Top Real Estate Articles

How to Buy Notes - Note Buying, Knowing your Enemies

Apr 28, 2009 Real Estate Properties

How to Buy Notes…You and Your Seller

You’ve probably heard of Sun Tzus (the famed Chinese warrior) instruction to his soldiers to know your enemy before going into battle.

Well the same is true with note buying.

Every note buyer and brokers should use “know your seller” as their mantra.

Why you ask?

Not knowing your seller will place you in a position where you will be entering a negotiation with no idea of what your negotiating tactics will be.

A How to Buy Notes Example,My Recent Bid

A bank has the mortgage on a house in Salt Lake City and they want to sell the 1st.

The note had matured over 2 months ago and the borrower hasn’t paid on the note in over 120 days. Technically the loan could be called due.

No foreclosure notice has been served by the bank.

The bank has called you to see if you want to buy the nonperforming note and mortgage.

My first objective was to determine how much I could offer for the loan. So I contacted a local realtor to provided me with some comps and then compared it to the BPO and title report that I pulled.

And we put in our bid.

My rep at the bank hinted that she would need approval from a committee of senior staff at the bank.

But she was very cagey about answering any of my questions about where she needed pricing to be in order to sell, and what the status of the borrower was.

Her behavior was suspicious to me so I decided to probe for more information. When I did, she clammed up and would not discuss anything further with me.

There was something fishy going on with this note buying deal.

Especially in this circumstance with one individual loan, I found it very odd that the bank rep would react the way she did. This was my first time experiencing this.

How to Buy Notes-Tips on Talking to the Banker

So I called her back again, and tried a little exploratory language with her.

Would it be safe to say that the bank has a unique relationship with this borrower? I asked her?

Absolutely, she immediately replied.

I was curious - what was going on here in this defaulted mortgage deal?!

I was aware that she wouldn’t reveal any information to me other than yes and no answers, but I kept probing.

Is there a reason why the bank hasn’t foreclosed yet?

Again…she answered, yes.

And youre probably not at liberty to tell me, but this sounds like its a difficult relationship for the bank to foreclose on, is that correct?

Yes, that is right. I can’t share anything further with you.

I have one more question. Would the bank be more open to selling this nonperforming note if they new what exit strategy I would be pursuing? Rather than bassed on price?

Yes, she answered briefly again. That would be correct.

What is going on with this note deal?

Well, what I learned in two more phone calls with the woman I was negotiating with at the Bank was that the borrower was extremely well connected in Salt Lake City political circles, and her ex-husband was a close friend of the banks President.

If the bank foreclosed on her, they might find themselves in a political nightmare. And that is why they wanted to sell the nonperforming loan to a 3rd party investor.

Lessons Learned on How to Buy Notes

Take the time to learn why the seller is trying to sell the loan, know the circumstances. If you don’t, you may completely miss out on what your negotiating points should be.

The bank was more concerned with our exit strategy rather than price. They wanted to know how we would work out the note with the borrower.

How to Buy Notes - Action Items

1. Understand why a bank is selling their notes or pool of notes.

2. Figure out the negotiating points and what are the reasons why the bank is trying to sell their defaulted mortgage to you. It is usually one or more of the following:

a. Price

b. Speed with which you can close

c. If you are able to close (price you are offering on a discounted note won’t matter, if you can’t close a deal)

d. Your note buying exit strategies

The next time you are talking to a bank to buy notes, think about all these points.

You will become a much better note warrior!

Tags: buying notes, find notes, Foreclosure, home loans, how to buy notes, how to find notes, liens, Mortgages, note buying, Real Estate, Real Estate Properties

How to Buy Cash Flow Notes - “We don’t sell Notes”

Apr 18, 2009 Real Estate Properties

A Common Hurdle When Learning How to Buy Cash Flow Notes

When you are looking for non performing notes, you will most likely run into this common hurdle. I wanted to take the time to share it with you.

So you’ve been busy cold calling banks and looking for notes to buy.

A lot of these bank contacts have told you that they either don’t sell notes or that they don’t have any non performing notes right?

Let me ask you…when we hear this, should we just accept this information assuming it is the truth? Or should we do some more research by say, contacting someone else?

