EP 443 – Small Commercial Notes

This is the no Closers 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 this episode of the no Closure show. As always, Scott Carson here to talk with you today. Hopefully you guys have had an amazing weekend as this kind of basically falls on our Monday here in Austin, Texas. But it is a gorgeous day today after it's just a rainy kind of nasty weekend. And today's topic, we're gonna dive in a little bit some stuff and some small commercial notes and kind of diving into that aspect of things because we haven't talked about that in a long time and we're starting to get not really bombarded with smaller commercial notes, but we're starting to get quite a bit stuff in across our books. And so we thought we'd spend some time going and talking about that today. But I wanted to talk a little bit something first and foremost about, you know, it's kind of, it's an interesting time out there. I'll just put that it's a very interesting time with what banks are doing as far as buying and selling assets. And I got an email in today from somebody who's asked me a question, a listener. So thank you for listening and asking. And the question was about our pricing. How are we getting pricing to be kind of where they're at? Because this gentleman, Sean, he goes listen to your pricing options podcast today episode and then you said that you only pay 30 to 40 cents on the dollar for non performance. Correct me if I'm wrong. Well, that's usually paying 30. That's kind of right depending on when that episode was done, Sean, for sure, because some of the tapes that we've seen for non performing contract for deeds either have strike prices of 60%, 88% of UPB, values greater than UPB and it's all equity deals or they don't accept Our bids at 50% of UPB. How do you get that much of a discount buying big tranches at one time? Your reputation. What please. He also goes on to say he's new to notes to be closing on his first deal next week. So here's a big thing and Sean, I'm going to answer this question by saying it depends if there's a ton of equity on an asset above what's owed, you're going to pay a higher percentage because there's all that equity. All right, so if there's. I'll give you some numbers. Let's say the value of the property that you're buying the Note on is 75,000, but the unpaid balance is 50. If you're going to end up foreclosing and taking that property back, you have to expect that you're going to get paid off of the foreclosure auction where you got all this equity. That's why a lot of the sellers out there are trying to get 60 to 70, 80% of UPV. Because there's a ton of equity on the backside doesn't mean it makes sense or because you have to still look at your numbers and go from there. A lot of people are out there smoking crack. They think they're going to get something. That's why they price it at it and come back. So, oh no, we want 80 cents. So they won't even counter your 50. Here's the situation now, if it's the other way around, the yellow 75 and the value is only 50, then there's no equity there, it's upside down. Then a normal 50%, 60% price should be pretty make sense. When you say you're brand new to notes, that's kind of what a lot of people get bogged into. They come from the fix and flip side, the ARV or the afterpay value. And that's not the case here in the notebooks. You're buying off of unpaid balance and you're hoping that the value is less than the unpaid balance. That way you're bidding off of value. Now if you're buying off value, there's a lot of equity. You have to expect the price to be countered closer to upb or full payoff. It just is what it is in a market like this. Now that's not saying it's going to close that way. One of the best things that you can do as a note investor is to follow back up in 30 days, fall back up in 60 days, fall back up at 90 days. And that's why I like, why I like following up with bids is you often get bids that you bid on that fell through and now the seller is much more motivated to move it. You want to get it cheaper thing we're doing. So Sean, hang in there, buddy. Hang in there. It also one thing to keep in mind, see where you're buying that asset. If you're buying, I Think Sean, cities from Phoenix, okay, you're gonna have the higher price there because if it's in Phoenix, if it's in other areas, which I'm going to bet for contract for deeds is probably not seen a lot in the Phoenix market. But it all depends on where you're buying to. Also eviction laws. If the seller is on a lot of legal, if it's performing or semi performing, you're going to pay a steeper price for that than if it's totally non performing. So when I say 30 to 40, kind of scarce, that's a fuzzy guide. For the most part it's a fuzzy guide depending on the situation of the asset and then going from there. Just follow up and look at things. But if you're also dealing with that out there, if you're a note investor and you're kind of struggling, you probably need to take a class. If you've never taken one of our note buying workshops or our no buying blueprint, really phenomenal thing for you to get started and that's a little pitch at note buying blueprint.com or noteblueprint.com sorry. Anyway, let's dive in. The main topic for the main topic I really want to talk about today is what to do when you're seeing commercial notes. Now if you're reaching out to banks on a regular basis, you're calling, you're following up, you're doing the things that you should