Case Study: Austin Nonperforming Note Deal

Foreign.

This is the no Closer show where you get the latest developments in distressed note investing and learn the secrets of how you can control millions of dollars worth of property for Panties on the dollar. Get educated and entertained by someone who has closed thousands of deals and lives to support you in achieving the same. Now here's your host CEO of We Close Nodes, Scott Carson.

Hey Note Investors. So you want to dive into the world of note investing but no know how to get started or you don't want to pay 30, 40, $50,000 for a one on one coaching program that just completely does not deliver the deals or the funding or the access that you need to take your note business to the next level. That's why we have our one on one coaching program. I'm Scott Carson. I've been buying notes for 20 years. I've helped thousands of investors buy their first note direct from banks using either their own funds or other people's money to buy non performing, reperforming or performing notes yielding them an above average return. Now what's involved with my one on one coaching program? It's unlike anybody else's because guess what? You're working with yours truly. Not some paid student, not looking at some recycled list of stuff. Now what we do is differently than anybody out there and that's why we have such a huge success rate with our one on one coaching program. What's involved? Well, once you take in our three day class or not Buying for Dummies workshop, sign up for our coaching. You get 10 weeks of one on one coaching calls. These are on zoom in the morning, the after the evening.

What works best around your work schedule.

We accommodate this to help you start looking at stuff. And during those 10 weeks we focus on finding deals, making offers, getting your website, your social media stuff set up so that you are a lean note buying machine after spending 10 weeks of Zoom calls with yours truly. That's right, live not somebody else will spend two days one on one. And usually people come to Austin, Texas to hang out with us on a Thursday, Friday or Saturday, Sunday. And those two days are focused on whatever you are still lacking and need the most amount of work. One Sometimes it's making offers like Larry came In, we made 50 offers that he got 20 approved in a weekend. Other people came in to raise capital so we help them find IRA investors to fund their deals so they're able to raise hundreds of thousands if not millions of dollars for their note deals and other investing stuff. We're also going to give you a list of asset Manager contacts for you guys to dive into. That's right. This will be your LinkedIn profiles, emails, phone numbers, names, all for you to start reaching out to people. No, you don't need to buy notes directly from me. We're going to show you how to go to banks and contact them directly. We're also going to make introductions to our top 12 hedge fund managers that send us deals on a weekly or monthly basis. That's right. You go straight to the front of the line and guess What? There's no 10, 20 or 30,000 upcharge for the deal you buy direct from the hedge funds. Because we make the introduction, that's why. Because. Why do we do this? Because we know not, we believe, we know there are more than enough deals to go around. And yes, we make most of our money from buying note deals for ourself. Some people say, oh, you're creating competition. No, because there's plenty to go around. All right, we're also going to give you a one year membership to our WCN membership for one year. That's $97 a month. Usually that's going to allow for you to continue support weekly coaching calls along with access to our base camp group for other things, other tapes, other resources for our coaching students. We're going to help you with raising private capital, putting your pitch deck together, putting sample deals together, or your case studies that we've done, other students have done, or that you're doing so that you help raise capital or help you find IRA investors in your local market or the markets you're looking to buy in, you're going to also basically for you, plus your partner, spouse, person you're going through this with, you're going to have VIP access to me. That's right. Whether you need to jump on a quick phone call, a text message, a quick zoom call to go through tapes or notes that you're making offers on for us to review your bids or help answer a question. When it comes to loss mitigation, foreclosure, bankruptcy, what it might be about a deal you're working through, get VIP access to me most of the time. Come on now, everybody. We're also going to do a six month follow up day after you spent two days with me, six months later, if you want to, we can do a half day, a full day, zoom follow up just to see where you're at, what are you dealing with, where you're looking to go. Because within six months you should have already closed on several deals the way that we teach them. Because we will help you find your first deal and then some. We've had students have closed on their first deal in 30 days. We've got others who closed on six deals in their first 35 days. Other people closed on 100 deals in their first year. We are here to help you because guess what ladies and gentlemen, there is plenty of inventory out there. We're not going to focus on owner finance notes. We're going to focus on how to get people calling you with their deals or how to get banks sending you lists on a regular basis that you can cherry pick and show you how to raise all the capital that you need. Our one on one coaching program is the most complete program out there. That's why you have such a high success rate and it's cheaper than most of the others out there. And we also give you the biggest bang for the buck by helping you make the introductions, looking at the tapes, helping you bid if you're coachable. Now, not everybody's coachable. Not everybody can afford this. But what we can do is we can set up payment plans and different options for you. I encourage you to either book a phone call with me@talkwithscottcarson.com and we can talk about it. See if you're a fit and not everybody's a fit and that's a okay. But go to talkwithscottcarson.com, book a call on my schedule and we'll gladly talk about our one on one note coaching program to see if you're a fit. One of the very requirements is we do require people to go through our three day class but that whatever you've paid for that three day class is applied to the tuition for your one on one coaching. And we also have a third party provider who's willing to finance this and carry financing for two to three years to help you paid off. But we're going to work with you until you get your first deal closed. We want to help you make your money back in the first six months, if not sooner. So check us out. Pick up the phone, give me a phone call. Talkwithscottcarson.com that's talkwithscottcarson.com book a call and let's see if you're fit to take your business next level. Sometimes all we need is just a hand up to take you to the next step to show you the way. This is not a blow smoke up your tail, give you the crappy tapes left over or upcharge you 10, 15, $20,000 per asset. No, we want you to buy direct. And we've always found if you can show a man how to fish, you'll feed him for a lifetime. So let's get started.