Your Two Responses to the Question: Can I Buy Cash Flow Notes?”

Let’s review to the 2 possible situations you will be get:

1. Our bank doesn not sell real estate notes.

2. Our bank does not have any non performing notes.

The former, I can believe. The latter, I can’t.

There is probably a 25% chance that if someone is telling you that they don’t sell non performing notes, they are actually telling you the truth.

On the otherhand, if they are telling you that they don’t have any non performing notes, the likelihood that they are pulling your chain is about 99.9%.

The best follow-up is find someone else to call at the same bank!

Finding Your Contacts When Learning How to Buy Cash Flow Notes

You can try contacting the CFO directly at the bank or you can use the corporate HQ number and ask for the head of secondary marketing. Then try to contact loss mitigation.

There are always “multiple” ways to solve a problem. Don’t let the first door shut stop your note buying pursuit.

How to Buy Cash Flow Notes - Finding Contacts…A Tip From Will

Will, one of my students, has shared a useful tip with me and I would like to share it with you. It has proven him success in finding contacts.

1. Go to thomas-law.com and select “mortgage banker licenses”

2. From there you can select the state and click on the link that says “mortgage lending division”

3. Then click on the licensee records link which should be on the left hand side

4. choose the “licensed mortgage bankers” link

Any one of those links will give you principal’s contact info & email. You can do this for all 50 states. Now who has the bank contacts? Use them and buy some cash flow notes!

Nothing ventured, nothing gained.

Tags: buying cash flow notes, buying notes, defaulted mortgages, Foreclosures, how to buy cash flow notes, Mortgages, note buying 101, note buying course, real estate note investing, Real Estate Properties, REOs, Short Sales

Cash Flow Note Business Success - A Story About The Lone Wolf

Apr 9, 2009 Real Estate Properties

A Look at the Cash Flow Note Business

A friend of mine, Heather, flew in for her 40th birthday this weekend.

We just spent four hours catching up over expensive white tea and salmon salad at the Samovar Tea Lounge near our house.

It was great.

She told me about a current project that she was working on, and it really left an impression on me.

I automatically thought about how it related to my Cash Flow Note Business. Because of the simple fact that the story had a direct impact on you, your life, and the way you interact with people in your community.

The Cash Flow Note Business and its Relation to Heather

Heather’s an artist, a very talented one, who has specialized in story-telling through different media. Very different from my speciality which is buying notes.

Her current project involves a Native American woman from Washington. She is a member of the Sakgit Indians, and Heather has been documenting the life and wisdom of this woman.

Heather interviewed this wise woman, who was considered her tribes community builder. The woman told her that people were no longer fulfulled and they became emptier and emptier.

This when Heather brought up the Hopi poem about the Lone Wolf.

I just read it, and it struck me that I needed to share this with you to point out how it can serve as wisdom to all of us, especially for those of you starting a new cash flow note business, a new venture explored, and striking out on your own.

Cash Flow Note Business Success, Words of Wisdom

Let me share the poem with you ..

“There is a river flowing now very fast. It is so great and swift that there are those who will be afraid. They will try to hold on to the shore. They will feel they are torn apart and will suffer greatly. Know the river has its destination. The elders say we must let go of the shore, push off into the middle of the river, keep our eyes open, and our heads above water. And I say, see who is in there with you and celebrate. At this time in history, we are to take nothing personally, Least of all ourselves. For the moment that we do, our spiritual growth and journey comes to a halt. The time for the lone wolf is over. Gather yourselves! Banish the word struggle from you attitude and your vocabulary. All that we do now must be done in a sacred manner and in celebration. The poem ends with the words: “We are the ones we’ve been waiting for.”

Cash Flow Note Business, How Does This Poem Relate?

