Real estate professionals can get support around structuring owner carry transactions, and help their clients maximize the value of the notes created. This recent email represents fairly common questions that people have when they discover that owner carry notes can be sold, just the way banks sell notes/loans back and forth to each other:

 Dear Purchasers of Notes/Mtgs.,

 1.  Does it have to be seasoned?  If yes, for how long or how many payments?

Usually some, but not always.  It greatly depends on the other factors in the transaction, and whether you’re trying to sell a full, or simply a partial.  I occasionally buy notes without any seasoning, while on the other extreme I may need to see 24+ months of seasoning before considering any type of purchase.

2.  Do you have minimums and maximums on the dollar value of the note/mtg.?

No.

3.  What type of discounts are required and how do they work?

Once in a very rare while, I can pay as much as .90 cents on the dollar, most are in the .60 - .75 range, with some I wouldn’t pay a penny for.  There is no standard discount.  It all depends on the variety of unique circumstances attending each transaction.  The overall discount will be minimized if you choose to only sell a partial, and keep the tail end of the note for yourself.

4. What is the process if I have a note to sell?

Send me the note and security instrument (mortgage or deed of trust) and let’s have a brief phone chat. A brief overview of the transaction is also extremely relevant:

• Type of property securing the note
• Location of the property securing the note
• How long you owned the property before selling it
• Sale date
• Sale price
• Amount of down payment
• Credit score of buyer/payor
  

I’m guessing you’re asking about this because in your real estate investing business, you may need or want to use owner financing (with the subsequent sale of the real estate note) for either acquisition or disposition strategies, or both?  I can usually help structure these types of transactions for maximum financial benefit when I am brought in as a consultant before negotiations are finalized.

For professionals… real estate agents, new note brokers, or investor/rehabbers in the business of doing multiple deals, I provide limited email and phone support to members of Owner Financing Club.  People who want in-depth coaching or consulting can arrange that as well.

At Owner Financing Club there are many training videos and some downloadable documents that will help you understand notes and more deeply answer many of the questions you have posed above.  You may want to avail yourself of this affordable education (and support) as a way to increase the number of tools at your disposal for investing in real estate.

There is also a fairly new (and free) one-hour video that will help simplify much of this conversation for you: Why Notes, Why Now?

To your success,

Dawn

REGISTER FOR THE WEBINAR

I really haven't been a fan of lease options for a variety of reasons, evidenced by the fact that I practically ignore them entirely in my book, "Seller Financing on Steroids".

In my mind, there are more ways to be unpleasantly blindsided with lease options, than with regular 'ol installment sales. But the odd thing is, lease options seem to be more accepted, and appear to be much more familiar to main street buyers and sellers, and the real estate professionals who serve them.

I am really looking forward to having Wendy Patton as the guest for the next monthly meeting of Owner Financing Club (Thursday, October 13, 2011). Besides the other things that will come up, I'm going to make sure we do lots of playing around with various scenarios... to ferret out why lease options might just be the best answer in certain situations, and how to minimize the inherent risks and liabilities.

Like me, Wendy is a licensed real estate broker, which means she is very concerned with doing things the right way... legally, ethically and intelligently. I am really looking forward to our chat, and plan to learn A LOT from her.

Also, click that picture right above...

If you are reading this post in your email inbox, please sign up for my new e-zine "Property and Paper" to receive weekly (every Wednesday) updates, articles and special offers that will help you understand how to navigate OWNER FINANCING AND NOTES to achieve a sense of Power and Possibility, whether you're buying or selling property or paper.

The article in this morning's Issue #1was about Simultaneous Closings (simo's, simultaneous note sales, table funding, etc.) I also have a Calculator Corner section that will help you learn to use a financial calculator. And, I introduced two new classes that I am starting later this month:

Owner Financing for Realtors

Why Notes, Why Now... and How?

The best way to participate in these classes is to be a member of the community at Owner Financing Club, but if you just want to participate in the classes without joining the club, you have that option.

Are we ready to wake up and use our big “outside” voices?  If you aren’t already on the track of understanding how our wealth, individually and collectively, has been intentionally and systematically highjacked, perhaps it’s time… it’s not that fun, but shining a light on the truth of what is happening is the first step towards healing.

Watch “The Money Masters“, and/or sign up for “The Solari Report“.  There are a lot of other sources of similar information, but this is a place to start.

I’ve been pretty quiet lately on this blog… doing a lot of studying, thinking, and emotionally and spiritually processing what all of this means to me… deciding what I believe in, what I want to stand for, how I’ll navigate my business and how I’ll counsel others that count on me for advice for maximizing and protecting both their real and paper assets in these uncertain times.

Money is about to get even tighter with the Fed’s latest move.  Private lenders and buyers of owner-financed paper are going to be increasingly necessary to provide liquidity in the real estate market.

