Bill Eisenhauer
Austin, TX Active 9 months, 2 weeks agoForum Replies Created
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He discussed the buses in his “Back to the Future” seminar. And I can’t remember if it’s in the same seminar, but the two trucks might have been discussed too. I recall hearing it and don’t think it’s in his paper seminar.
Also, it seems like Jackie Lange is heard asking a question in “Back to the Future”! 🙂
Jack Miller’s “Financial Strategies for Uncertain Times” ebook seems pretty dead-on in another quick scan of it today.
My powder is dry, but all this QE is going to make it worth less and less. I think Jack’s advice is to transition into leveraged real estate with rock-bottom fixed-rater mortgages. Notes will lose value to inflation, so less good. You just hope that the rental controls won’t go crazy and prevent the former from being viable.
Do I have that right, Jackie?
Yeah, Mike, I had pointed that out somewhere in the discussion on Facebook. They’d have to take off their realtor hat and become a principal in the transaction. I would guess that would have been dicey for this person as it seemed like they were new to the profession.
As an epilogue to the story, I did get chastised by one person in that Facebook group who suggested that I had heard the advice of two of the wealthiest people they knew in the area. It’s weird the things that push people’s buttons. I feel like no two attorneys would maybe advise to do this deal the same way. Anyway, I finally detached myself from the conversation to diffuse from the negative energy.
FWIW, there is a case study in John Schaub’s Real Estate Notes home study course that talks about getting an option on a house that needs rehab and the seller cannot afford the rehab costs. Seemed like that case study and the question asked in Facebook were similar enough that the suggestion of the option approach was solidly in the realm of reasonableness.
That was how I proposed it. Get an option, record it, and have the documents necessary to convey the deed held in escrow. They are suggesting they wouldn’t do such a deal without having the deed in hand. My first thought on that was that it could be difficult to have the seller agree to deed over their property prior to selling. They also feel like the seller would sue if they changed their mind about the profit.
People in Austin seem very concerned with lawsuits. This particular group is sponsored by an attorney, so the legal side of things seems to be overly focused on. I recall Jack Miller and John Schaub always setting themselves up to avoid lawsuits through crafting documents or just reading people and figuring out who you do deals with.
I feel like there are many ways to do deals. Who cares who’s right as long as the problem is solved to everyone’s satisfaction?
It’s a non-starter. I had actually thought they owned the loan, but I believe they are just the servicer.
It was a “fun” conversation, though.
For what it’s worth, this advice lifted from Jimmy Napier, but I’ve heard of the technique from a variety of sources. Jimmy’s original advice involved a Savings & Loan which seems more negotiable than someone like Wells Fargo or any big institution.
Would the seller be okay if you were transparent about your intentions someday to sell the house to a tenant buyer? In such a case, you’d wrap the note and you’d still be making the payments which sounds like what he wants. The pre-payment penalty suggests to me that he wants the note to go to term.
It’s been a long day, I’m probably not thinking straight, but I’d say continue talking to the seller and see if you can figure out the intent of those restrictions.
If the owner is forwarding their mail to another address, that directive instructs the post office not to forward your postcard, but to return it to you with that forwarding address. And now you know the address to use to take a more proactive approach like knocking on a door. Or, if the address is not local, you have some insight which may inform your tactics going forward.
On the HP10bii app:
Plug in what you know:
30 N
2000 PV
175.98 +/- PMTSolve for what you don’t know:
I/YR
which results:
94.78% Yield
The $2,000 PV comes from the purchase price $2500 less the down payment $500 the buyer provides
The $175.98 PMT amount comes from the note with the buyer.
You basically get that income stream for the net cash outlay of $2,000.You probably already figured this all out if you watched Lonnie, but just in case, here it is.
For the realtor, it is cash now in lieu of waiting months for their commission. The amount would be discounted some amount or percentage.
For the IRA owner, it represents a short-term investment and a return on likely a small dollar IRA.
I am not sure of the mechanics of how to do this. The commission will vary based upon the sales price, so maybe you only lend on a percentage of the projected sales price and then discount off othat principle amount. And if the sale never happens, the agreement rolls to another listing. And if there is never a sale, then I’m not sure. Maybe the note is cross-collateralized on something they own somehow.
I’m pretty sure this type of thing is done by some, but I’m not sure how it’s done or what the paperwork would look like.
I’m not a wholesaler, but I think the general advice would be to assure that your deals are not on the thin side. And probably make sure that you are in touch with the needs and wants of your buyer’s list. You’d want meat-on-the-bones deals that you have demand for. You don’t want thin deals because of the possibility that the market value could drop and eat away your margin.
But someone with wholesaling experience might be a better source of advice, so hopefully one of them will come along and fill us in.
Buyers of the note will have to like the property that represents the collateral. They will also have to like the borrower as well.
Thereafter, they will have to like the quality of the paper. Can it be resold if they need to go liquid? And, they will have to like the yield of the note.
Given that the Fed has just increased the Prime Rate to 5.25%, your 4% is not very competitive. Why would someone buy that note and lock in 4% over 15 years? In times of inflation, it’s not good to be a lender because you’ll be paid back with weaker dollars. So if your note has a 4% face value, you’ll probably have to discount it considerably to attract a buyer. They will want at least double the yield, I would guess.
But there may be more to your question about why you need to create this note and subsequently sell it. None of the above may be relevant depending upon what else you may have to add to the story.
Cheers,
BillOkay, I see what you are trying to do.
You have blog posts on your blog and you want to get some of your links out there to get traffic and build some SEO authority. Here are some ideas:
- Register on StumbleUpon.com and share your post links
- Register on BizSugar.com and share your post links
- Share on inbound.org (similar to the above)
- Try justretweet.com
- Ping the site with pingler.com
- Upload a PDF version of your post to scribd.com
- Post to tumblr.com
- Guest post on someone else’s site (hopefully, popular!) and link back to your site
I hope some of these ideas help out.
Bill
I would say that finding private money is more of a process than a just-in-time event. Building trust and authority takes time, in my opinion. Having said that, if you have a good deal, it seems like you should easily find the money (easy for me to say, right?).
Did you get any insight on why your potential lender bailed?
The other thing I believe to be true is that you only need a handful of private money lenders. Make them feel secure and take care of them and you can do deal after deal.