Here’s how this applies to you directly in your (and my) Note Buying Business.

a) The river flowing fast resembles you, and the unknown world of investing in nonperforming notes. It must terrify you.

b) The other people who are less adventuresome than you will “hold onto the shore” while you proceed.

c) Trust in the river - and that it has a destination - one that you’ll be able to reach if you allow yourself to “flow” with it. (example: multiple exit strategies for you defaulted mortgage business)

d) The time for the lone wolf is over, think of it this way, if you want to really succeed in your cash flow note business; you need to reach out to people, whether those be bankers, investors, real estate agents, or title officers.

e) Don’t ever think about this as a “struggle” - this is you learning how to swim in a river that moves faster than you’re used to - but once you learn how to float (in regards to the cash flow note business - you learn the lingo, you learn what a trade looks like, you study the process and you eventually close your first deal), you learn to let the river carry you along.

A Tip on Your Cash Flow Note Business

The important lesson learned? “We are the ones we’ve been waiting for.”

So listen to what I’m saying. Write this down, put it on your beside table or your desk even. This is your new motto for your new Non Performing Note Business.

You can do anything you put your mind to. There is no one else you need to wait for.

Imagine the conversation: Me, meet Me.

The power of this simple realization should not be underestimated.

As Heather put it to me earlier tonight, she said: “the most powerfully creative moments for an artist are when we get out of our way, and just let our creative energy flow.”

Remember, it’s YOU that you’ve been waiting for.

Make use of all the wolves out there and get out of the river.

Tags: bad paper, buy cash flow notes, buying notes, cash flow note business, defaulted mortgages, Foreclosures, how to buy notes, Non Performing Notes, note buying, Real Estate Properties

How to Buy Mortgages from Banks - The 4 Buckets

Apr 4, 2009 Real Estate Properties

On How to Buy Mortgages from Banks

Let me share with a commonly asked question.

“My understanding is the federal government is going to be offering financing to private equity and hedge funds to buy up the bad debt aka defaulted mortgages.”

If anything it would seem this would at the very least invite a whole heck of a lot of competition.

“What are your thoughts on this?”

My thoughts are this:

4 Buckets - How to Buy Mortgages from Banks

The competition is adding to the deal sources when buying mortgages from banks.

There are 4 “buckets” in the note buying industry:

a) Big Boys - buy $100 million +

b) Mid boys - buying $20-100M

c) Small boys - buying $1-20M

d) Mom and pops - buying less than $1M

A lot of the shifting is happening between the big boys and mid boy stage. That is just my opinion in terms of raw dollars.

So lets think about these investors financials for a second.

They are only concerned with their yields on their note buying investments.

How to Buy Mortgages from Banks, Your Deal Sources Definted

If you fall into the mom and pop or small boy category, guess who just became your new deal source for buying notes? Yes, the mid and big boys.

They are looking for a huge internal rate of return (IRR) so they are buying more aggressively than what you will see compared to the small boys and the mom and pops.

Come up with some kind of approach where you would offer them 5 points or so in exchange for picking and choosing from their portfolio. They will become your new note buying source so partner up with them!

So you don’t have to be worried about the the water from the your fountain being intercepted. All you have to worry about is repositioning yourself in a way so that the water still drips in your direction.

And you can always look for other opportunities to buy your non performing notes.

Hope this information helps you.

It’s time for some action!

Tags: buy mortgages from the bank, buying notes, cash flow note business, Foreclosures, how to buy mortgages from the banks, how to buy notes, learn how to buy mortgages from the bank, note buying, note buying business, Real Estate Properties

Buying Notes-Where’s the List of Banks That Sell?

Mar 26, 2009 Real Estate Properties

Investing in Notes-The Most Common Question

What is the most common question asked? At least 58 different people have wondered the same thing that I did when I completed my first course on How to Buy Notes 4 years ago. Where is the list of banks that sell?

That was the only question I had for my instructor, Mark. By the time my 3 day workshop was done, I was so eager to get a hold of the list. I didn’t understand why he was waiting so long to give it to us. Why couldn’t he have just handed it out at the beginning of the course?