be doing in marketing. I mean it's the second weekend of April, it's really the end of the first quarter, then it's the starting of the second quarter. Between now and the next six months, banks are probably going to be moving a lot of stuff just because they expect probably a downturn. They probably won't get this stuff off their books before the market turns around or the market rebounds or does something strange, who knows with the election. Right. So the thing that I want to discuss, let me pull this up here. I'm actually, I've got a list that was just sent to me by a gentleman. Thank you Casey. I'm sorry, Case on sent me a list of some non performing stuff that just came across my books this morning. All right, so the thing about commercial notes, when you're looking at stuff, this is stuff that's usually held by the bank and the banks are more interested. Yes, I said more interested. Are really interested in probably getting most of their stuff off of their books. That is the small stuff. And by small stuff I mean smaller balance stuff below a million dollars in value. Like I just pulled this spreadsheet up and yeah, we got all this is small balance, commercial that I'm looking at. Yeah, yeah, 129. Although there is $1 million loan on here that I'm looking at. Okay. And it doesn't say what it is, just his loan name. Here's the street address. So the biggest thing when you're looking. Oh, here we go. You have a funeral home. Oh, this falls in the glass of small retail. You've got funeral homes, small retail, strip mall, freestanding office, motel, hotel, strip mall, restaurant, bar, restaurant and residential. So storage warehouse. Okay. That's a two million dollars and only quarter million dollar value or epb. Okay, Same thing on this one. Okay, so we got some stuff. Auto repair, auto repair, small retail with five. Okay. So the great thing when you see stuff like this is every commercial deal is going to have a different story, just like in a non performing thing. But the thing that's different about commercial, it's going to be harder to find comps because two things. A vacant commercial property is not as attractive as when it's occupied. Why is it one that's occupied more attractive? Well, you've got rents and that's really what commercial loans are all based on. It's on the cash flow, it's on the cap rates. Now you'll have somebody tries to sell cap rate on a vacant property with what you could get if you moved in or off of square footage and going rent rates in an area per square foot. But the thing you want to look at now what's nice about getting these directly from a bank is often you will have the original financials on this stuff. Now do they have the origination dates on these things? Appraisal dates 2002? Yes, they got a lot of, they got appraisals all over the place here. So that's not really a good thing. All these are due for 20, 18 and 17, so some of these are behind. Okay, great. KSI was telling me that the bank was one par for a big chunk of these. And I'm like, okay, well they got par in the past. I love it how bankers often think that what they got in the past is what they're going to get today. Or what sellers or buyers paid for or got in the past is what they'll get for today. That's not the case. Okay. You always have to look at where the assets are today. Is it occupied? How, how far in the lease are these tenants? Are they paying on time? What's going on with the market because you've got stuff in Pennsylvania, Illinois, New Jersey, Philadelphia, Pennsylvania Chicago, North Carolina, California, Pennsylvania, Hemingway, South Carolina High Point, High Point, North Carolina, Cleveland, Hempstead, New York, Raymondville, Texas Big Bend, Wisconsin, Freeport, Pa. And back in Chicago. All right, these are all the places. So the thing that you have to look at is basically you can't run a stair step on a commercial asset list. There's no way you can do that because it's all the way off. Some of these are values of these don't. I'm sure if we looked online, we might see some of these that were previously listed for sale. You might find some commercial assets on LoopNet and that's a great place maybe to find previous financials if the seller is looking to sell that stuff off, which is great. Now it's nice in commercial notes is once you buy the note on a commercial deal and if there is tenants oftentimes in the mortgage, the loan agreements, you'll see a right to collect rents once the borrower goes in default. That takes away a lot of the whole borrower computer to pay Paul Aspect or the borrower using the commercial property. The commercial rents as basically its own personal ATM without paying, you know, paying the mortgage, paying the bank in this case. So what we do basically with when we look at this, I have a spreadsheet in like this is you have to really kind of become the Sherlock Holmes. All right, what do you mean by what I mean by Sherlock Holmes? Well, you've got to first see what the property looks like. You probably need to talk to a commercial agent in the area. You need to get pricing expectations. What is the seller looking for on these? Okay, if there is a ton of equity, all right, great. You probably are going to pay close to paid off. All right, or close to upb. You should never go off a payoff because that payoff is in your right to collect on. And hopefully if there is a big payoff compared to upb, then it does make sense paying off a UPB at that point. I mean, you're