Top Real Estate Articles

How to Purchase Non-Performing Notes: The Good Brokers

Apr 15, 2009 Real Estate Properties

Purchasing Non-Performing Notes, the How To

If you have a good broker that you are working with in your note buying business, you will be very successful.

This past week, I received 4 phone calls from one of my Good brokers.

He was checking up to see where I was on my non performing note bid.

Example of a Good Broker when learning How to Purchase Non-Performing Notes

A friend of mine that had previously worked at an investment bank had brokered a pool that I put a bid on.

Always polite and professional, he would ask me, how is your due diligence coming along? Is there anything you found that you didnt expect?

Or he would say something like: “So which notes have you kicked out due to value, if any?”

He would always make me feel that he was doing everything that he could to keep myself and the seller on the same page.

He would always say something like “Well, what I’ll do is to tell John what youve just shared with me in case you havent already told John, and then I’ll let him know that you’ll be contacting him again once you’ve finalized everything. When do you think that will be?

How to Purchase Non-Performing Notes- Good Brokers are Key

A good broker is always adding value and helping the relationship. This broker never got in the way and simply improved the buying process.

He knew everything about my bidding process. He knew what my bids meant and why I was bidding on the non performing notes.

He was aware of the potential “kick-outs”, in other words, notes that I might pass on. Some reasons to pass would be title issues.

Remember this, if your broker isn’t making your non-performing note purchase easier…then you are not getting the value for the commission that you are paying.

Tags: how to buy notes, how to purchase non performing notes, Non Performing Notes, note buying, purchase non performing notes, Real Estate, Real Estate Properties

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 Notes - A Note Buyers Dream…Understanding Your Borrower’s Needs

Mar 28, 2009 Real Estate Properties

One Lesson on How to Buy Notes

Its funny how the little things (so u think) are actually a big deal for your borrowers.

What am I saying?

I have two stories to share with you. They are about Natalie and Judy, 2 borrowers that were included in one of my portfolios.

A Story on How to Buy Notes…Introducing Natalie

My first example is about Natalie, she had a performing first mortgage that was included in the pool of non-performing notes that I purchased. Natalie was an ideal borrower, whose mortgage payment was due on the first of every month. She owed $93,000 and paid a monthly payment of $680 like clockwork, the only thing was that the payment was received around the 5th of every month.

So, when I called Natalie for the first time, guess what her biggest request was? She asked me sheepishly if I might be able to push her payment due date back from the 1st of the month to the 7th of the month so that her paycheck had time to clear in her account!

What does this have to do with make money as an investor who is learning how to buy notes?

Because of one simple thingin the market today, and just in human relations in generalthere is one fact when it come to the financial relations of people.

It’s sometimes the little things that matter the most.

As an investor in non-performing notes, when a borrower like Natalie asks me if she could pay her mortgage a few days after her due datehow did you think I responded?

I said of course, what date works for you?

You mean, you CAN do that for me? She sounded incredulous.

Thats all it takes, just me asking?

Wow. Eye-opener for me in this business of how to buy notes, I tell you. That something as simple as changing a due date could make such an impact.

So of course, my next step involved asking Natalie if I could refinance her real estate note. I asked her if I could put her in touch with a specialist that worked on my team, and because she now trusted me.she provided all the information that I asked from her.

A Lesson Learned on How to Buy Notes

If you actually listen to what your borrower is saying, and can determine their needs, you can create a relationship based on the fact that you helped them. Anytime that you help someone in need, they automatically feel an obligation. Use that feeling of obligation to your advantage.

Another Example of How to Buy Notes, Judy’s Story

I have a 2nd story that I want to share with you. This one is more recent.

Judy is from Tennessee, she has the cutest accent that Ive ever heard.

Her accent is so sweet, you cant help but smile every time you hear her voice.

And when Judy spoke, what do you think she said in regards to her defaulted mortgage?

Dean, I owe you all a HUGE thank you for paying my taxes.

