EP 361 – Pricing Guides

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 pennies 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 notes, Scott Carson.

Good morning, good afternoon, good evening, everybody. Welcome to this episode of the no Closure show. As always, I'm your host, Scott Carson. Excited to be here this morning. Absolutely love the weather's going on. It's a little dreary. I've seen a little rainy outside there here in Austin, Texas. But it is what it is. But I wanted to discuss today about kind of pricing guides for your note business, especially pricing for non performing first for your contract for deeds. And so I'm going to focus solely on the first lien position. All right. Solely on the first link position. I'm not going to talk about seconds. I'm definitely not going to talk about thirds. I'm going to talk about what you should be doing in the market today with the pricing being where it's at. It's all about pricing guides. What I want to talk about is first and foremost, I'm getting emails from people like, oh my gosh, I spent offers. The seller says my offers were way too low, I'm freaking out. Or they say I'm smoking crack at my pricing. Well, the thing I would tell you to do is to push back and tell them that they're smoking crack. So like last night in America, we had Joel Markovitz on, talk a little about some of the assets. He had somebody that sent him a tape. They were moving stuff. We had a little bit of kind of a thing happen last night. Ashley, he sends me a list over Friday. We work on it Friday here in the office to get it up to talk about it last night. And then the seller changes their mind, literally changed their mind about a half hour before and pulls a list. Pulls a list. Now what's funny is that they decided they wanted to sell the whole thing at one tranche. You know, it's a, I kind of chuckled, I seriously laughed about that when I looked at the assets. Like there's no way you're gonna be able sell this whole thing off to one buyer. You have some really nice assets. And he had some stuff in there that was, it's been vacant for a while. So they were smoking some crack. Well, anyway, Joel comes back. Yeah, they think they, they bought the golden goose in this stuff and I chuckled on that stuff. That's fine. Don't waste our time. We went to second round but he brought on some assets though too of second seller especially on some of the reos was smoking a little crack, wanting something in the 88 range on an reo and some things like that. So that's what I want to talk about with you guys out there. What are is pricing out there looking like? And we had Kristen Gerson was. I think Kristen's watching this morning. Hey Christian, good stuff. You did a great job last week with talking about pricing on owner finance notes. Well, I'm not going to talk about owner finance notes. I'm going to talk about kind of the non performing market where we see things at especially on first liens and contract for deeds.

Okay.

Now there's oftentimes people ask are asking the sellers what are you looking for? And a lot of them don't want to give you a price point back because they don't want to price against themselves or they are like they want to get the highest and best which you can understand that. So I always tell people like if they don't give you a true price then go off the stair step model. Now the stair step model, this is a guide, okay. Is a strict guide. I love it. There's people out there that bash this model saying it's exactly what pricing should be at. And I've always said it's, this is a guide. It is not a hard fast aspect. If somebody's not going to give you a price point, what are you going to do? Pull a price out of your ass? Are you going to pull it out of midair and just throw it on the tape? No. You want to have some sort of guidelines to what you're doing. And the best advice I can give all of you is this is a guide and I'll talk about some of the things that affect it. You're going up or going down. All right, so the base thing and this is off of non performing notes, okay. Not Arios, not newly originated aspect, not performing notes, not contract for D. This is first true first lien. So they got a mortgage on it that you're buying the debt on it.

Okay.

Consider it a stair step. You start low and you work your way up. All right, so there's basically two phases to the staircase. We'll talk with it. We'll start at the kind of the mid price point of $50,000 assets. It's got a value of 50,000. You probably want to start Your pricing somewhere in the mid 50% range. 55% roughly. This is talking about what is my light doing here? This is about if you're going buying a one off. Now if you're buying in bulk, you should bring the price down a little bit. Okay. Now this is just a short guide. Relax. There's some things that will affect this amount. So I don't want people flipping out on me. Oh my God. And comments on Facebook or. Oh my God. That's not what the seller told me. Just chill a little bit, everybody.

Okay.

It's a guy. So if you're something that's in the fifty thousand dollar value range, as is not arv. As is. If somebody tells me they're not going to make an offer, I literally put around 55% of the as is value provided that the UPB is a lot higher.

Okay.