When you start to realize what has happened to us over the last 98 years since the creation of the Federal Reserve in 1913, and you realize how money really works (hint: it’s not what we were taught in school) you’ll go through disbelief, denial, anger, bargaining and then probably spend some time in despair… until you’re ready for acceptance.

Out of acceptance, the clarity of the next step will have a chance to emerge.

Speaking of Operation Twist announced by our friend, Benny Boy (over at the Fed), Chris Mayer writes…

“It’s a plan so dumb you have to have to Ph.D. to believe it will do any good…” (at least this made me laugh)

Markets haven’t exactly liked it, have they?  The DOW is down a few hundred points, most of the big players are selling more than they’re buying, and I hear that trades betting against the S&P 5oo are at an all-time high… and congress is going on vacation without knowing how the government is going to continue to operate next month.  Good times, good times.

Most people should not have direct exposure to the stock market right now.  If you’ve still got regular equities, consider selling them… soon, yesterday or last year.

How is the average saver/investor supposed to protect what is left of their wealth, their money, their assets?

Doing nothing (hiding money under your mattress or in a 1% CD) has become even more risky than investing.  If you aren’t making at least 9% on your money (the current rate of inflation), then it’s disappearing while you sleep.

I happen to believe that investing in notes with lots of protective equity, secured by generously cash-flowing properties in strong, non-bubble, job-supporting markets, is one of the last bastions of growth and preservation of the wealth of the average investor.

Yes, many people want to own those cash-flowing properties and have them professionally managed.  But I’d rather hold the note secured by those assets at half the value of the property or less.  It’s simpler, easier, and I am hedged against further fluctuations in the prices of real estate and rents.

I want to be happy if the note performs, and happy if it doesn’t.

And… there are blended products that give you both…

You can have hassle-free, safe, note-investment returns, plus a piece of the upside of the real asset that secures it.

For the record, here are my other sentiments…

• Have some basic preparedness items on hand… food, water, etc.  You never know when even a random power outage could create craziness around you.  Plus, buying commodities (the things you need and use every day) at today’s prices is a hedge against future inflation

• Start growing some of your own food, even if you’re only sprouting alfalfa and garbanzos.  Here in suburbia, our food markets and warehouses only have a 3-day supply of food.

• Get backyard chickens (this could actually just be a reaction to “empty nest syndrome”… as the children left, I bought poultry.  You feed these goofy little birds for a few months, and they start laying eggs for your breakfast.  I fed four kids for 20 years, and never once did they lay me an egg… just sayin’)

• Hold some physical gold and silver

• Stay grounded in things that make you feel good and help you stay aware of how much abundance is around you right now… the gratitude game

• Look into alternative and complimentary local economic systems that will support our communities.  The California Federation of Time Banks is holding their annual convention in Pasadena on Oct. 1st & 2nd.  We need to create a safety net for all the people who are falling through the cracks

OK, so that’s quite enough for one day…

Find more of my brilliant philosophizing and training segments over at Owner Financing Club (members’ only protected content), and if you want to invest in notes with me, please fill out this Note Investor’s form.

Ciao.

Just a quick post to let you know that tomorrow’s Owner Financing Club meeting will be a webinar.  I wanted to have a better training format than the telephone conference call could provide, as I’ll be going over a recent note transaction… exactly how I closed it, so the process is demystified for people who think that buying a note is woowoo.

If you want to participate, REGISTER HERE.

I think that notes are one of the few ways for the average passive investor to get solid and reasonably safe returns in a volatile, uncertain market where inflation is probably sitting at around 9%.

If you’re not making at least 9% on your money, it’s disappearing a little more every day. You just want to make sure you’re not risking a lot to get your 9%+… personally, I like to sleep at night.

Kaaren Hall, president of uDirect IRA Services will be my guest, and will help us understand how to use SDIRAs to buy notes, buy property, lend money, etc.

Private investors like you and I can make a profound difference in how the real estate market functions. Many of us tend to hold our breath to see what the government, or the banking sector will do... we can do a lot without them.  The principals and professionals who understand, or are willing to explore this, have the opportunity of a lifetime in front of them.

In my world, banks are only one small part of the market.... not THE market.

Last night I had the privilege of interviewing a long time investor and professional, Walter Wofford, and he was explaining how and why he will NEVER PAY CASH or hard money rates ever again to buy and hold, or buy and flip real estate.

He's buying with 0% financing (NOT $0 down... big distinction) and then flipping to either a qualified home owner or a motivated investor, and giving them 5% financing, so that for owner occupants, owning is cheaper than renting, and investors can get favorable terms so they have instant positive cash flow.

My two favorite quotes from my call with Walter last night:

“As investors, we can make back everything we’ve lost in the last 5 years”

"Owner financing is a partnership between the lender and the borrower"

CLICK HERE to listen to the recording of this perspective-changing interview.

