to investor basis. Now, some institutional investors may only need a very small discount to market value because they're buying at such volume and their company structure is such that they don't necessarily need the same sort of discount that a smaller mom and pop one or two deals a year type investor needs.

Now, with typical Fix and Flip that's often what people think of an investor for real estate. When it comes to residential real estate, they're typically going to be looking for a range of anywhere from 15% to a 30% as what a normal range for a discount to market value is. Now with that discount to market value, it is important that we mentioned that it's not just what the property is worth with a discount to it, because also investors have to take in mind what is going to get the property to its potential market value. So with that in mind, there's expenses, there's the expenses of rehabbing the property, holding costs and closing costs. Just to name a few, with those expenses, they're going to take a look at what is the discount to market value they need the property at, minus those costs because the discount to market value is where an investor makes their money. And actually it's important to say that a discount to market value isn't typically what an investor will only look at. They're going to look at what is the discount to After Repaired Value because the market value of a property in its current condition could be different to its market value after it's been repaired. So the ARV After Repair Value is the market value that they're going to be looking at when they start calculating what sort of discount they need.

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59 - What is Market Value? - Effortless Home Buyers

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/59-what-is-market-value-effortless-home-buyers/

Today Steven Wear discusses the topic “market value”.

Market value is a familiar term in real estate but there is more than it meets the eye.

Market value is the worth of the property on the market, seems easy to understand right?

But the question is, “what is your market?”.

Remember, a property is only worth what it will sell for. Looking at other listings of properties won’t actually give an actual depiction of what your market value is.

https://www.effortlesshomebuyers.com/

Real estate is a people business, and you, as our client, are what’s most important to us.

Whether you’re trying to sell, buy, rent, or repair your credit so that you can do any of those, real estate can be a confusing, overwhelming, and disappointing endeavor.

However, it really doesn’t have to be painful. When you have the right education and honest people on your team, real estate becomes something that’s working for you.

We’re here to simplify your life, so you can spend less time worrying about real estate and more time living. As experienced real estate professionals, we buy and sell property across the nation with the primary intent of creating positive outcomes for people in predicaments.

Our job is to make your life easier, and because we are investors, we have the flexibility to offer you multiple solutions when buying and selling property.

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Hi, this is Steven with Effortless Home Buyers. One of the most common questions that we get from people that are working with us is what is market value? It's a term that gets tossed around a lot in real estate, but really is ambiguous when it comes to a meaning. So market value is what a property is worth on the market, seems pretty straightforward, but really isn't because the market determines what a value is, but what is your market? It depends on what sort of sales transaction you're pursuing. So for instance, if you were selling a property to an owner, occupant using a real estate agent on the MLS, just a typical real estate transition, the market would be general population, people that are looking to be living in a house. They have some investors in there, but primarily when you're using a real estate agent, it's going to be living in the house.

Now, if you're using the investor market value can be slightly different because market is now just investors. When you're selling to people that are looking to do a lease option or some other more advanced sort of real estate technique, the market gets even smaller. So the short answer is that market value is pretty subjective, but in general, when market value is used as a term, it's referring to what is the largest population of potential buyers thinking of this property being worth? How market value is typically calculated is by looking at similar properties in the immediate area that have sold. So if your property is four bedrooms, two bathrooms, and it's a ranch home, typically looking at other four bedroom, two bath ranch homes in the immediate area without crossing any sort of major roads or parks or geographic obstacles like rivers, that would be a good way to determine what your property is worth, because a property is only worth what it will sell for. So looking at other listings of properties, isn't actually going to give an accurate depiction of what your market value is.

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58 - What is clear title?

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/58-what-is-clear-title/

Understanding what is a clear title

When a buyer is going to purchase a property from a seller, both parties should legally be able to do that. So a title company can look into the chain of titles to look at everyone who has ever bought and sold the property to make sure all is legal.

This is basically proving that the seller has the ability to sell that property.

To find out more about this, you can visit our website at:

https://www.effortlesshomebuyers.com/

Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,

Find out more at

https://www.TheStorageStud.com

https://titanwealthgroup.com/

Listen to our Podcast:

https://thestoragestud.podbean.com/e/effortless-home-buyers-what-is-clear-title/

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What does Clear Title mean? When someone goes to sell and someone goes to buy a property, they need to make sure that both parties have the ability and the right legally to do so. So what is usually done is a title company, or an attorney will go through the chain of title and we'll look at everyone that's ever bought and sold this property over a certain period of time, maybe 50, 75 or a hundred years to make sure that each one of those conveyances or those transfers of the property were legal. This is a way to make sure that you don't have just some random person saying, Hey, I'm going to sell you the Eiffel tower. And I own it, well it's okay. Prove it to me that you own the Eiffel tower and that you can sell it to me. So title is that way of proving that the seller has the ability to sell the property to you. Now, just because the seller owns the property doesn't mean that they have Clear Title. So say for example, they, the seller did not pay their water bills or do not pay their property taxes. Liens will be put on to the property, which will cloud title, meaning that it is going to be no title company will ensure that and will not. No seller will be able to sell that legally without removing those encumbrances or those liens and clearing the title.

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57 - What is a contractor lien?

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/57-what-is-a-contractor-lien/

Understanding contractor lien

This is placed by a contractor who did work on a home and is not paid. It states this seller is unable to sell the property until my debts are paid.

To find out more about this, you can visit our website at:

https://www.effortlesshomebuyers.com/

Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,

Find out more at

https://www.TheStorageStud.com

https://titanwealthgroup.com/

Listen to our Podcast:

https://thestoragestud.podbean.com/e/effortless-home-buyers-what-is-a-contractor-lien/

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What is a Contractor lien or a Mechanics lien? So when a contractor performs work on a home if they are not paid for that work, what they'll do is actually place a lien or an encumbrance on your property that states this seller is unable to sell this property until my debts are paid. Usually when we're doing rehabs, as we go throughout the stages of the rehab, every time a contractor wants payment, we'll ask them for a lien waiver for the portion of the work that they've done. You have to be very careful. There are you know, some unscrupulous contractors out there that even after you get paid or after they get paid, they may put a Mechanics lien or a Contractor lien on your property. So always make sure that if you're paying a contractor, that there is a receipt for the payment and that you receive a lien waiver from them so that they can not encumber your home.

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56 - Do encumbrances need to be cleared before closing?

https://u109893.h.reiblackbook.com/seller6/effortless-home-buyers/56-do-encumbrances-need-to-be-cleared-before-closing/

Do encumbrances need to be cleared before closing?

That’s a good question. And the answer is yes. It can happen before or at closing. Basically, the property cannot be transferred to a new owner until the encumbrance is removed or satisfied.

To find out more about this, you can visit our website at:

https://www.effortlesshomebuyers.com/

Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,

Find out more at

https://www.TheStorageStud.com

https://titanwealthgroup.com/

Listen to our Podcast:

https://thestoragestud.podbean.com/e/effortless-home-buyers-do-encumbrances-need-to-be-cleared-before-closing/

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Do Encumbrances need to be cleared before closing? And the answer is yes. It doesn't necessarily need to happen before closing, but it can happen at closing. The only thing is that the property will be unable to be transferred to a new buyer until those Encumbrances are removed or satisfied.