Now the EPB is a lot less. That's an equity deal. What you have to realize is if there's not, if there's a lot of equity, like say the house is worth 50, but the borrower only owns 25, you're not going to make an offer at 55% of 50. That would be like 27 5. It doesn't make any sense. Okay. You would drop it down at that point. We'll talk about equity deals in a minute. So just chill off. Equity deals, right. If an assets in the 40 range, my light is going bonkers here real fast. It doesn't like the weather either. If the asset has a value in the 40s, $40,000 range, you would offer roughly 45% as a starting point. So 45% of 40, what's that come to? It's like 20 something right? Now if you go down in the 30,000 range, assets worth 30,000, you know, 30 to 39. Roughly 35%.

Okay.

Anything below 30, $30,000 valued, I wouldn't offer above 25% and that asset's got to be in good condition. The reason for this. Why do I offer so low on 30,000 asset blow? Well, because if you have an expense, an AC still costs the same across the board. All right. A furnace costs the same across the board. If you got to put paint, carpet. Yeah, maybe a smaller valued asset, but you still have costs, a roof that costs and things like that. So a lot of people avoid the lower valued assets. That's great. There's nothing wrong with avoiding it. But if you're going to buy, you have to realize you should not be paying really above 30 cents on the dollar for an asset below 30 grand, you face issues, especially if it's in a longer foreclosure state. Okay, now let's move back up. Like I said, anything below $30,000 fair market value, it's a 25% offering of that.

Okay.

Provided that the unpaid balance or they owe more than what the property's worth. 30s, 35%, 40s range 45%, 50s range 55%. Now if you start getting above higher priced assets, you know, values more than 60, you're going to start seeing, especially buying one off assets where the sellers are going to probably start wanting you to be pushed closer to the 60 range. Okay, 60, 65% range. Now here is where the stair step model guide changes on you. All right? You have to look at foreclosure time frames. All right? If it's in a state like Texas, Georgia, the states like that that have really fast foreclosure time frames, that skew is going to go up a little bit. All right? That pricing point is going to go up a little bit, especially in Texas. Here you're probably going to see something closer to 70 cents on the dollar. Why does that freak everybody out? Because here in Texas it takes 30 days to roughly foreclose. Okay. You can do things relatively quickly and inexpensively here in Texas. Now how would that number skew south? Well, if you're in a longer foreclosure state, New Jersey, South Carolina, maybe parts of Florida if it's not so hot. Florida's hot. A lot of people like Florida, so they're overpaying in Florida for the last year or two.

Okay.

So that's what you have to realize. If not if the market's appreciating and it's a say six month time frame to foreclose, but the market's a hot market, you're going to see that percentage across the board kind of inch up a little bit, 5%, maybe 10%, depending on how fast that market's appreciating. And some markets are really hot, others are really long, slow. Why it's important for you when you, before you finalize pricing to take a look at the days on market. How long is the properties taking a move? Is it six months? Is it taking over six months for the stuff to foreclose? So that's why you adjust that model up and down a little bit or that dial, I guess you could say, depending on where that market is in the foreclosure time frame.

Okay.

Now another number that you should reduce but your bids buy is the taxes owed. All Right. If there's a astronomical amount of taxes, like five grand, if you're at 55% on a 50,000. $55,000 asset. Yeah. Take 55% minus taxes and then go off of that. Why? Because tax has got to be paid.

Okay?

Now, one of the most important factors I can tell each and every one of you, this is a guide, okay? The whole idea is if a seller doesn't give you a price and you make an offering and they counter back, work the numbers. Does the numbers make sense? Take a look at those considerations. Foreclosure, timeframes, does the property need work? Is it in good condition? Is it occupied, Is it vacant? What's the likelihood of it to modify? Because then you have to look at your exit strategies as well about what's the ROI going to be. If it's occupied and you've checked the taxes and the taxes are paid, and then you've also looked and seen that utilities are up to date, the buyer's got a lot of private ownership, then it's probably going to be a modification, a reinstatement of some sort.

Okay?