You being a note investor for the.

Rest of your investing lifetime.

Good morning, good afternoon and good evening, everybody. Hey, welcome to this episode of Monday Money Mondays. Hope you're doing well and thanks for listening to the note closure show as always. Scott Carson, be here with the day. Hope you all had a great weekend. It is Monday, Monday, Monday, Monday. If you're listening to this, it's Tuesday, Tuesday, Tuesday. But absolutely had a great week last week. Just absolutely. It was hot last week of summer in Austin, Texas, and it was a hot one. And it was kind of funny, kind of had a hot deal fall. My lap that we're working through. And I thought I'd go through that with you today because I think you guys really do love it when we break down the case studies of individual deals that we're bidding on or working through. And this is a one of those deals that I love it when I see something in Austin, Texas that I actually can sink my teeth into. Oftentimes, Austin being a fast, obviously the capital, the fastest foreclosure state in America can often be overpriced. They often can be too damn expensive or way overpriced. They just don't make sense or there's just way so much equity that the seller wants way too much for it. That just doesn't make any sense for us to buy and only make a, you know, a single digit return, low single digits in a lot of cases. But this episode is about this new deal that came in across Friday. Actually. It's close enough that I could drive to it and I thought I'd go through the deal with you, break it down. The pros, the cons, expected ROIs, returns, you know, that kind of stuff. And I think it's a great way to learn. And this doesn't necessarily need to be in Austin, Texas. A lot of you guys out there listening and gals can take this deal and kind of apply it to where you live depending on your situation. Okay. And so it was just here's a picture of the property. This is actually a, oh, the Cinemax version of the property. Obviously it's had some work done to it, which is great. But it's a, it's a good looking property. When I googled the address is like, oh, okay, that's pretty good. Now it's got a flat route, pretty much a slight, you Know it doesn't have as angled a roof is that you'll see that it's just how the photo is. Take a bit of an angle to get in the office or the outside building that's attached to it. But anyway, this is a, a property kind of down in South Austin north of the airport a little bit, but in a hot and up and coming area of Austin. And this is the image from February of this year. And you can kind of see what it is a little bit more accurate Google image. Pretty good little size lot. It's a three bedroom, one bath with an extra building. I cut off the address a little bit there so you guys could not see it and go chase this thing down. But it's on a pretty good sized lot with trees. That's the February image. We go to the. That was February and this is from March of this year. Okay. A little bit different image with these posts from. For a fence up, the fire pit built into the right side. All right. It's a little bit different there. And these are the actual images that I took of the property. Now it was occupied. I didn't want to stop, get out, take pictures because somebody. But you see that these posts are not looking so sharp anymore. We're now in August. Those are February, March photos. And you can kind of see that there somebody's doing some work to the property and there's a lot of junk out there. It's still occupied. This is what it looked like a few years back. This is, this is a picture from prior to 2020. Now the property obviously has been fully rehabbed. A lot of work has been done to it. When whoever bought it back in 2020, they rehabbed the whole property, made it look nice at that extra building to the back stuff. So it gives you a bit of an idea of the transition. It's a good looking property, not the biggest of properties, but let's go through the, the analysis of it. It's a three bedroom, one bath, 1084 square foot plus I call it an ADU or office building out there. There's no bathroom out there. Doesn't look like there's any closets, but