Finding Owner Financed Notes To Buy

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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.

Good morning, good afternoon, good evening everybody. Welcome to this episode of the Note Closer Show. Scott Carson, always excited with you today in this episode, I'm probably going to piss some people off. Not a surprise having to do it anyway. But I've been getting bombarded, honestly a lot of phone calls from my students and others out there that are looking to sell owner finance notes. Well, they're being approached specifically my students being approached to buy some owner finance notes and I wanted to share some basic summons. It's just like any other note. You need to get the full information you need. First and foremost, find out what the seller's looking for on an owner finance, what's owed, who's servicing it, if they're self servicing it, what's the property values? But love me, what do they want for the note? The biggest crock I hate is I think this is where I'm pissing people off. I think chasing owner finance notes, chasing where you're out there trying to find them and sending postcards and letters or calling them I think is the biggest waste of time that people get sold in owners. I know that's I'm going to get some gurus out there that talk about owner finance are great deals to buy. They can be. But if you're a note buyer, it makes, it doesn't make a lot of sense all the work you put into it. I mean if you think about those that teach buying owner finance notes, what are they teaching you? Pull a list of mortgage leads and send them a letter or reach out to them to see theirs and sell their notes. Now, with owner financing as an exit strategy, you have a lot of these people that have owner finance a property because A they owe too much on it, they couldn't pay commissions, C they rehabbed the property too much, or D the property was remote, they couldn't get a traditional loan so they had to offer up terms. And that's nothing wrong with that. I just don't like owner financing as an exit strategy. If you can't sell the property traditionally, what are you doing? You shouldn't have been buying the deal to begin with unless you're comfortable selling it and carrying a portion back for an extended period of time. You gotta have, you know, those notes have to have at least 12 months of seasoning if you're gonna sell them off and get a size. I've had people call me so much, oh, we want to create and sell it immediately at the closing table. It's just not that market right now. That market has been around for a while. You really need to have 12 months of seasoning. So sorry, anybody out there, if they've wasted time mailing out letters to get 1 to 2, maybe 3% direct mail response rate to get it. Nope, owner on the phone and they not want to take a huge discount. Okay, so here's what I like to do and I'm just going to put that out there. This is why this is a short episode for Friday, Fun Fridays and stuff like that. Today I'm actually teaching my three day virtual workshop, my note Buying for Dummies workshop. Check it out. No buying for dummies.com for listening today. And you know, if you go to LinkedIn, if you go to Facebook groups, if you go to real estate investments club clubs, and you say, I buy notes, I'm looking for notes. And you market that to your social media, to your email database, or even to realtors or mortgage brokers or title companies in your area. That's so much more effective than mailing out postcards or chasing these mortgage leads. I'm sorry, it's not saying you can't pick up a note or two. It's just much smarter. It's a 21st century leverage. LinkedIn by posting, hey, we buy notes. And then you'll have people that reach out to you that are motivated to sell. Maybe there's a broker, maybe there's other people that have come back and said, hey, I've got a note, I need to sell or I've inherited a note. You just have to get the word out. I, I'm sorry, but there are some, as I said, gurus out there that preach reaching out under financing. I'm sorry, it's a different market. Welcome to the 21st century, ladies and gentlemen. Okay, yes, it can be a decent strategy, but honestly, waiting 30 years to get paid off in a mortgage. Oh yeah, let's add all the payments up. Yeah, that's great. But what's the time value of money if you're only getting a 6% return? You're getting a 6% return. It doesn't matter what the back end is. If you gotta wait 30 years, you're still making a 6% return. It makes much more sense to get cash out of the deal with the traditional seller. Take a little bit of a discount off the property value versus trying to sell it 110% of value, which I have. People that reached it back out to me to buy their note. I'm like, your house isn't worth 110%. Your house is worth 100, not 110. Why did you sell it for 110? Well, cause I could, because I'm the bank. No, you can't. Guess what, you're gonna take a bigger discount and you're gonna hold it for a longer period of time to get that. And especially with values dropping, you may be holding onto that note for a little while or taking a bigger discount to liquidate that. So that's the biggest thing before you decide to finance something, owner financing, because you took some class or you heard somebody talk about owner financing, you think it's the great and sliced bread. Make sure that bread doesn't have a lot of mold up. Okay, pick up the phone, give me a phone call. If you are going to do an owner finance now, don't do 100% financing. Do an 80, 10, 10. Require the bar to bring 10% down, carry a second for 10 and sell and have that first 80. You'll get a much bigger price and a lesser discount by having that set up. Now, of course, you still want to have a third party to service those notes. I don't care what they're paying or what cost is. It's cheaper to pay $15 for a third party servicing company to collect that stuff and keep track of it. So the statements out versus you collecting. And then at some point in the future, you trying to put together a payment stream or a payment history, especially if the borrower's paying you cash or checks and your deposit account, that's a cluster in itself. They're trying to put together a payment history. So don't do that. I know a lot of people want to save money, but that $15 that you would have been saved, that you would have paid would have made you a lot more money versus what you lost. And this is, I guess you could say this is my public service announcement. I'm not trying to piss anybody else off, but look, sometimes people sell stuff with the idea that they tell you one thing so it benefits them and not you all the way. You gotta know the rest of the story, as Paul Harvey would say. And the rest of the story is, understand, talk to a third party. Don't just take somebody at Face value for what they're telling you. Oh, it's the greatest thing is a sliced bread. You need to do this. Look at all this money you're gonna make over 30 years. Well, let's be realistic. Most people aren't going to be around for 30 years. And B, you probably want to sell that note off or get the capital and so you can