So looking at that and running those numbers off the offering is still going to be important to you. See if it is smoking crack. That's what I always like to joke about when I see bids that come in way overpriced. Now if somebody's selling you above 70% for the most part, it's not going to make sense to you, okay? They may think they've got the golden goose. That just doesn't make sense. Now you have to look at also some other considerations. Is the asset a bankruptcy deal? Bankruptcy is going to affect your pricing point too on your assets. Now if the BK chapter 13, what does that mean? Well, that means it's probably be a loan mod. So it means you're probably going to have about a five year payment plan on that. That increases the value of the note. You're going to expect to pay more. For BK chapter 13 note, this is basically cash flow, okay? That's probably going to go closer to 70, 80 cents on the dollar because it's a BK chapter 13, the BK chapter 7, it's a liquidation, a debtor where you take the property back. That's going to be basically foreclosure. So you got to look at the time frame on that. Now the most important thing is our good buddy Dan Zatovsky likes to say, oh, you never know, you got to expect for the worst. And I agree to that to a specific point on things. If it's a vacant asset, you better expect it to have and need work done. And then you may want to call Kristen Gerst to come out and sell your dirty carpet. Okay. On the rehab. Hey Kate, Kristen, can you come out and get to meet the biggest bang for the buck? Daddy needs a new pair of shoes. All right, you see Facebook marketplace to sell your sinks and all that good stuff. I laugh but it's, I think it's a genius tactic out there for some people, especially if you can be local to your deals. But anyway, what I'm trying to get at is you have, there's, there's a lot of guides besides just foreclosure, time frames, taxes, condition going to be a mod. Is it occupied? Is it vacant? If it's vacant, I would be deducting aspects. Basically it's been vacant for a while.

Okay?

Because it's been vacant for a while. You probably got weed liens, you probably got taxes owed. You may have people that have broken into the house. You may have squatters. This is why I crack up when people counter back. Oh my gosh. The pricing doesn't make sense. Well, okay, is it an asset you still like? Are you not too far off or is your bid a little bit south of where their bid is? Is it within five grand? Ten grand? If it's close, then send a realtor out, take a look. Maybe you can come back with a true valuation. Because you have to realize most of these hedge funds, most of these banks on these distressed non performing notes that we see haven't had anybody go look at the property in a year. They don't know what kind of conditions in. So if you come back with photos or real pictures of the property and provide more proof in your bids, you'll have a stronger leg to stand on when it comes to the countering back and forth. Is this making sense? I would really love if anybody had any questions here watching live on Facebook live to go and post the comments there so we can kind of go through that aspect of things. I know I'm probably going to forget something. If you're listening on itunes, Stitcher or any of our smart TV channels. Awesome. Thank you very much. Love, love that you're watching this especially on our new network breakdown with over 50 smart channels out there. I'd love to hear back from you guys. If you are watching this, feel free to shoot me an email at Scott we close notes dot com. I'd love to see if you're watching this on, on any of the Roku's or other Smart channels that were out there across the board. If you're listening on itunes, stitcher, as always, please feel free to drop me a message that's got we close notes as well and we'd like to talk with you about that. But the thing I also want to keep in mind, like I said before, let's do a quick little recap. Before anything below 30,000, you probably shouldn't. It's just a first link position. Probably shouldn't be offering above $0.25 of the value in the 30s, 35% 40s K assets, 45, 50K assets, 55 above 60,000, you're going to start seeing higher price at that point because the equity, the check amount is bigger obviously.

Okay.

$100,000 asset, you're probably gonna pay somewhere in the mid-50s to 60s.

Okay.

Now I would like I said I would not go above 70% unless it is in a state like Texas, fast foreclosure or the foreclosure is 90% of the way done and the property is in great condition. Okay, so I'll get this contract for deeds in just a second. But like I said, that's the stair step method from the low 30. Upwards of that take a look at the foreclosure time frames. Higher foreclosure time frame, you reduce it high taxes, you reduce your bid by taxes owed. It's in good condition. Great. That's the kind of thing, hot market, it's appreciating market and you're going to ride that market up. I made a lot of money in Florida by buying at a right price and writing it up. While I foreclose on things. Now, I would not necessarily count on the extra juice on appreciation. I would focus on where my number's at. If it's vacant, I'm not a fan of it because on a vacant asset you're going to have to expect some work to be done. That's why you always want to be conservative. If you see that the asset is vacant and make sure you put eyes on it and see if you can't sneak inside with a boot hammer.

Okay.

Now contract for deeds is a different animal of aspects. Okay, so Laura Blunt comes back and asks a question here, says what are your thoughts on newer CFDs with less than 10 total payments that are non performing? I got no price expectations. I use basic stair step and they came back with 60 to 70% expectations which just a bit upwards because they look clean. Okay, great quite question. Great comment. I would never pay 70 cents on the dollar for something that's a non performing new cfd. It's less than a year old.