going to bid off EPB anyway, whether it's equity or not. But it's going to be a higher percentage if there's a lot of equity behind the asset behind the loan is what I mean by that. So if they finance these commercial loans at 75, there's 20, 30, 40% of equity. You're going to have to come in pretty close to the unpaid balance to do that. Now if it's vacant and it's not the same type of asset that it was when it was originally originated back in 2015 or 12 or whatever like that. Then you have to look at it and justify your bid. Now when you're dealing with a commercial lender, commercial bank, what you have to realize it's a little bit more formal process than you just submitting in a spreadsheet with bids. They're usually going to want a true letter of intent. It's usually a two page document talking about what you're looking for. As far as I'm going to need this, this and this. Here's my bid. If this works out, here's long, I need to close and go from there. It's going to take a little bit longer for due diligence on commercial notes than a residential deal like you residential deal, you're pulling comps, you're having a realtor drive by, you're looking at the payment history, you're going from there. Well, the commercial, you're going to look at the rent rates if you can find them, the rent rolls, if they were provided the value. What's going on in the market? I'll give you an example. They've got a couple self storage units on this list. Well, what you're going to want to do is do a little due diligence, call up the self storage, act like you're trying to rent a spot, ask me, drive by the property if you're not there, find out what the rent rates are, how busy are they, how occupied are they. And so a lot of banks, especially in the self storage side, when you're looking at self storage, you want to look what's available within 5 mile, basically 5 mile radius of your location because that's going to tell you how full you're going to get. It's also going to tell you what the appropriate rent rates are for a unit or one of your tenants. You also have to look at the expense ratios on things like that. I mean an apartment complex you're gonna see somewhere between a 45, 55% expense ratio depending on whether it's individually metered or not individually metered. That's a big difference. Especially in the smaller apartment complexes where you see a lot of larger apartment complexes, usually it's individually metered. It's a little lower expense rate cause you're not having to collect. Now if it's not individually meter in an apartment complex then you're having like either a collectomy, gas and utilities, trying to split that up a little bit more of an expense for you. That's why your expense ratios go to 55% versus 45. Self storage is somewhere between 28 and 35% based on the size of the operation. Now the bigger the number of doors and self storage facility, the lower the expense ratios are because you've got dollar cost averaging or you've got the cost being spread out further across the board. Just makes sense that way. Also, you don't have a lot of the, you know, on site living. You may not have a lot of the other stuff. You may not have a lot of utilities obviously because it's covered all in the one spot especially unless of course it's climate controlled. And then you got to look at that being a little bit more expensive than something that's just sitting outside. So there's a lot of moving parts. And this is why I like Curb Marshall because it's a little rare error. You probably want to reach out to a commercial title company in that city to have them pull how to report not only in the property but also in the borrower if you can track down who the borrower is. Now a lot of times, especially small commercial, it's pretty easy to do that bigger commercial. Sometimes you'll have smart people that are using and creating separate LLCs or separate entities just for that one commercial property, which is smart. But in smaller areas, smaller commercial stuff, oftentimes the borrowers may have multiple properties which works in your favor that if you don't get made hold the foreclosure auction or whatever, you can not whatever by getting me holding and take the property back, you can then slap a deficiency judgment against their other properties. All right, so that's the thing to keep in mind. Now when I look at this spreadsheet, the first thing that pops up, let me look at here, look at the borrower's names. So loan name gives like last names. Yep. Now there is one. I guess there's an auto auction that's an entity name. It looks like this last name is what it says on here as far as the loan. Now you're going to have to double check to see how that property is titled over. You also make sure you're actually it's the property on the loan, not a business loan. I see that happening quite a bit like oh hey, here's all the assets. Well, I don't want to end up buying a, I want to buy a cherry picker or a backhoe or your receivables. When I'm looking at the commercial note business, I like the property, one of the real estate. But I also don't want to buy unique properties that are gonna end up being vacant. Like I don't want to own something that I can't use. All right, I'll give an example. Like I don't necessarily want to buy an auto bay or a gas station. Now there are some people up there love gas stations and that's why it makes sense to market these days. If you find somebody that makes sense and the numbers look like it