it's an additional 192 square feet of living space out there. If you want your office, you know, she shed, whatever you want to do, you can. Okay. Now it's on just under half an acre. It was totally rehabbed back in 2020. The current buyer bought it after it was rehabbed. All right, so it's not the guy, the family that rehabbed it. They're the buyer of the rehab. Now the current fair market value of the property, when you look online, it's somewhere in that 500, 519,000 range. Okay, that's a little concerned. Now the great thing of where it's at in the MLK district, a lot of work going on down there. A lot of rehab, a lot of construction. A lot of new apartments are being built down this next to the woods. It's just off of Springdale Road basically around the 290 and I30 interchange basically of Austin. But a lot of growth in this area now there are some really nice properties nearby. There's also some ugly properties that people are going here and buying and rehabbing these properties up. Good morning to everybody. For those that are watching live, listen, reported. Hey hey or rogue. Good to see you as well in there. So anyway, so three bedroom, one bath, 1084 square foot plus another 992 square feet. That building. So it's just under. Oh, was it 1300 square feet? Roughly under half an acre. Fair market value is 519. Here's some of the rehab photos from the previous listings. This gives you a better, a better view of the property. Of course it's staged, but they did a really good job at first when I saw it I was like, oh, is this a one of those, Is this a storage building, you know, that's been converted and no, it's not. It's actually the original home which just had a total gut job done to it. You know, a lot of white interior. And what's great about when you can see a property like this that was listed a few racks or sold and you find the online photos of the property. It gives you a whole lot more comfort when bidding on an asset versus what it used to look like back prior to 2020. There's the backyard showing not only the main house, the additional building. Okay, pretty nice, right? We can all agree that's a pretty good looking property. Now to give you an idea of the note deal, the note financing, it's a 30 year six and an eighth interest rate on it. Currently the current owners bought this whole property at 492. Okay. Back about two years ago, 492 was a purchase price. They put about 30,000 down. It's got origination of 463,000 and some change. The current unpaid principal balance is just right at 445,000. Give. Take a couple hundred bucks off that. The P and I payment is just under 2219. It was 2218 and like 93 cents. I just rounded up the 2219. For simple math purposes, the current taxes and insurance is at 1410amonth. Okay, 2219 plus 1410. So you're seeing basically a 3600, 3630 monthly payment on this thing. Okay. Don't know if there's any hoa, but that's roughly the numbers P and I payment of 2219 per month. Now the lender came out and said that they'd be willing to sell this at 80% of the unpaid principal balance. That's a number of about 356,277. So we go back here and take just the UPB. The current up 445 times 0.8. Now when you have a seller that tells you kind of price expectations, it makes your life a whole lot easier to figure out. Does this make sense? Does not make sense. Okay, so if you just take the difference between 356, 277 and 445, that's about an $89,000 gross profit to foreclose. Okay. Now that's not including your foreclosure costs. Okay. Which would be about 10, 15 bucks. Now here's the thing. The seller, I mean the owner of this property is only two months behind. They were late in June. They've missed the July and August payments and they basically September coming in a week, need to see if they're going to miss September in the next 30 days. But to foreclose we need to hit that 90 day threshold. Right? So if I buy the note, the transfer of the assignments and all that stuff, servicing, transfer, maybe they would miss their September payment. Then they're 90 days. Then you could foreclose. So if they miss the next payment, of course the payoff balance goes up a little bit.

Right.