Okay.

Now what I will look at is a couple things on contract for deeds and now a contract for deed to realize it's basically going to be an asset that has a value less than 50 grand for the most part because most banks aren't going to do most investors or hedge funds aren't going to do a CFD for an asset over 50,000. They're probably going to do a true first mortgage and use a mortgage loan originator to write a mortgage on it or on a financing contract. Free deed is something that they're offering on assets below 50,000 because it's an easier eviction or cancellation of contract if the borrower doesn't pay. So Laura, to your note or basically if they're not performing less than a year. I'm going to look at a couple of things specifically with contract Freddie's. I'm going to look at the amount of down payment.

All right.

I'm going to look at the amount of down payment they put down. If they didn't put anything down 500 bucks or less than 1,000 bucks. I would treat disease as reos.

Okay.

Now you have to look at the cancellation time frame in those states too. Michigan is going to be faster than like Ohio. Ohio's still going to take you a good six months to finish the eviction and cancellation of contract and go from there. So keep that in mind.

All right.

Eyes on the property. Are they still occupied? Are the utilities? I would be calling the utility departments and checking taxes out on that stuff. Now the thing is you to keep in mind too is if it is occupied, what's your return gonna be if you do get it? Re performing?

Okay.

I don't like to really pay above $0.50 of the dollar at all. I prefer to be in the 40s of contract for deeds because the fact is they often are lower valued assets.

Okay.

Prefer to be 30s most of the time because they're usually lower valued assets and you're gonna need some work. And lower value assets, depending on where they're located may not have the best borrower classification, a borrower pool to draw from. So most of the cases if they don't get re performing we're moving to eviction looking at, looking to sell it, not looking to re originate. So if they think they got the golden goose of 60s and 70s, I kind of chuckle at that because that just doesn't make sense. They can try that and you can always adjust your bid back if it makes sense for you on a one off basis or a small bulk basis. Yes, they give you numbers, they counter you back. Okay, take a look at it and go from there. But still the same thing. How much in taxes are owed, how much utilities, how clean is the property? Was it sold as a contract for deed as is because it needed work? That's the thing, you look at newly originated CFDs. Just got to be careful about that. Okay, hopefully that makes sense now. And Steph says here very nicely she just figure out what your wheelhouse is basically with what you're buying, whether it's your contract for deeds or your first liens and stuff like that. Now a thing that keep in mind as well is the only time I might pay above 60 cents on the dollar is if there is a lot of equity in the deal.

Okay.