makes sense, then I would reach out to people in your network that maybe already are gas station owners in the area or they're self storage owners in the area. Maybe they'd be an opportunity to take over another property. Maybe. Now the beautiful thing is if you can find the financials. Cause that's what it's all going to end up coming down to. What are the financials? What's it going to look like? All right, and that adds value to the loan sale. If the bank's got current financials, great. That helps you with your due diligence. It helps you look at the numbers. Not estimated financial but actual financials from the borrower. Now oftentimes banks will require that from an annual basis. They're pretty regular basis from the borrower. So they know everything's rocking roll. Now what's probably happened. I don't know if these are not. Well these all look like they're non performing because they're the due dates are all as of last year except for a few of these. And one thing too, it's important to take a look at this spreadsheet. Looks like it was marketed loans for sale 325 so it's about three weeks old, two weeks old, sorry. So I like to see who is the creator of that spreadsheet and oh, I just got a name on here. Now it often tells me the offer of the spreadsheet is often the person who works for us. So now I have that person's name here. If I have question, of course I'm going to reach back out to the person that sent me the spreadsheet. That's the first and foremost. But if he doesn't have any questions or any answers to my questions, I want to go direct to the bank, I want to direct to the source. All right, so there's a few people that pop up on this with that same name on LinkedIn which is okay, so I'm going to type in that person's name and just type in commercial. I could just reach out to the my local title rep and say hey, who's the most recent lender on this one. Or I could jump on. Take a look at that on the. On the county records. That's easy enough to do. I'm just trying to see if I can't save me some time and energy by looking at this. Now, the thing is, you got to keep in mind the spreadsheet doesn't tell the whole story. What's going on? Are they months behind what happened? Some of these, like I look at, you're not gonna find out until you actually start googling and looking at some of these assets. Okay. Now, it's the same thing when you get a spreadsheet. I usually wanna avoid the areas that I don't wanna buy in for the most part. But it's different with commercial loans. Commercial loans, you don't have a lot of the same restrictions you do have with a residential loan. Okay. You don't have the same type of license requirements or things like that. Now, as long as it is a true commercial loan. I have seen some residential properties that were financed with a residential loan when they should have been a commercial loan before. That throws a whole wrench in the machine. The thing to keep in mind as well is that not many people are looking at this stuff. You have an opportunity to pick up a decent property in some different areas. That would make sense. All right, so like this one. This one says, let's just look at. I'm going to just. All right, there's a freestanding strip mall and I'm just gonna. Basically, I'm gonna quick Google this address down in Raymondville, Texas. I'm gonna give the address. It's all I need to be running around. Oh, hey. All right, so when I type in the address, it is a church, I think. Oh, well, this makes sense. Let's see here. That's what first pops up as a church. See if I can see an address on the building. So I'm going to go back. When I googled it, I looked at the street map view. Let me see what pops up as far as the search. Just pops up. A church. It shows it being listed for sale. Okay, so it's a convenience store. Also sells tortillas and barbacoa on weekends. All equipment to make your own masa and cook barbacoa. Convey with sales. Wow. That's what I want. I want a barbacoa restaurant. A convenience store with no gas pump. So it's just a regular. Yeah, it's just kind of a small balance. All right, let's see. This is great. 1:25,000 was listed for sale at. Which is kind of funny. Although they dropped the price on this one and on this one. Oh, you see, the unpaid balance on this one's only 30 grand. Wow. Okay. Now I can understand that's a kind of a sad thing. Now, the interest rate's at 13.5%. But borrows this due date was January 10th. So they're two months behind. The property was originally appraised at 435, but that goes back to 2008. But they're trying to sell it for 125,000 right now. So they're trying to sell it, make some property on this or make some profit on this. So in this situation, this would be not something that would make sense. Cause look at it this way. They're only two months behind. They owe 30 grand on a property that's. Let's just say they're trying to sell for 125. There's 95 grand in equity. You're not going to probably get this reperform. And if you did get it reperforming and you paid par and then went and sold it off, you wouldn't make that much besides two months of payments, which this is basically a dud. Then at this point, doesn't the only way this would make sense if they were to take a discount on this asset. But I would be willing to bet in Raymondville, Texas, this has probably been listed for a while. And the nice thing, they do have a lot of photos on this property online, which is nice. So basically like a little restaurant