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   If you have a project or task that you need to do but are procrastinating, write the project on a legal pad and throw it on the floor.  Having to constantly step over it will keep reminding you of what needs to get done.

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President's Corner

This week I want to make sure that you know exactly what we are looking for, what our investors purchase and what we can help people with AND what we don’t do.  Once people know that you have access to millions of dollars to buy notes they will be contacting you for every conceivable real estate related cash need you can think of.

Seller Financed Notes - If you’ve been in one of my classes or workshops you know that “WE DO NOT DO LOANS”.  We do not originate, create or otherwise make any loans.  We purchase existing seller financed first position notes secured by real estate on the secondary market.  These are called these “Purchase Money Mortgages.”  To further explain, we buy existing first position notes secured by real estate that were created when the seller of a property carried back a note to facilitate the sale of the property.  An existing note is one that the seller has already received at least one payment on it.  To clear it up even more, if they are not RECEIVING payments on a real estate secured note, we can't help them.  This is 99% of my business, the purchase and brokering of existing first position seller financed notes secured by real estate on the secondary market. I know it seems repetitive but repetition is sometimes what is remembered. Now that we understand that, lets briefly touch on some things that can be done but that are out of the main focus and niche of buying existing first position seller financed notes (or the other 1% of my business).

Second Position Notes – Yes, there are a few, very few, buyers for second position notes but the discount is so great you need to go through hundreds of note holders to find someone that is desperate enough to take the discount.  The few buyers that I know will only pay up to 35 cents on the dollar for a second position note and there are many requirements that make getting these to funding very tough. So, I don’t spin my wheels on second position notes.

Non-Performing Notes – Yes, there are a few, very few, buyers that will buy a note that is in default (when the payor on the note hasn’t made the payments and it is near or already in foreclosure) but again the discount is usually so great that it is tough to convince someone to take the discount.  We will be seeing more and more of these defaulted notes in the coming months.  Sometimes note holders who would otherwise not call us to sell their note will start to call and want to sell their defaulted note.  I tell them that they should have called to sell their note before it was in default because now with a non-performing note the discount is much greater that with a performing (paying on time) note.  The few buyers that I know who purchase non-performing notes will only pay up to 50 cents on the dollar for a first position note in default.  What about a second position note in default, no way.  I do expect to see a few more investors step up to the plate in the next year or so to buy these defaulted notes so be on the look out for them.

Simultaneous Transactions – Yes, there are a few, very few, note buyers that will do a true Simultaneous Transaction where the seller of the property sells the property, carries back the note and sells the note at the same time.  I learned years ago that for me this way of doing the note business is extremely tough.  In short, it came down to the fact that there were just too many people to make happy.  The funding source and the note broker are usually always happy.  But then we have the seller who doesn’t want to take the discount, the buyer who wants to give a lower down payment and wants a lower interest rate and sometimes there is a real estate agent who want to know how much money we are making and if it is more than they are making.  So at this point the most I will get involved is to educate the seller (or real estate professional) and suggest the most favorable terms of the sale of the property and the best terms of the note to carry back so that if they want to sell the note after they sell the property they will get the best price possible and the least amount of discount.  Then after they have sold the property we can then purchase all or part of the note. I have a new book coming out similar to my Note Holders Handbook but for note brokers, property sellers and real estate professionals. It is called the Note Creation Handbook and will be ready for you before the end of the year.  Of course, you will be the first to know when it is completed.  

Loans – I get calls all the time from consultants, brokers, sellers and individuals looking for a loan.  They want to tell me about a unique situation or an unusual request or special circumstances.  We are talking about people that want to refinance their homes, get a loan on a piece of property, hard money loans, bridge loans and the like.  You will get many, many calls from people that want loans for something.  I will say this just once, if you can’t put it on a mortgage worksheet then we can’t do it.  The first clue is when you ask, “When was the property sold?” and then you hear back, “Oh, it wasn’t sold” or “It’s not for sale.” My suggestion is that you start to find yourself a few loan officers, mortgage brokers, hard money lenders, commercial property lenders and venture capitalists that you can refer these people to when they contact you.  That way instead of saying “No I don’t do loans,” you can refer them to someone that might be able to help them and at least earn a referral fee. 

As you can see, my business is focused on the purchase of existing seller financed first position notes on the secondary market which comprises 99% of my business every year.  The other 1% might include non-performing notes, simultaneous transactions and referral fees for loans.  I do not want to spin my wheels on things that have, for me, been traditionally and historically a waste of my time.  I am not trying to discourage you because there are a few brokers who do specialize in the 1% that I prefer not to do. 

Next week we will talk about the basics of a Seller Carryback note and the different documents that we are actually purchasing when we buy a seller financed real estate secured note.  We will also talk about some documents, scenarios and agreements that we just don’t have buyers for and why. Remember, Success Demands Action! Keep on marketing, it’s going to work! TWITA!

Feature Article

Finding The Ideal Note Holder

Question of the Week

Q – Hey Jeff: 

          In your seasoned opinion, what is a realistic expectation of income from brokering residential and/or commercial notes in the first year and beyond with a $10,000 marketing budget? I know a lot try and fail, but they also probably don't come from a lending and real estate investment background. I'm just trying to weight a risk versus return on this venture. I've bought your books and online video series in the past. 
                                                                                   ~ Clint R.

 A – Hi Clint!

           Thanks for the email! As you know, no one can predict or guarantee the out come of any business, let alone the note business which has so many factors to create success. However with individuals with good negotiating skills and a basic real estate knowledge should do well.

           I can tell you that this is a real business and it takes real money (for marketing) time, effort and knowledge to make it work. Hope this helps!

                                                 ~ Jeff

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