So going back to our previous comment, hey I see Dan Zatovsky's on here giving a thumbs up on this pricing stuff. Only time I can go above 70 cents a dollar is if there's a ton of equity. So let me give you an example. Say the house is worth 50, they only owe 25, then I would probably come in at 60 to 70 cents of the unpaid balance and offer somewhere in the 20s, you know, a thousand for that knowing that I can evict and take the property back. And then there's a lot of equity on the back end side. Okay, now that's on a contract for deep on a non performing note, true note, I'm still going to be very conservative on my bid. Now if I take the amount owed, the unpaid balance plus the back payments and I add that number, those numbers together and that number erases the equity, then I basically am buying a note that has no equity on it. I'm still going to offer below UPB never go off a payoff. There are some sellers, some funds out there that want to go off a payoff in their sales price and I'm sorry, that doesn't make sense to me. Okay, that's great. But I'm not going to go off a payoff, I'm going off of unpaid balance. That's where this market is at, that's what we bait off of. I'm not going to pay off the unpaid balance. Okay, care if it's 30 grand, I'm going to go off of the UPB. Now if there's a lot of equity, that's why I say there's a lot of equity still. I still can be conservative because you to realize if you foreclose you're going to get paid off on what your payoff is. If your payoff is way well below the value of the house and the house goes to foreclosure and it sells above what you're paid, that money doesn't come to you, that money goes to the borrower. So you, to keep in mind, you can type your money for a while, go through foreclosure, only get a small amount. So don't bid high percentages off of upb. If there's a lot of equity, okay, you only want to do off. You still have to look at the value of the house and determine it. But this is why often they'll buy assets that have a lot of equity. Now contract for deeds. I'll do that off of unpaid balance. Because there's an eviction, it's not a foreclosure, that borrower is not going to get entitled to that equity unless it's in the state that requires you to foreclose or it falls into that. If they pay 20% down at the time of purchase, the time of that loan, original, not 20, then it got 20% equity at the time before close, but they paid 20% down payment at the time of purchase. Okay, Lord comes back here, says we kept our bids in this 48ish 67. We thought there was some LSD mixed in with a crack. That's funny. Yeah, exactly. And you know what everybody, people are trying to sell stuff that just doesn't make sense. The beautiful thing about this time of year is a lot of that LSD and crack will wear off as we get closer to the end of the year. People get more motivated to move items. And so what I would do is just follow back up. They countered back higher than what you want to pay. Hey, follow back up with them in 30, 60 days. They, as they hold on to that asset every month, they're incurring costs, servicing taxes, other things along the way. They may come down their price. Who knows? Okay, so the biggest thing I can tell you, everybody out here realize what you're looking at. It's just not a hard number. Just don't. Well, I'll run numbers in a spreadsheet. I'll run numbers in a spreadsheet. If I don't get those are guides. Like if I take a spreadsheet, like last night before we got on, I was looking to it. There was, these were assets that were like 70, 80, 90,000. So I'm putting those at 55% at least. Okay, at least I'm going to put it at that amount and then run my numbers or take 12 months of P and I divide that by my pricing of what I would make bid and see if the ROI makes sense. If the ROI is at 7,8% on a re performing, I'm probably not going to buy it. I got to look at the equity. In that case, it's a true foreclosure. I'm not to foreclose to make any money. I still want my return to be roughly in the mid-20s on the back end if I foreclose. So it's at least worth me worth my time of making 10% and also worth my investor's time. Biggest thing you have to realize if you're gonna probably have to put some paint and carpet in each one of your assets to get it marketable, to get full value on that.

All right.

You have to expect it if you're overpaying. Like last night they were talking about like an asset being worth 139. If you put 30 grand into it and the guy was 185, I'm like, that's still too skinny. That just doesn't make sense to me. I have to get the highest point in the market to try to get my most amount of return. Why am I going to work any, do any work to make five grand or ten grand in a deal that takes a year? That's just not smart thinking to me. Okay, as I say before, stick to your guns. And Chris Savannah, Savannah Investments there loves the same thing. Stick your guns on your pricing. Yeah. Look, just because they want something and you can't come to a point, now stick to your guns. There's plenty of deals out there. There'll be more hitting the market before too long. And let's see here, what is stuff he said. Laura, sometimes no matter what logical bid price you offer, the seller may have pipe dreams of what they think they should get or they have to get. And as time pass, it changes sometimes too. As you said a little bit LSD might be jacking up the correct pipe. Also keep track of your bids that they didn't go through the first time exactly. Because following up here in the next 90 days is be very valuable to you. Now let's talk about performing notes a little bit for a second here. I see people like, hey, I want to make some bids on some performing notes. So a performing note is I constitute somebody who's been making payments for a while now. A true performing Note has got 12 months of seasoning. I don't care if it was non performing to begin with. If it's got 12 months of seasoning so that 12 months of seasoning on it, that's great. Okay, six months of performance. Some people will look at it. What I will look at is off of a yield. So what I do when I figure in my pricing and this is a pretty common thing, take your payments, take your 12 months of P and I divide that by 12% or 15% yield because that's usually what you'll see most performing notes that are reperforming notes that we sell, it's between a 12 and 15 yield. Now whatever that number is is roughly what you're offering is and if you take a look at that number compared to what their sales prices because that's a performing note cash flow especially 12 months of seasoning bar put some skin in the gang or it's a newly originated notes where they put some skin in the game. That what's, that's what you have to look at 12 to 15% is what I want to see on my performing stuff for me to be able to make any money. Especially if you've got investor money that you have available to at 6 to 8% and you want to arbitrage the difference, you can do that. But if your investment is at 12%, it's hard to make any money buying a note, a performing Note at a 12% yield where you're not going to make any money. Now Dan asked a question here. If you have to foreclose on a cfd, can you still keep the equity? Depends on where it sells at the auction, Dan. Now if it doesn't sell at the foreclosure auction and you take the property back. Yeah, it's yours.

Okay.