barbacoa there. Yeah. All right. Yeah. Great. Until it's occupied or vacant in older photo. So an established. I guess it's still in operations, which is kind of funny. I'm just looking at 20 sparking spots we just listed. Oh, it's been. Okay. It's been on the MLS for over a year now. Yep. A year and a month. Okay. So they dropped it down. Price change, I guess it was at. Yep, they dropped it down to the 250 basically. Yeah. Or the 125. I'm sorry. Yeah. So this doesn't make sense. I mean, there's a ton of equity on this asset. The loans at 30, if they're one par for this, great. Doesn't make any sense. Cause you're not gonna make any profit on this thing. All right. Now, I don't necessarily want to run a convenience store down in Raymondville, Texas either. It's usually an owner operator on this stuff. So if you were to buy the note, there's no guarantee that you're going to be paying. It's probably why they stopped paying because they can't sell it and they're probably not making that much. I mean, how much money are you going to make on Masa and Barbacoa on the weekends? I mean it's not a bad looking little property. But still though, it's just, it's too far remote. It doesn't look like there's a lot of shelves. Yeah, there's not a lot of displays by the photos. They're basically showing us the restaurant. So it's basically. Yeah, it's like it's mostly just a barbecue monster restaurant. It's not really a true commercial store. I may sell some other stuff, but it's just basically it's like a restaurant for the most part. So doesn't really make sense. They're trying to sell the thing at 125. They drop the price down already. This is a no go on this one. Even with the equity taking over the property loan, when somebody's trying to sell, you're going to do more work, due diligence, you're not going to make it back. So let's just kill that one. All right. That doesn't make any sense. This stuff there, you know, let's look at this one as self storage. So what you see here is this one's in an entity name. This is a self storage unit. Doesn't tell us we can take a look at this thing. Unpaid balance is 76 grand. The due date was December of 18. They gave original appraisal 155 back in 2015. They say it's valued at 130. So they've got 50%, you know, got 100% equity on this thing. Based on value. They say the current appraisal from January of last year was 130 and they only own 76. So I like to do the same thing. Let's just google in the address and let's see what we got here. All right. Oh, it's a property for lease. This little property for sale is not really a self storage. It looks like it's more a commercial building. Two docks in the front of the building and a one drive up ramp at the rear of the building. Renovated offices, restrooms and common area. Lower level basement space with two restrooms and shower are available. So okay, secure storage is what it is. 5000 square foot of first floor office and warehouse along with 2000 square foot of lower level office and Storage space. Great storage yard for contractor to operate a business upon. Update offices and lower level office. Okay, great. Parents wanted to store some stuff there. There's no interior photos, but they've got some exterior photos in here. It's not the greatest of buildings, but, you know, you have to look at what part of Cleveland looks like. A little rougher in the back, but it's a good older commercial building. Okay. Some offices. You got a basement, they said, as well, too. So. All right. Five photos online of that one. So that's the same thing. It's not really a storage unit. It's an. It's just a commercial warehouse space, basically with some office on it. Now, the thing about offices, you could sublet those off and sublet them out to somebody looking for an office. You know what screams to me on this thing is not a gas station, but most of the square footage on it. It's not bad. If you wanted to live in Cleveland. And it's off of East 55th Street. Let's see where that looks like that compared to the rest of the city. It's south of I90. So it's on the north side of town. Yeah. So it's north of downtown Cleveland, northeast. So between. Basically halfway between east Cleveland and downtown Cleveland. So maybe not the greatest of areas, but probably not the worst of areas either. But you gotta find somebody that wants that asset for the most part. Now, looking back at the numbers on that one, they say it's valued at 130. They owe 76. Somebody's been in for a while. So it's probably somebody the business has changed or they stopped the business and went out of business. That's what kind of jumps to my mind. So let's see what we got in here. Okay, so here's what it used to be. Okay. Used to be a restoration company or. Yeah, office. Ohio Trucking. Okay. I see people. Thing is, I already know is like Ohio Trucking Company. Yeah, it's a warehouse. They gave me a name here. General Warehouse and Storage. Yeah. So I know a little bit that a. The trucking company said I even have a manager's name here. I could pick up, make a phone call to phone number and go from there. Did I see this was listed? Did I see an MLS listing? I see that was listed on realty track. Let's see what this pops up. Probably the same general information that I've seen before. Yeah, I signed a previous listing. So somebody's basically behind. They got some equity, but it's just really not that desirable. If this is not an operating business in there right now. So okay, there's