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Virtual Coffee Q&A – Land Trusts, Owner Financing & NPNs, Dodd-Frank, TRID, Licensing (Oct 2015)

Wow, another great call this morning. I can’t tell you how much I enjoy these conversations. A big thank you to all those who participated.

We started off with Tyler from Utah, who is considering buying his second property with owner financing. He bought his first property giving the seller $10,000 cash, and taking it ‘subject to’ the existing bank financing. He’s worried he did it ‘wrong’, and wants to use a land trust for the next one so he can protect the underlying financing… reduce the risk of it getting accelerated, or ‘called.’

We had Woody, who is increasingly transferring funds out of his Wall Street brokerage accounts to invest in more notes with me. He’s not feeling as rosy about the stock market these days. It was interesting to hear his perspective.

There was Lynette from Texas who is just starting to wonder how to get involved in real estate and notes so she can take her mother’s savings and help her create passive income to support her comfortably through retirement. She’s wondering how you safely get involved when there is so much talk of depreciation and hard times coming to America.

My personal approach is to tighten up my underwriting. If a property appraises at $100,000, I ask myself if I would still do the deal if it was only worth $80,000. We can’t quit engaging in the market. We need private solutions more than ever. One Mom n’ Pop to another, we can create financial solutions that strengthen the communities in which we live.

Buyers need to buy, sellers need to sell, and investors need to invest. We need each other.

Mike from New Jersey came on to talk about his experiences with non-performing notes, investing in real estate, and keeping a balance of both in his portfolio. He shared a story of a guy that bought a non-performing 2nd in 2010 for $11,000. It had a balance of $110,000. He sat on it for several years until the note was covered by substantial protective equity, i.e. the property securing the note increased in value.

And then he got it re-performing, meaning the payor (the owner of the house who owed the money) started paying again. After 12 months, he used that note as a down payment to buy another property. The seller gave him an $80,000 credit for the $110,000 note. So… for $11,000, he is getting $80,000 in value, and the guy accepting the note is happy for the 12% return and the chance to get started in notes.

The 12 months of seasoning is an important thing to look for if you’re buying re-performing paper. Mike says that in his experience, after 12 months of perfect payment history, only 10% of the notes will default again. Several players in the NPN space have reported to me that up to 50% of their re-performing notes go delinquent again within a 9-month period.

We ended the call talking about Dodd-Frank, the new TRID guidelines, and licensed servicing in general… how to stay compliant. Jolene from Texas provided some great insight. To find out if a servicer is licensed, reference this site: http://www.nmlsconsumeraccess.org/. I love how much more powerful and meaningful the conversation is when we bring in the experience and expertise of a growing group of like-minded people.

To find out when the next Virtual Coffee Q&A call will be (and to see what else we have going on), please reference our Facebook Events.

Click play below (or click the image below) to hear the October 2015 replay:

owner financing club




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