You're going to put a bid in at the foreclosure auction on a cfd. So if you've got to go the foreclosure route and you're owed 40 with your payoff and everything and it sells for 45, that five grand is going to go to the borrower, not back to you.

Okay.

So it all depends on what your bids is. It's above your bid and what you're able to bid, that's going to go back to the borrower.

Okay.

Doesn't go back to you, you take the property back. Then of course then it's an REO at that point you can sell it for whatever you need to at that point.

Okay.

Dan Depen Fusion Notes out of Denver, Colorado. So now the question people always ask me is what do you Expect in pay in rehab costs. And I'm like, listen, rehab costs can go, but I don't want to do heavy rehabs, okay? That's not my business model.

All right?

If you're a one off investor and you're doing this as a hobby and you don't mind the rehab, that's great. You can do the rehab aspect. That is not my business model. My business model has changed over the years, okay? My business model is I want to buy occupied assets, all right? I want to get the bars reperforming as best as I can. If I do, then I have to take the property back.

Okay?

Then I try to sell that as fast as possible. So the question is here that I want to throw out to everybody here. If you're looking at assets that are going to need some work that are outside of your hometown or place where you've got friends and families, you're probably hurting your business. It's not in one, two, or three markets where you have great teams that you can put together to do this rehabs. If you're doing a lot of one off stuff, you're actually penalizing your own business and holding your business back by being spread too thin across the board. How do I know this? Because I've been in those shoes in the past. You don't want to be doing that. You want to be sticking your rehabs to Italy. Just a couple markets, and be sure that there's plenty of work there. You don't want to be. I'll give you an example. We discovered this in the Flint market recently when we were out there doing our roadshow through Detroit. We were having breakfast, having coffee and donuts with Jennifer and Adam Adams just outside of Flint, the Saturday morning up there. And Adam was telling us about his Flint assets. He was having a hard time getting rehab crews to come over from Detroit to do it. There weren't a lot of people in Flint that want to do the work they did. They were through the nose because they were being so busy with what's going on to Detroit. So keep that in mind. You're buying in secondary markets. A lot of your labor costs are going up. I think Kristen talked about this earlier on last week's show. She's seen labor costs, especially in hot markets like Dallas and other areas, go through the roof because people. It's a supply demand. There's a lot of demand for it, and there's little on supply. So that's also something you want to keep in mind when you're looking at assets. Especially if it needs work. I would be pulling back on the assets that need any type of work just because I don't want to run into it with it, especially if it's in a prime market or especially in a secondary market. Now, I'm not saying you can't get roofers out there, you can't get some people to come out there, but it's probably going to be more your local handyman versus a true GC and a crew. So you're going to piece that work together and that's not effective in a long run business model as well. If you. Okay, question here. Chrisylvani. Having out of state rehab is a huge time suck and not worth it. Yeah, it is. That's a suckage you don't want to embrace.

Okay.

And then Jim says when they depend on foreclosure or eviction. So Jim, so Jim asked a question here. This goes back to CFDs. Yes. If you evicted, you're not worried about it.

Okay.

You just take the property back there. It doesn't really matter with what the unpaid balance is. Exactly. But if you do have to foreclose in some states, you've got to go through a foreclosure route in different aspects.

Okay.

Then you have to keep that in mind. That's gonna be more a conversation with you and your attorney about what's going on in that state specific, that contract for deed law. Each state's a little bit different when it comes to contract for deeds. But I'm loving the questions, everybody. Thank you for asking these. It helps us out here as well as always providing great information to you guys out there. So let's talk about. If you're going to be buying assets in the market that you're going to rehab, you have to expect to take a look at things. I mean if you expect some hidden costs, whatever your bid is, if you're getting two or three bids on your construction stuff like that, you probably need to go in the middle row. You don't want to go the low route on your bids because they're going to undercut you and they're always going to come back and ask for more. It's just the way it always has been. I've never had a low ball bid ever coming on budget.

Okay.