The payoff balance is a little bit higher than that 445. There's not including basically about six grand of payments that they miss on that. So that's 451. There's about six grand in escrow from taxes and insurance being collected as well. So we just kind of said, okay, let's just to give that 89, but we need them to miss one more payment. Okay. Now if the borrower reinstates, let's say the borrower next month, we buy the note and then the borrower brings the full money due to the table. The, you know, the three months of payments, well that's 15 months. If you hold that note for 15 months now, 15 times 2218, that comes at 33,001, $285 collected in fifth in a year because they're making up to three months plus the 12 months of payments. If you divide that 33, 000 cash flow divided by the 356 purchase price, now that's only about a 9.3% cash and cash return in year one. Well after year one it goes down from there a little bit to just 12 months. Right, but that's year one. Now of course, if they start paying on time for 12 months, could you turn around and sell that note? Yeah, you could probably turn around, sell it not at 85 90. Make another 10 to 15 grand on a note sale. At that point you can make that happen. But that's really only desirable if you're using your own money. If you've got to pay an investor anything above 6%, 7%, you're not making any money on this deal. You're really breaking even, thinking you might make a little bit more on the note sale in 12 months. But you're not really going to cash all much stuff at all at, well at all the first 12 months. It's gonna be kind of hit and miss. Now why is the, the lender selling this note? Because they're only 60 days roughly behind. So we'll go through it in a second. So if they don't reinstate and we do foreclose and it doesn't sell at the foreclosure auction, we now own an reo, a real estate owned but doesn't sell the foreclosure auction. We now take the property back. Now we can tell it, sell it for full value after eviction. Cleaning up, you know, I would finish the fence, you know, do some stuff like that. A little bit of rehab to it. Not much at all. It's going to be in pretty pristine condition. But if the value holds at 519 now we sell listed it, you know, okay, let's expect to sell it at 90% after closing costs and commissions. You take that 10 closing cost commissions. Yes, we're going to pay an agent both sides. Okay, so at 90% of the 590 or the 519, sorry, that comes to 467. 467 minus 360. That's the cost to buy the note in a couple grand to foreclose. We're assuming it's gonna be in pretty good condition, doesn't need much work at all. So that would be about $107,000 gross profit on the Deal. All right, now that's a 29.7% return on investment by taking in 107 divided by the 360. Okay, that's a pretty good day, right? That's if it takes a year, and if it took six months, which was what I would expect this thing to sell in six months, that's about a 59.4% cash and cash annual life return. That's pretty good, right? It does. But you have that big if, what if, what if, what if. Now, to understand the what if, you got to do a little bit deeper dive into the board. And luckily I was able to find some information. So it looks like. Because this is not the only property that the borrower owns. So I was thinking like, oh, they probably tried to rent this, maybe turn this into Airbnb. You know, the house does have that black Audi or BMW in front. So maybe they are living to it, but it's not their only house. So maybe they tried to rent. Would it make sense to rent this property? And no, it wouldn't, because the rent's $2,200 a month. It'd be a very bad rental. Okay, so no, that's not a good thing. To give you a bit of an idea, you can see here, average rent, Media Ranch, 2200. When you map it all out, it's the orange spot on here, the blue spots, and I write about the same thing. The red are a little bit higher, but it's not really going to rent that much more. Plus, you got all those apartments and stuff going on around there. And it is a smaller house. All right, to try to rent it for three grand a month, it's just not going to make sense. How could the borrower file BK when you foreclose? Of course they could file bk. You know, they could drag this up. Now, could you buy the note and have the borrower refinance you out in a period of time? Yeah, but that's probably not going to happen because it's at a 6 and 8% mortgage rate. Rates are still at about that. If the previous lender has been reporting this to the credit bureaus, you're going to have to wait 24 months for this person to refinance out. So it just doesn't make sense a lot to try to do this and turn this into a rental. It really makes sense to a buy the note, then either foreclose or try to force the borrower to try to sell the property and. And make some money on the split. Okay, so let's move on now, I did want to go back. Did I, Did I miss a slide? There was a couple slides in here. That's that. Did I forget the slide? Maybe I did not put it back. So here's the thing. I did a little bit of research on this borrower and found that they own two houses. This is both mailing addresses go to this property. Okay? Now, he's the guy that owns this, has a unique name. He actually works in the cattle industry. All right? He imports cattle, sheep, livestock, over to Asia.

He's a business that does that.