not an operating business in there. But if you knew somebody in the neck of the woods, what I would do, one of the things that I would possibly do is I would look around that area and see if there's any other people. I call a listing agent in the area and see if he's got anybody else that's bought stuff in the neck of the woods. Anybody else that came and made some bids on some stuff. Cause that would be an easy sandwich. But still, once again, you can't be paying par for this one if the bank wants par. Cause it's been sitting there vacant for a while. Just cause it says it's appraised at 130 doesn't mean it's worth 130. It means it's gonna be a little bit tougher to move as well. Same thing. You would not be paying par on that one. Because the fact is, and that's the thing to look at when you're looking at the spreadsheet when you're making your offers in. Sometimes when you submit your bid in, you have to say why it's lower. Hey, here's the reason. We're making a bid offer on this one at 76,000. You know, we're making an offer at 40 grand on this one for the note. Okay. Now it would be nice though if you bought this cheap enough, you could turn around and lease it out to somebody, become an operator in that area and rent it out. If you bought it at 40, great. You do an asset for 33 cents on the dollar for the most part, or 30 cents on the dollar. That's not a bad day, it's not a bad deal. As long as you can justify renting it to somebody is gonna make some money for you. It's a good yield on that aspect of things because you could offer up a deed loan, cash for keys to the entity of the borrower's name on that stuff as well. So here's one. Looks like we've got a apartment complex. Let's look at the apartment complex real fast in Chicago. Probably not the most desirable areas, but let's take a look. Yeah. Okay. It's a three story house, three beds, 3,800 square foot a lot. 3,800. It doesn't make any sense. It would not be a single footage. It's a 12 unit building rehabbed. 12 unit building for sale. Four studios. Four one, four, two. You're looking for a great investment. Okay, that's the old listing. So maybe this property has been renovated and We've got a 12 unit apartment complex that you can pick up the note on. Now let's look at the numbers on this unpaid balance is $205,000. Due date December when this was run. So it's at least three months, four months behind. They don't have a current appraised value. They finance it at $365,000. It looks like on this one. Let's do one other thing here. This would have been an apartment complex that was renovated. Yep, they look like it renovated it and sold it. And I guess the person's rubbing from Peter to pay Paul. It is individually metered. They show a picture of the actual meters, which is nice. Of all the electrical meters, they show that it's nice. It's not a single family or multiple family. It is a multifamily one on this 12 unit. Okay, now the next is to check. All right, here is the old listing we found. So UBC was originally sold in 2013 for 365. So they've had the mortgage for six years. They paid it down. But on this one you'd want to check the rent rates. Okay, what's the get? Six, one bedrooms, six, two ones. 500 square foot, 675 square foot. So then you would run comps. Hey, what's market rent rates? Look at maybe if it was listed for sale you could see what it looks like. I would try to track down see if there's an old rental listing. There may not be, but it's not a bad looking little property. It's like it's on a corner street for the most part, but three stories. It's basically four units of floor. So you get some opportunity on this one. You know, there is some equity obviously. Let's just say that the. It's. It's probably gone up in value. Obviously it's a 365. So then that you're going to run your rough take 12 months of your rent rights, you know, 12 months of the six units. 12 months of the six two ones and the one ones. So you got 12 units. Figure out what your gross rent would be roughly. Then multiply it times expense ratios since individual meter would be 45%. And that will give you a rough estimate on your net operating income. That's not including debt and taxes because you have a rough estimate on that aspect of it. And then divide that by a cap rate. Now it'd be really nice to reach out to the apartment broker in that neck of the woods to find out what a 12 unit apartment complex is going for. I mean, it's probably a good starter. They probably aren't paying because a, they've either fallen behind or maybe they've got some rougher tenants in there. Chicago's a rougher area. You got tenants that know the system. I wouldn't want to buy it, but there are plenty of people in the neck of the woods that like that. Neck of the woods, same thing. If it's worth at least 300, there's some equity. Since the unpaid balance is 205, I'm sure the bank is the one close to payoff on this one close to upb. And so you just got to negotiate back and forth like now longer. You know, I'm going to do all this stuff. It's going to take some time. Okay. Not necessarily something that you want to deal with. Okay. Especially if you're not in Chicago. But the first thing I would do is I'm going to email this out to one of my Chicago agents. Say, hey, I found a 12 unit that you can pick up the note for. You know, in this case, like I said, it's in the name, looks like a last name. So finance it. Hey, you can do a deed and loom if it is occupied. If it's bringing in