Walter explains that many sellers of investment properties have 4 options:

• let a property sit vacant
• rent or lease it out
• sell with owner financing
• sell for cash at highly discounted rates (if at all)
  

Sellers (and the professionals who serve them) will greatly maximize their financial results when they understand how to offer intelligent seller-financed terms to a prospective buyer.  And done especially well, sellers-become-note-holders will even be able to sell all or part of the note they create through the transaction.

We need to be able to think outside the box, but with an intelligent approach to risk/reward, and a soulful determination to create value for others, and act ethically and morally in the marketplace.

I’m not sure how many investments these days can offer the safety, return and low risk profile of discounted notes when purchased properly.  Buying properties with below market terms from sellers and then reselling with higher and better terms is also a way to create positive and almost effortless cash flow.

Next Thursday, July 7th, I will be interviewing Walter for the next meeting of Owner Financing Club (a virtual investment club focused on owner financing and notes).

Walter has done a lot of investing in his time, and right now, he is really “crushing it” buying and selling real estate with seller financing.  Sometimes he subsequently sells the note(s) created to really top off his profits.

He also happens to be an expert at investing with and through self-directed IRAs, which is a strategy that I believe more and more people will see is the only chance at preserving any measure of their wealth as the economy collapses around us.

If you’d like to listen in on the call and have a chance to ask questions and brainstorm over your deals (or listen to the recording afterwards) be sure to…

FYI, I also added the videos of the live owner financing class I taught last month to the arsenal of information available to club members.

And I’m always looking for investing partners for both property and paper deals that come across my desk, so if you’ve got some capital, and you’re tired of making 0-1%, and watching inflation blow it away, then let’s have a chat.

My best,

Dawn

When I ask high-end Realtors if they ever see owner financing used in putting their transactions together, often I’ll get some sort of offended scoff, because no… of course not… their clientele has all cash and can easily get financing if they need it.

Well, Inman News recently reported:

“Trump ended up taking $95 million for his Palm Beach home in 2008, but the Wall Street Journal reported that half of the price was seller financed.”

Even if the buyer could have come up with all cash, it’s likely that they preferred to leverage to keep cash available for other investments.  And I’m sure it helped get Trump his reduced price of $95 mil. (I think he started at $125 mil).

I recently spoke with an agent who had a listing in the $4 mil range, and the seller, who owned free and clear, was offering to carry at 3% to a buyer who came in with a 50% down payment.

3%…???

That’s not even keeping up with inflation.  If you were a savvy buyer, and you could make better than 3% on your money in other investments, it would be foolish to pay all cash for that property.

Owner financing helps sellers get a price that’s stuck in their heads… that makes them feel like they did OK in the market… got their price, made a good deal and “didn’t just give the property away”.

Buyers who understand this can often pay top dollar for a piece of property, but get it with such powerful below-market terms that it becomes an even a better deal than getting the property at a reduced price.

This won’t often leave the seller with a note they can sell without a steep discount, but getting a certain dollar amount on the sale is, many times, the most important thing for sellers in this market, and they’ll never sell the note… unless they get desperate for cash for some reason.

I’m really pleased to have Ellis San Jose as the guest speaker on my next club call on June 2nd, 2011.  Ellis, like myself, is a California real estate broker, a real estate investor, note buyer, and co-founder of The Note Guys with Gerald Lemoine.

While he has done and can do just about every step in “The Dance Between Property and Paper”, he recently told me that he’s mainly focused on buying non-performing 2nd TD’s.  And I think he mainly focuses on bank paper, whereas I never touch anything related to the banks at all, but we’ll find out together just what he’s up to this Thursday.

If you’re already a member of Owner Financing Club, then you’ll be emailed the details for the call.  Hopefully, you were able to enjoy the call with Henry Dvorken last month, on May 3rd. (P.S. Some people told me they had trouble getting the free contract that Henry has to share with people… if that describes you, PLEASE let me know and I’ll make sure you get taken care of).

My web designer/developer says that the online support site for the club will be live before the call, so let’s keep our fingers crossed… this is where the past recordings of club calls will be, along with the video of that owner financing class I taught on May 10th, and a few other bonuses and blog posts that I have in mind to put up for all those who have been so patient with my technical issues and learning curve.

My goal is to make you feel, beyond a shadow of a doubt, that your returns have far exceeded your investment in our community of like-minded individuals.

Hope you can be with me to enjoy Ellis and ask him anything you can think of related to investing in non-performing bank notes.  He and Gerald are people that I can wholeheartedly recommend as investors with as much or more reputation equity than real estate equity, which is saying a lot.

And don’t forget to come to the call with any deals that you’re working on right now, so Ellis and I and others on the call can help you brainstorm and figure out how to work things to your best advantage.

Take care,

Dawn