And I found his information, found a working number. It works. I found an email address, I found the website, stuff like that. So maybe that's why they. He's fallen behind by 60 days. But here's the thing. Why is the lender selling the note? It turns out this is supposed to be a Fannie Mae loan, that Fannie Mae wouldn't buy the note because on the bank statements that the bar provided, when it came down to double checking that they didn't have that money sitting in the account anymore, they'd use it for down payment. And they wanted them to have about six months reserves to approve this loan. Well, guess what? The underwriters did not verify that the funds were in the account. And once they closed, the funds were not there anymore. So Fannie Mae would not buy this note. Okay? So that's why A, they don't have a lot of money in the account. The taxes are paid. That's the good thing. Taxes are about 60 or 7 grand a year on this thing. Power's on. Somebody's living, it's occupied. Stop being trashed up, because those are the photos I drove by. So what would you do when I open it up to you guys? What would you do? Would you buy the note and take the risk? I mean, that's a lot of money to tie up right now. Would you take the, buy the note and hope they foreclose? You're not really going to modify it? I wouldn't really modify this that much. I'd want the bar to bring all the money to the table to reinstate. I wouldn't give them an opportunity. Could they file bankruptcy? Yeah, they can file bankruptcy and drag it out for a period of time. So it's, it's an iffy. Iffy. Now, I bit. I went ahead and bid 80 just to see if we could take, get it approved and then dive into the, lock this bit up. And sometimes you're going to bid just to lock deals up. All right? And that's what I did. Hey, if I lock this up, I'll have some time for due diligence and maybe they'll miss the payment come September, which is basically a week and a half. Any questions, any comments? What would you do? What are your questions when it comes to it? Now, if you're not watching this live, you're catching the replay. Feel free to type your questions into the chat roll or message me. You know you always book a call with me@talkwithscottcarson.com that's talkwithscottcarson.comthat's my direct booking link to schedule a call with me to chat about this deal. But it's an interesting deal. Like I said, it's not there. He owns another property in the same count in, in Travis County. Taxes are escrowed in, they're paid up. He has a business, he's, he's an entrepreneur. I don't know if it's a slow time of the year for him or what, but it's interesting to see a little bit of that due diligence research. I didn't have a LinkedIn profile, but I was able to find by doing some Google searches and white pages and kind of doing as many skip trace on the borrower by checking the address. But look, it's a good piece of property looking piece of property is values going up. Has Austin gone through a bit of a price correction in the market? Yeah, we have. Do I think it's worth 519? Yeah, I think it's worth 519. I wouldn't pay 519 for basically a 1300 square foot house. But that's where we're at in Austin, Texas in this area town. Tom it's interesting to see what's going on and that's why if you get a chance, get out and drive by an asset or two, see what's going on. A lot of construction going on, a lot of development in this area. So it's an up and coming area of kind of South Austin, Texas. So potentially could be an $89,000 deal or more, but potentially could also be a 9% cash and cash return if the bar reinstates the loan or files bankruptcy, starts making payment over the next 12 months on this thing. Okay. So always encourage your questions, always encourage you to reach out to me if you've got a deal case date like for me to break down and go through. I'm always honored to do that for each and every one of you. Once again, this is not a bad looking property we go back here, you know, it's good. It had a lot of online information for us to take a look at. It's a nice looking little property. So if you. I made my bid on Friday. I bid the 80 of upbur and we'll see what happens this week. If my offer is accepted or the counterback, I'm honestly, if they go higher than 80%, I'm not gonna accept it. You know, I would need investor funds to fund this. If, you know, anybody's looking to make an above average return on their money, feel free to reach out to me. I'd like to talk about it. I do have somebody does have the money to put this in place, but I still think it's just a bit too skinny a deal for him to be at 60 days. At 90 days, we can foreclose quickly. Heck yeah. They missed that September payment. Boom. We're rocking and rolling and starting that foreclosure and foreclosure come October, November. So. All right everybody. Well, hey, that's all that I've got for you today in this episode of the no closure show. As always, lots of great deals out there. It's a great time to be buying non performing notes, residential commercial notes. We're seeing more and more increased stuff. Please check out our other socials. Make sure you follow us on our number one YouTube channel at weclosenotes tv and also check out our Tick Tock channel as well where I'm posting daily short videos like I am on our YouTube channel shorts. If you're on tick tock more on YouTube, make sure you follow me on there. But go out, take some action, buddy. Have a great week and thanks for watching and we'll see at the top. Bye. Sam Sat.