The “Magic Binder” - Banks That Sell Notes

When Mark handed it to me, I wolfed it down. I skimmed every page for nuggets, details, of every bank that “the Master” knew. And here’s what happened. Here’s what I did with that information…Exactly … nothing. Why? Let me walk you through what happened after the course was over.

a) For one thing, a good number of the banks werent in business anymore. (If Indymac was a bank I wanted to pursue, I would probably have a hard time trying to deal with the FDIC).

b) Most of the phone numbers were useless. They were just main numbers, the same numbers that I could find through a google search or in the phone book.

c) Some of the banks weren’t selling their notes anymore

d) There were banks that weren’t on the list that actually did sell notes and defaulted mortgages

e) Once I had the name of the bank itself, I still had to make my presentation to the right person - and that had more to do with what I needed to talk to the banker about than about whether the bank sold notes or not

And now…what do you think happened to the magic binder of banks that sell? It is still propped up in my bookcase and hasn’t been touched.

So What’s my Point on Buying Notes here?

The list is huge. There are so many banks that sell notes and defaulted mortgages.

And it’s based, in almost all situations, on who you know.

In fact, the people that know the list inside and out more than anyone are … Let’s think about this for a minute:

a) less than 3 dozen banks and lenders that sell notes.

b) People that I know in this industry buy from less than 20 lenders. These are people who run a $1-50 million dollar fund. A lot of them have no more than 10 people that they purchase from. (some advice, good brokers are a gem. Treat them well!)

c) An individual that I worked with in the past became very wealthy from one relationship. He spent 7 years buying notes from The Associates. They were his only seller.

d) Everyone who’s a “professional” note buyer has one thing in common… and here’s the secret so listen carefully:

The Secret To A Note Buyer’s Success

They can talk the talk and walk the walk. The professionals not only know exactly what to ask for, they know what to do with the information once they’ve received it. You get that? What you do with what you know is more important.

Now, imagine yourself with one of the most successful Note Buyers (the Zen Master of Note Buying). The both of you are on the top floor of a New York City building admiring the view of the lower east side.

It is an amazing view…all the noise of the city is muted. She asks you to join her onto the fire escape so you climb through the window. All of a sudden you can hear all the sirens and honking cars in the noisy background. She says to you…”Look….that building right there…there they are”. You have a puzzled look on your face.

“Who is there?” you ask.

“They are,” she answers. “The ones you are looking for.”

You look out to where her arm is pointing, but her arm is moving in a gentle arc all the way from your far left to your far right. Now, you’re really clueless. You’re about ready to ask her to explain what she means, but she cuts you off.

“I can sense your doubts.” she tells me.

“I have a story for you”.

She shares a story with you about her master and the time he taught her where to look for the Fountains of Perpetual Notes. She tells me the four words that he spoke to her…”Look for the suffering”.

“So now,” she whispers to you, her arm still pointing over the buildings lighting up New York’s night sky, “I tell you.

“Look for the suffering and there you will find the Fountains of Perpetual Notes.”

She leads you back into the building.

Find the Fountain of perpetual notes. Look for the suffering.

All I’m looking for is a list of banks that sell notes!

How are Suffering and Buying Notes Related?

There is suffering everywhere.

There will be a few lender that don’t have non performing assets to sell.

But there are a lot of lenders that are selling notes right now. To both investors they know and investors they dont know.

Lenders are even being forces to sell notes to investors that they don’t know.

There are many investors that are calling up those lenders asking to be put on the “list” of approved investors. If I were to give you the list of banks that I know sell, it would be like telling you to go pick a number and to stand in line at Katz’s deli at lunch rush-hour on a weekday.

So just go and “Look for the suffering”.

Approach everything with the thought that every lender sells. Don’t ask if the sell…but rather ask to whom they sell.

Tags: bank notes, buying notes, Foreclosures, homes, how to buy notes, learn how to buy notes, mortgage notes, Mortgages, note buying, profit from notes, Real Estate Properties

Loan Modificatons-A Solution For Your Non Performing Mortgage?

Mar 16, 2009 Real Estate Properties

Loan modifications, specifically principal write-downs will be the answer to many people’s mortgage needs.

An interesting solution.

The Solution For Negative Equity - Loan Modifications

The FHA insurance package which will insure $300B of new mortgages for borrowers that are in “negative equity” positions is part of the Hope for Homeowners initiative which was passed by Congress in July.

Negative equity, meaning that most of these properties are worth less than the balance of the loans.

Well, the borrower has to qualify for the loan modification with a 31% or lower DTI ratio, at least 6 payments made and none of them late.