Never had that happen. A highball bed, you don't want to do that either. So somewhere in the middle there is really what you want to do. But keep that in the middle bid, especially in rehabs in mind because that's. You got to look at it all right, what's the time frame for that? What's the market doing where days on market. Just because you can pick up an asset cheap doesn't mean it's a good deal until you start looking at days on market. I had a investor coming one time. It's like, oh, I'm buying this asset in Texas. I'm getting the Texas asset, like 30 cents of value. I'm like, Whoa, where's it at? Like LaGrange, Texas. I'm like, whoa, wait a second. You know where lagrange is at? Like, yeah. Is that where ZZ Tops from? I started laughing. I was like, what's the value of the asset? Well, it's about 80,000 after repair. Like, okay, that doesn't make sense. What's it worth right now? What is it in your note business? All about what the value is, as is right now, okay? AS is not arv, not after repair value, okay? Because a lot of fix and flippers get into the business going off their mao, as they used to call it. The maximum allowable offer on a fix and flip would be, which should have been ARV times 70 minus repair and money costs. That would have been your highest bid. You don't do that in the note business, okay? That equation does not work. It's not computable with notes. If it is, you're paying over pain and you're over hurting. Especially when you take the asset back or don't take the asset back in a mod. So going back to the range, guys paying at 33 cents, it was worth like, oh, it's like worth 60. It needs about 10 grand worth of work. I'm like, okay, what's your minute cost? Well, I'm using hard money is going to fund it to me at 12. Like, oh, that's going to hurt. I go, what are the days on market? He goes, 368 days. I'm like, oh, you're going to hold that asset? You have to expect to hold that asset for a year to get that thing sold. I said that would be the biggest red flag to walk away, okay? Walk away from the asset, be done with it, okay? Another thing that's important in your pricing is looking at the market too. If you see a lot of empty houses or trashed out houses in your block, it's bringing the value down. No matter what their BPO says or their Zillow, there's zestimate or they, their AVM says, take a look at the comps, see what they're looking at. Because oftentimes they're buying these comps and big bulks or they're adjusting the value to best hit their number.

Okay.

I know the company that actually adjusts the dates of the comps and you can't find the comps anywhere. They actually go on and adjust the dates on their proposal values to escalate the values. And I think that's fraud. I'd spread out fraud. They can't provide the true comps and stuff like that. One thing to get a cma. But when you pull a true BPO and the dates are adjusted on sales and time frames on sale, that's straight up fraud. That's not. You should not be doing business with people like that.

Okay?

Like I say, everybody going back steps. Lots of reason not to buy certain assets. Those reasons are so important to heat. Yeah. Look guys and gals, if you're not going to recommend anything in the note space or the CFD space, I always say pick out a couple more. So I started off by saying picking out five states. Most of you need to probably focus on two to begin with. Two or three. And get to know that say know the timeframes, know your attorneys.

Okay.

Get to know your vendors in a local area. Talking to other investors in a mastermind group or our WCN crew page rang those pages talking to people who are using things.

Okay.