My first thought wasWhat?…taxes?? So of course, I looked through my file to see what I did. I quickly realized that after running my tax check (something we do towards the last business day of the month), it was in my best benefit to pay her taxes current.

How to Buy Notes-Benefiting Both Yourself and Your Borrower

We advanced it to her loan obviously (property taxes advanced by you can be charged to the principal of the loan), and since her delinquent note rate is pretty high, we get to accrue interest on that advance. So from my perspective, it was both protecting our interest as well as making a smart business decision that would make us money.

And from hers, it was the sweetest and nicest thing we could have done, because we were looking out for her. The actual words she used with me were: Dean, I want to thank you for helping me keep my house. Ive been here 20 years and now Im finally caught up thanks to the patience youve had with me.

I was floored. Absolutely amazed at how a simple decision to protect our real estate note position, pay the taxes owing so they wouldnt fall further delinquent and threaten a tax deed sale (Tennessees a tax deed state, not a tax lien state - more on that in a later post), could be perceived by the borrower as a generous move to protect her own interests.)

You can only imagine how the rest of my day went, it was wonderful! Nothing feels better than to sit there and receive such gratitude over the phone. It really touched me. In the business of buying notes, experiences like this dont happen very much.

And I also learned today how useful it would be to explain advances to pay taxes and insurance for any other borrower in terms of helping to protect their home and to help them to protect their home.

A situation where everyone wins doesnt seem so clich now does it?

Not when you look at what Natalie and Judy taught me about the experiences in how to buy notes.

Tags: buy notes, discounted mortgages, Foreclosures, how to buy notes, learn how to buy notes, Mortgages, Non Performing Notes, note buying, profit from buying notes, Real Estate Notes, Real Estate Properties

How to Buy REOs - Non-Performing Notes Versus REOs

Mar 20, 2009 Real Estate Properties

I would like to share something on how to buy REOs vs. Non-Performing Notes with You.

A hard choice, I know.

Many people probably would ask themselves…”If I can buy real estate so cheap, why would I want to own bad paper and buy non performing notes?”

Well, yes. REOs can be cheap.

And yes, you would be acquiring real property as opposed to a debt.

And, yes. You can get rid of it pretty quickly if you price it right. So why shouldn’t everyone drop everything they’re doing and buy REOs?

Buying REOs: 4 Risks Involved

1. Valuation

You must be precise with the value of the home, as well as the interior condition. When you have a non-performing note, you have several options in ways to turn your note investment into positive cash flow. (example: getting your borrower to make payments).

It is a necessity to be certain of your REOs value and the condition of your property. In order to squeeze profit from your vacant property, these values are key. When you are buying notes, this information is not as important.

2. Purchase Risks

If your sources aren’t nailed down, they can waste your time. In most cases you are dealing with brokers who are 2-5 people deep in a chain, and a fradulent attorney that claims they have mandate for someone else.

3. Deal Risks

After 2 months of chasing a deal that consisted of REOs, a friend of mine only closed on 1 of them. Why? All the others were listed for sale and as the agents got the properties into contract, the seller pulled them from the deal.

Or they were lost to a competitor since there were 3 brokers in between him and the seller. The one REO not pulled was the one that wasn’t already listed. The “loss ratio” on non-performing note pools - in other words the rate at which notes are pulled from a specific pool - aren’t as high by any means. (One day, ask me about the west coast pool that we lost!)

4. Discount Risks

The discounts that you typically hear about when buying REOs may not be quite as juicy as you’ve been made to believe.

You can close on a note buying deal at a 30% discount and you will hear about pricing this low on a regular basis. REOs priced at this range are typically unheard of.

I don’t mean to be negative about REOs. All I am saying is know what you are getting into. Don’t listen to everything that you are hearing about REOs being the deals to invest in.

Tags: Buying Reos, Foreclosures, how to buy reos, invest in non performing notes, learn how to buy reos, non performing note buying, Non Performing Notes, note buying, note investments, Real Estate, real estate investing, Real Estate Properties, reo business, REOs

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