What happens if the borrowers meet all the guidelines? (And keep in my mind, that most of these are non-performing mortgages. And if I had to guess what the debt to income ratio on average in 2007 was, it would most likely be around 40-45%).

Loan Modifications - Who Qualifies?

The answer is: Very few people.

When the program became available, out of 49 people applying, zero applications were approved.

NonPerforming Mortgages Included In FHA Secure Program

The FHA Secure program had a total of 203 applicants. Out of that number on 49 applications were approved.

In California around the same time, a Notice of Default was filed on about 1,300 homes.

If the H4H program needs more time, can’t we just wait?

Yes.

Just keep in mind that if lenders are going to participate in these 90% principle reduction loan modifications, they will be looking for federal backing. H4H included.

So, while everyone’s waiting for the good news on H4H to come out, why not get your wallets out and make an offer on those 49 notes that were just turned down?

There will be a whole lot more non-performing mortgages (to buy) where those come from.

Tags: banking, buying non performing notes, buying notes, home, home loans, how to buy non performing notes, Investments, learn how to buy notes, load modifications, Mortgages, Non Performing Notes, note buying, notes, Real Estate Properties, where to find notes

How to Buy and Sell Real Estate Notes - on Cash for Keys

Mar 14, 2009 Real Estate Properties

Cash for Keys When Buying and Selling Real Estate Notes

The information that I am sharing with you will be a valuable lesson, pay close attention.

Assuming there are no Junior Lien Holders…

Buyers in CA are willing to purchase REOs at 75% of market value.

Non-Performing notes aka Real Estate Notes are even more discounted and can be bought at 50% of market value.

So the act of taking a property to sale, and eliminating primarily the BK risk, is worth a full 25% of the homes value.

Remember this when you are buying and selling real estate notes!

Buying and Selling Real Estate Notes - A Cash for Keys Example

Take a look at the numbers:

$100,000 value of home

$150,000 1st mortgage

$50,000 price

What should I offer the Homeowner in Cash for Keys?

Let’s say it took 4 months from the purchase of the real estate note to sale of REO. If I offer $15,000 and the borrower accepts, what would be my yield on that investment?

The answer would be 45%.

To get the annualized return, take the yield and multiply it by 3. Here’s the scenario: You paid $50,000 to buy the real estate note and $15,000 for the deed. You sold the house for $75,000 in a 1/3 of year.

Cash for Keys Can Save You Valuable Time

Paying up to 15% of the home’s value in order to get the Deed is justifiable. The amount of time you save is high as well as the impact on yield.

Before you think “no way Mr. Borrower, you don’t deserve a dime!”, think about the impact of having the Deed and the costs you can save. Don’t be stingy on your cash for keys offer.

Be your success & go out there and TAKE ACTION!

Tags: buying notes, home loans, how to buy and sell real estate notes, how to buy real estate notes, how to sell real estate notes, Mortgages, note buying, note buying business, Real Estate Properties, refinances, REOs, trust deeds

How To Find Notes-Can You Speak My Language? Tip on Buying Notes

Mar 11, 2009 Real Estate Properties

Do you remember that 1981 hit from “Men at Work called Land Down Under?” (OK, so I was a big Men-at-Work fan, I admit.)

I recieved an email from a Korean by the name of Joe and it reminded me of the show.

What Does This Have To Do With Buying Notes?

Because Joe told me a little story today that demonstrates one of the most important lessons in the world of how to find notes. Relationships matter.

In fact, not only do relationships matter, but “commonalities” matter. In other words, what you want to do when you’re trying to find notes is to find out ways to build ties with your seller.

These can be social, cultural, sports-related, geographical, you name it. Almost any activity, sport, hobby, pastime, event, book, play, food group or Australian rock band can be a point of commonality.

Joe’s Little Gem of A Story On How To Find Notes

Here’s what he wrote to me today:

“I am the owner of Korean Investment club, but we are not ready to think about buying notes yet. ( for lack of understanding) I was solicited last week from a big Korean bank to buy the notes from the person in charge of the defaulted mortgages. He ask me to offer any amount for the first trust deed with face amount of 2.5MIL or more (including interest will be 2.7 Mil) collateral behind is the 79 room big motel with restaurants. I am really interested in buying the notes, because I know it’s worth around 4Mil. Is there any way to make it through? Thanks for your advice.”