rents, hey, offer cash for keys, deed loan for the borrow. Otherwise you would want to then enforce the going after the rents. Going after the rents for sure. Trying to get that occupied. Now that all depends. That's a great thing. If you could take it over. If you did buy this at close to 200, but you could take over, find out somehow if the borrower is interested in just walking away from the property. If it is fully leased and you've got paying tenants, great, take it over, walk away, Offer deedaloo cash for keys. You've got a apartment complex there. If it makes sense at the 200 to buy. Okay, now there's a lot of moving parts. You still gotta talk to agents. You're not gonna see interior inspections on a lot of these things. That's nice that you got older photos. And what is also nice is if you're dealing directly with a bank, they probably have the old appraisal so you can see what it would look like, see what the work was done when they financed it at 365, see what the condition was. You can see how long the tenants are in place for. You also see if it's above or below market rents. So the lease is expiring and you have the opportunity to come back and bump rents up. Now one of the great things I would look at is you could figure this out real fast by just going to rent a meter, you know, paste in the address, type in one bedroom or two bedroom and see what rent rates are. So for this neck of the woods, the 60619 area, let's do one bedroom and then analyze in that neck of the woods. So median rent range is somewhere between 640 and 760. So the 80% mark is. Yes, but yeah, between 680 and 750. Somewhere right around 700amonth. Okay, that's for the one bedroom. Let's change it to two bedrooms. So basically 850 bumps it up by $100 a month. Median's 858. So now you've got that, you've got six times 850, which is six times 850. Let me pull my calculator out here. You know, you're going to have roughly, we'll just say 750 and 800,000. That's 800. 800 times 12 units is 9,600 gross rents roughly on a monthly basis, 9,600 times 12 months. That means you got 115,000 roughly coming in. And gross rents multiply that times it's individual meters. So you're going to take 45% off. Or just multiply times 0.55. It means your NOI is roughly around 63,000 a year coming in after you're selling that by a figuring out an 8 cap $792,000 value. I can see that being closer if it is fully occupied. If you do have those rent rates coming in. But now you have an idea of why the bank would probably say, oh we wanna sell this thing at par. We're not gonna take a bigger discount on this. Well, they're three months behind. You know, they shouldn't take some sort of discount. At least a 10% something. Yeah in there. Because the fact is it is non performing. You got to also figure it for them to foreclose, for them to do a lot of work to take the property back. They're gonna have to do. It's gonna cost em a lot of money. So figuring that in your bid it might work out for something, might work out to something that makes sense in making an offer and going from there, going back and forth and seeing if it makes sense and doing that work. But that's the thing. This is why it's so important to know your network is also why it's so important to be able to work the numbers and be able to show that stuff. So, like, if I was interested, which I'm a little interested, I'm reaching out to realtors, I'm trying to pull comps, I'm trying to see the property was ever listed for. It was listed recently because that's what I'm willing to bet is probably somebody who has built this up, got it going, got rents going on. They're trying to sell the asset off if they can, and make a bunch of money without having to pay their underlying mortgage. And they're enjoying the free cash flow that's coming in. Not really free, but you get what I'm saying? So commercial notes, guys and gals, same thing. Checking values. It's more due diligence than just checking a Zillow or estimate or a cma. There's a lot of moving parts. You got to see what's kind of available. It's moved in the market, in the neck of the woods. This is why you really need your commercial agents. You can't do it all yourself at all. You can get a good idea, some stuff, but then you still want to talk. Reach out, talk to a drive, play the sleuth. All right, Pick up and call and see if there's any units available for rent. Some case you may want to jump on a plane and fly there and drive by, walk it, see what's going on. I mean, we have found in the past and some stuff that we've done, we got started is we'd see for rent signs. And so I would pick up the phone and call and actually talk to the landlord. Hey, what do you have available for rent? Oh, you only got one available. Okay, great. Are all the units the same? You know, asking simple questions like this, not to, like, show your hand, oh, hey, I'm buying your note. You don't want to do that. That's not the smart thing to do. You want to basically play your cards close to your chest. So you want to have somebody calling different than you, probably, or calling from a different number and your cell phone, just so that when you're talking to the bar, talking to the management, you've got some things. Now, one of the things that would be really nice to do, I think I've done this before, is I've used. I take the address and I'll find tenants in the building. Anybody else that has an address. Because you gotta realize there's 12 units, you can probably Find some