go buy two properties or buy one and a half or bring in your money so you can do something with it besides having all that profit tied up for 5, 10, 15, 20 years. Okay, I don't mind buying notes, but if you're gonna sell me a note, I'm gonna take a discount. I'm not gonna pay par for it. And I'm gonna make sure you know what the borrower's credit score is. Make sure they you really need to underwrite it like it's a traditional note. You need to get an rmlo Max Bailey from call the underwriters, a great guy to run that stuff through. I'm a big fan too. If you're looking to sell a note, run it by Fanac USA. Fanacbrokers.com is a website. Put it in there, they'll tell you what to pay for. They're often going to offer the lesser in a lot of cases. And they may even offer a partial, you know, 12, 24, 36, 60 months on a partial payment versus the whole note. So those are some things just speaking to me today, everybody. It costs you a whole lot less. Instead of sending out 50 letters on 51 off deals for you to post to the masses or talking to the different Facebook groups, you might as well market to the masses. You know, LinkedIn groups, Facebook groups, Hey, I buy notes. If you go to our LinkedIn, follow me on LinkedIn, you'll see that we post, hey, we buy notes. We're looking for performing non performing residential commercial notes. And then when people reach out to us. Great. I need to collect information. I'm going to ask them, you know, how much the property sold for, what was the down payment, what's the value of the property, the address, is it performing? Is it non performing? Do they have a copy of the paperwork? And if you're brokering a note, be honest. I'm brokering the note. Great, that's fine. How much are you wanting to make? Don't tell me the max. I want to make as much as I can because I'm just not going to play ball with you. Okay? You got to realize selling and owner finance notes, there's some Specific things that have got to be pulled on there because it is owner finance. It's not the same value as the paper out there now also too, you have to realize if you do a low interest rate, this is going to shoot a lot of folks in the foot. I've seen people like go give a 3, 4, 5% interest rate to an owner finance deal. I'm like why the hell would you give them a bank rate when you're going carrying finance? You should not be doing an interest rate really below 8, maybe even 10% now on an owner finance model, especially with interest rates being up in the sixes sevens, maybe even 8% by the end of the year, not further. So make sure you just don't get the greatest ideal. Talk to somebody, talk to a note buyer. I had a guy from New Jersey call me today, is trying to owner finance a condo conversion with 100 units. He wanted to sell them at this closing table. I said it's not going to work to sell them at the closing table. These days your note buyers are going to want to see some skin the game from the bars and they're going to want to see some seizing, you know, six to 12 months of season depending on what the down payment is and at least a 620FICO or greater special in today's society. So keep that in mind, ladies and gentlemen, wearing a down payment to greater but also structure the deal so it's the best. That means clean paper, that means disclosures rmlo making sure your pull credit and making sure you get as much as a down payment as possible. If you try to take the first owner finance buyer borrower who's got just a little bit of money, you're going to take it in the shorts a little bit longer. But structure your deals. Max for first lien is 80%. Carry the small second for cash flow if you want to do that. But it's better than instead of doing 100% getting 72 cents on the dollar of 100 of, you know, them giving you 90 cents on the 80. It's going to end up being the same way. But you take a lot litter hit, less hit. You keep that second for cash flow and it's a better, better deal that way. But reach out to me talkwithscottcarson.com if you got a deal you're looking to sell or looking to structure, I'll be glad to tell you my unbiased opinion and tell you whether which way you should go. You know, a big thing to look at is to look at what's going on your market. I mean if you're a real market and you end up buying a property, get something there and you don't, you see big days on market. Yeah, it might sense make sense to offer terms. Okay. But you probably should have bought that note to begin with anyway. Okay. Don't over rehab. Yeah, I know we all. Some people get caught in the different things where markets are changing and values are dropping and stuff like that. I get it. But just be smart about what you're doing now. Buying on owner financing, that's a whole different business model than buying a non performing note or selling a performing note on a property as well too. So keep that in mind. I think owner financing is great. We like buying on terms of because the idea is we want to set that stuff up February with your great interest rates or 0% interest rate. We're maybe paying a little bit more for the property but the principal reduction is so much more dramatic with 0% interest rates out there. So we'll probably discuss that at a later time. But I encourage you guys go out, take some actions, do yourself a favor, seriously put out what you're looking to buy share. We talked about this a little bit last week, I believe to share. Hey, I buy notes, I buy performing, non performing. I buy owner finance notes, residential, commercial property. Tell people what you're looking for, okay? You got to share with what your message is. And then when you get something in, make sure you start asking those questions. Hey, what do you want for this? What are you looking for? Is that they tell you apart. It's not worth wasting your time. And sure it's not worth wasting my time. So if you call me, the first thing to say is what's the price? What's the price? What do they want for it? And let's go from there. All right. Make sure they got all the information on a spreadsheet, not copies of payment stuff. Make it clean, make it as easy as possible for somebody to make a bet. Otherwise the, the worse and longer it takes for me to identify and figure the hell you have, the bigger the discount I'm going to charge you because of being a pain in the ass. So don't be a PETA loan broker. Be a godsend making sure it's clean. You've got copies, they file the loan, collateral, stuff like that. Know all this information and just take the time. Don't just listen to class or listen to somebody and say oh, I'm going to go do that because that sounds awesome. You got to know what's going on in the market. There's no simultaneous closings anymore where you're originating a note and selling it at the closing table. Just. We don't see that in the owner finance market for the most part. Like I said, six to 12 months of seasoning, third party services required. And do that and you make sure you keep your paperwork clean. So go out, take some action, buddy. Thank you again for always listening to the no Close show. And hopefully we'll see you in a class sometime soon. Take care, be safe.