Because those vendors will often help because of its economy skill. If they can get business from four people, they're glad to do it and keep the price that makes sense across the board. And you don't want to be trying to do rehabs as Chris Venue saying. I guarantee Dan Zadovsky and a lot of the people say focus on one or two markets. Get to know that market, reach out to the vendors, reach out to the turnkeep. You've got to align yourself with like a Michael Jordan from Strategy Investment Group out of Detroit to help you out with the rehabs. That's a great group. Or Dave Parchin from Columbus Houses. Buy Columbus Houses out of Columbus or any of our buddies are doing turnkey stuff in any parts of the country. Focus on those. Those are great people to work with. In some cases they may not make sense for you to buy debt in that place. And rehab, it may make better sense for you just to buy a rental attorney in those cases. That's fine. Depends on what your schedule is like. You are rehab and assets. You're going to need this to be a full time. You can't do that on a part time schedule because you will just get Run rapid. And your foreclosures and your rehabs will take forever to get done. Gail. Good morning, Gail. Yep. You'll have to watch the valuable bit later. It's a company. I doubt Texas here. Jeff Wolf. Wolfman. I've seen it on a couple other places. I've seen it from some other like wholesalers do the same thing too. So it's just not really one company. I've seen wholesalers adjust things or I think we've all seen things. I've seen where people have sent over values and they had three BPOs and they went with the highest one. They left the other two BPOs in the file even though those values came in low. So there's a lot of people that like to adjust and escalate bids. You have to be careful of that. Okay, thanks for bringing up there. Stuff says none of the city requirements and what specific or special rules they may have or liens, license and registration, security. Just a few things that are so different across the country. Hashtag Cleveland. Yeah, Cleveland's one of those cities that is not making it beneficial to fix and flip homes because they put a. What is a $10,000 bond on every new assets, every house that you got to take it. That just doesn't make sense. They're making impossible other areas of the country. If you're buying, I think Seattle, if it turns it around, you gotta pay somebody to leave. That just there's things that are going on in different parts of the country that just don't make sense. So that's why I think the biggest bang for the buck is not those higher end cities like that, not Cleveland, not like Cleveland's higher end, but like Seattle and things like that. Let's focus on your markets that make sense. Focus on assets where somebody's living in them, somebody's made some payments. Maybe they had just a financial hiccup. I got a phone call from a borrower yesterday, actually called the office here. I've answered the phone and the guy, his wife, the older guy on the phone, knew that immediately. Wife has been going through cancer. He's been sick. He's been working with the city on the utilities, paying the taxes and stuff like that. Been late. Got a letter from our attorney to start the cancellation. Picked up the phone and called us, tracked us down. I had a nice conversation with the guy talking about things. I said, listen, that's fine. I'm gonna put you in touch with my asset manager who handles that stuff, can figure out what your payments are. We can create something that Makes sense in a win win and stuff like that. I'd much rather keep somebody in the house who's taking care of the house, who has a vested interest, has been there for five years, six years, trying to help them out, as long as they're willing to meet me halfway. What's that meaning me halfway? Hey, let's start making a payment plan. Let's get you started on something. I don't necessarily need to take your property back. I'd rather be the bank on it. And so that's what's so beautiful about being a bank, is cash flows king. And yes, you do have equity because you've bought the note at a discount. So you've got that note equity in there to do a lot of stuff with over the next six or 12 months. Or if they do stick their head in the sand and won't call you back, then you have the foreclosure aspect or cancellation of contract. So there's a lot of things you can do. But like I said before at the very beginning, that stair step method, all right, that stair step model is a guide.

All right?

It's a guide for you. It's not a hard, fast rule. It's a guide. And you don't know if it's going to be accurate. Depending on what the seller, what their expectations are. So that's why I was asked, it's pricing expectations. Before you do anything, somebody the other day, hey, do you want to jump in on this deal or help me out with it? I'm like, okay, what's the pricing? He didn't know pricing expectations. Like, okay, first and foremost, before you send me anything, I don't even, I don't care about the address or care of the property until you have pricing expectations, it's not worth me even wasting my time on, okay? Until you know what the price is, okay, you don't really have anything. If they won't give you pricing expectations, okay, at least they tell you that highest and best, okay. I'm not gonna waste my time with it most of the time unless I'm gonna buy in bulk. If they want the best and highest and an auction basis, that's fine. Let somebody take the asset down. I'll wait and follow up the week after. Hey, did you sell that asset? What was the final bid price? Okay, great. Well, if they don't close, here is where my bid came in at, or I wouldn't bid individually and go from there. I'm not going to get an option. Fighting point. Like a lot of people do for the most part now, what I do like is if they've got strike prices, here's what we're looking for, here's where we're at. It's great. Then we can make some things happen and you'll see more of that happen. You got to realize, everybody, it's only October, middle of October right now. We still got two and a half months left in the year. And there's about. You can get crazier as we get closer to the end of the year. Keep that in mind. Follow up with your bids. Your bids came in low. You think the people are smoking crack, that crack will wear off in reality with sit IN hopefully before December 28th or 27th on that aspect of last week. Okay? Hopefully it was helpful. Everybody, like I said before, just use the stair step model as a pricing guide. It's going to vary a little bit, up or down, depending on a lot of things. If you see people bashing a stair step model, tell them and ask them how are they coming to pricing and I guarantee they won't have an answer. Then I guarantee they'll probably be overpaying. And I'm not saying pricing has not gone up. I will agree to that in a lot of places. But you have to realize, stick to your guns. You're in the note business, not the REO business. You're in the note business, not in the fix and flip business.

Okay?

You're in the note business, not the rental business, okay? A lot of people want to get into one thing and they end up doing four or five other things. That's fine as long as you know that you're prepared for that. But keep in mind, the more straight and narrow and focused you can be, the better off you'll be in the long run. Guys, go out, make something happen and go make some offers and we'll see at the top. Everybody have a great day. Bye.

Sam.