So What is Happening Here?

We have Joe - the leader of a Korean Real Estate Investment Club located here in the US. And we have a big Korean Bank. And that bank has just sent a pretty interesting lead to Joe.

What does Joe Know About Buying Notes?

Joe knows nothing. And if asked if I thought that he made a great pitch to this big Investment Bank, saying that he was the perfect person to buy their nonperforming notes, I would say no.

No he did not. The note buying opportunity found him. And it also seems that they are willing to accept any offer that he makes on that note.

Just for a little while, try to stop focusing on the fact that Joe might be able to offer a low bid on this note and actually close his first note buying deal. This can be a great a deal! If the value of the collateral is actually $4 million and if the loan is a non performing note, Joe will have the opportunity to foreclose on a motel.

I want to point out something that is so simple when you are trying find notes. It is so simple, you probably looked it over thinking that there is a bigger lesson here.

What kind of a bank is this? Korean. And where’s Joe from? Korea.

So when this note, which is on California property, lands on Joe’s lap…it souldn’t be a surprise.

A Tip On Finding Notes

Remember when you are trying to find notes, banks often want to sell notes to people that they can talk to.

These people might also look like them, talke like them, act like them, and do business like them.

The Korean Investment Bank preferred to work with Joe because he was one of them. Even if a well known investor walked into that bank trying to find notes, they wouldn’t have gotten the same reception as Joe did. The bank automatically felt comfortable doing business with Joe, a process that would be a lot longer for you and ame.

So get out and start applying this note buying tip.

Find the Commonalities between You and your Sellers.

Find someone that speaks your language and ask them if they have any notes for sale.

Tags: buying notes, finding notes, homes, how to find notes, learn how to find notes, Mortgages, note buying, Real Estate, real estate investing, Real Estate Properties

Buying Defaulted Mortgages - Multiple Exit Strategies Needed

Feb 27, 2009 Real Estate Properties

The other day I had a conversation with a new Note Buyer who informed me that after a long career in wholesaling properties, he was going to start investing in buying defaulted mortgages.

When he said to me “Dean, the reason why I want to get into buying defaulted mortgages is not only for the cash flow, but I want to keep these people in their properties. This is what worried me.

I do admit that Humanity counts, don’t get me wrong. But…

Don’t lose sight of the forest for the tree.

When Buying Defaulted Mortgages, Don’t Only Focus On One Exit Strategy

It will not work.

Even if you want to pursue one exit strategy for the defaulted mortgages that you have just purchased, you can’t. (in this case, he thought that he could generate cash flow by re-performing all the notes he bought by modifying them.

Mulitple Exit Strategies Are Need When Investing In Defaulted Mortgages

You have to be like Rafael Nadal in order to invest successfully in defaulted mortgages.

Nadal is a really well-balanced tennis star. He has an amazing serve, excellent grass court experience, plays solidly on clay, and can fire a wicked forehand.

Follow the same approach when buying defaulted mortgages. Learn how to pursue MULTIPLE Note Buying Exit Strategies at once.

Be careful you don’t “stick yourself” with one note buying strategy.

Using Foreclosure as a Buying Defaulted Mortgages Tool

Sometimes it takes starting a foreclosure action to get a borrower to cooperate with you in getting a loan modified.

And Why?

The foreclosure action acts like a wake up call to someone who has been missing payments on a regular basis. That in combination with your help in their loan modification may be just what they need to get going to work their way out of their situation.

Be careful not to fall into the same trap as the investor I talked to.

If you want to be successful in your Defaulted Mortgage Buying business, 1 Exit Strategy is not enough.

To do well in the note buying business, know all of your 5 Exit Strategies.

Tags: Banks, business;finance, buying defaulted mortgages, buying notes, defaulted mortgages, Foreclosures, homes, how to buy defaulted mortages, how to buy notes, INVESTING, Mortgages, note business, note buying, notes, Real Estate, Real Estate Properties, real;estate