tenants there. So pick up the phone call and attendant say hey I'm sorry. Trying to track down the property manager for this unit. I'm interested in the area and see if there's anything available. Talking to the tenants. Hey because usually in a 12 unit they often will know what's going on in the complex. Oh yeah, it's a great area. It's great Rehab or no, it's a crap hole. You know we got water coming in, we got leaks. Tenants will tell you exactly what's going on with the complex. And you get so much information on there. You just really want to be writing notes as much as and asking some questions. Hey, is it great? Do you like living there? Dislike it is there it's a rougher area, those kind of things. This is this asset is if I look at the address it is on just south of East 79th street right by the Illinois Department of Human Services. Okay. And east of Avalon Park. So not the best of areas but also not the worst of areas. There's a funeral home just down the street. But anyway as I said we just all that stuff pulled up and it just show it gives you the comps in the area too what's going on and last seen dates. A lot of these are all marked. So yeah I love rename when it comes to this which is pretty nice. Gives you the property report gives you a property port of the nearby rentals so you can see what's kind of square footage which is pretty nice. Rent o meter well worth it out there. So by guys and gals that's it. I mean there's a lot of the smaller unit stuff that you'll see smaller commercial stuff sub million dollar UPBs that banks are often willing to get off their books because it's just not worth their time. They don't mind originating side but at some point I think a lot of banks are realizing they want to move this stuff. Especially now it's the end of the first quarter they got through their fiscal year. Now they're ready to move this stuff off. They can be a little conservative but I bet if you follow up with asset managers at banks especially commercial side in your first rounds and I accept it and just follow up with them every 30 days. Hey, did you end up selling that asset? Did you sell that note? My bid still available. My still bit still available. So it's all in a follow up system when it comes to commercial notes. Residential. Yeah I know everybody understands that. They like to touch it and squeeze it and be a Part of it. But even thinking about this, if you find an asset in here that or an asset on a tape that you know somebody's interested, why not get it to the person who's used to doing that and make a percentage. Stay involved, Learn the process. Right. Don't be afraid to, you know, reach out. Hey, I got a deal. I don't know if it makes sense, but put the deals together. Reach out, talk to the bank, get the information, put the deal together, all right? Do the due diligence and try to find as much information as you can, all right? That's the big thing you got to look at. You know, just look in to see what's going on more than anything else and see if it's actual deal. If it makes sense that the banks will negotiate. Hey, put in touch with somebody else's hands, okay? Put the deal in somebody else's hands as an expert versus sitting there letting it rot on the vine. And this what it comes all about. Networking. Annoying. And there are hedge funds out there specialized in every specific type of class. All right? Every type of class. Any other photos on this one? It's taking forever. Oh, here we go. It's five stars. One review. Five stars in Philadelphia, no photos. Let's just see if we can find some images in this one real fast. But that's the thing, guys. You could spend some time on this. Oh, yeah. All right. Yeah. Three story close to Mill Creek in a strip. So it's a musician's hotel. He said. That's kind of funny. Well, that's the thing, guys. You will find some interesting stuff on here when you look at commercial notes. And. But it's different, like I said, it's a different story for each asset. You really have to judge the merits of each asset for itself. But something that doesn't make any sense, just move on and have the next atmosphere. Don't get so bogged down and, oh, this is a kind of a cool deal. No, no, no. Coolness doesn't pay bills. All right, everybody. Coolness does not make things happen. And most important thing I can tell you is look at something, spend some time on it. Spend just a couple mention on each asset. If it makes sense, boom, great dive. And if it doesn't, then kill it and move on and go from there. Last thing you want to do is waste hours and hours of time, because that's the one thing about commercial notes. They take more time to get done than a residential deal. You're gonna spend several months probably on a commercial asset before you close. 30, 60, 90 days or more depend on the deal. So take some time if you're interested in commercial deals. Hey, reach out. I guarantee you can probably find something that you take a look at. Then it's a matter of just your negotiating skills and going from there. All right. Well, that's going to wrap it up for this episode of the Note Close Show. Hopefully you enjoyed this. We'll dive into more. So over the next few weeks, we're actually looking at putting together commercial Note workshop here for a lot of people because we've been getting a lot more requests from people asking and inquiring about commercial assets. So go out, make something happen, everybody, and we'll see you all the time, everybody. Bye. SA.