Green Acres Case Study - Vacant Reverse Mortgage

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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, and good evening, everybody. Hey. Welcome to this episode of the Note Closure show. As always, Scott Carson. Excited to be here today. Today's episode, I thought I would go through a recent case study on a deal that literally came across my desk in the last 25, last 36. I've driven by this property yesterday and thought I would go through the numbers and what we found on this deal because you guys love case studies and this is a true case studies in kind of my 28 mile backyard. Basically not here in Austin, a little bit north of an area north of Austin called Georgetown. This is on the north side of Georgetown with a Georgetown address. So, of course, anytime I see anything near where I live in Texas, especially in Austin, I like to go out and drive by because that's where you really learn. Now I'm also in the process looking at about 30 other notes that came in on the same spreadsheet all across the country. North Carolina, South Carolina, Alabama, Kansas, St. Louis, Florida, just to name a few. So whenever I see something on a list that says Texas, I like to jump on as best I can, right? And so this was one, the only one that was showing up on Texas from this list and it's in my backyard. I was like, why not make it a great case study to do it? Because the numbers kind of makes sense on the front end. Okay. The numbers make sense based on what the seller is willing to sell it for. Because my relationship with the seller and this fund I've been buying from for over a decade, they'll tell me what they're looking for. Hey, here's kind of what we're looking for on this list. You are on these individual deals. They won't tell me the price in the full list of assets, but I have to ask individually and they'll give me, okay, here's kind of the color that we're looking at. And the address for this property is on Green Acres. Okay. Green Acres Drive, Green Acre Street. So of course it makes me think of the, what was the show in the 70s? Green Acres is the place to be. Farm living is the price. There's a life for me. You know, where was the, you Know the Richie husband and wife who moved to the and bought a farm and they had a pig with them and stuff like that. So for some of you guys that are the new generation, you know, Generation Z, you won't know what the heck I'm talking about. But before that you remember it. So what's funny, because anybody, I talked with a couple investors about this deal and when I say Green Acres, they automatically start singing. So we'll leave the karaoke to another day, but let's dive into this deal so that you kind of see what we're talking about. You can kind of walk along with me because I have a video here of the walk through, the walk around. So you can kind of see what I'm talking about. And we'll go from there. So first and foremost, this was a list of 48 reverse mortgages. Here's the map. You can see stuff. Kansas, Missouri, Oklahoma, the one in Texas, down here, Alabama, you know, North Carolina, South Carolina. There's a bunch of stuff and there's kind of the mapping and they're all over the place. You know, some are as expensive as like a million dollars. Like there's this one over here, it's worth about 700,000 off of Cape Hatteras, you know, out in the middle, you know, the barrier islands there in North Carolina. Probably gonna get washed away the next couple years. But anyway, so we pull up this one and here's the picture of the property right now. This is very similar to what the Google, I mean, or what the Zillow image showed or the Google Maps image showed. And the thing that always concerns me, it's hard to tell, but the front door was wide open. I mean, I hadn't even gone into it. I pulled up and I see the front door is wide open. Now there's supposed to be a lockbox code and there was a lockbox door, but the door was wide open. That always concerns me. Obviously this is a vacant property with a door wide open. I'm like, oh, it's going to be trash out inside. It may not be worth it, but let's go and take a look at it. So that gives you a bit of an idea. When I pulled up, you know, the window was busted, which, that doesn't really bother me. In a vacant property, the window is boarded over. I mean, based on current photos and kind of conditions, I can see it didn't look like it was that bad of a property. You know, it's a three bedroom, two bath, kind of a weird kind of a frame to it, but where it was located on the outskirts of Georgetown. I was like, this might not be a bad property. It's on a third of an acre. It's got kind of farmland behind it. And then to the right over it is where it looks like a housing community is going into it. But for the most part, I was like, oh, this is kind of the outskirts of town. Maybe this is something that, you know, a lot of people like there. And you can see a picture from a different side of a different angle. You know, here behind the trees, is this storage? It's not really a garage, but like a storage barn. There wasn't a garage on the property. And it was like I said, you take a road. It's on the east side of I35. You know, it's a couple miles north of Georgetown. But it had a Georgetown address. So I was like, it's not so bad, kind of. You know, there are neighbors around it. The area's a little bit different. A lot of mobile homes, modular homes, some stick built, some brick homes. It's just no zoning out there. I actually saw one property guy bought a single wide and then built a tin building around it where it looked like the tin building had eaten the mobile home. It was kind of an interesting graphic. But a lot of dumping has been taking place along this area. You could see some stuff. I mean, look, is it the cleanest of neighborhoods? No, it's not the cleanest neighborhoods. Is it the worst? Not the worst, but also not the best. So I was like, oh, maybe it's opportunity. So here's another photo loop for the back. This is exactly for me stepping out of the truck and taking a photo of it. So to give you a bit of idea, it's a reverse mortgage. It means the borrower's passed away. The current unpaid principal balance of the loan is at 166,000. Just over that. The last payment was January of 2024. So this has been vacant for about 13 months, give or take a little bit. You know, that's the last payment. You know, that's when basically the borrower passed away. Okay, so that's when they tell me, last payment was that because they hadn't paid. It's a reverse mortgage bar, is not titled or doesn't have to make payments until they pass away. So they either passed away somewhere around the turn of 2024, maybe December of 2023. The legal unpaid balance with rear jersey and light fees, stuff like that, is 187,000. It's like I said, it's a three bedroom, two bath, 1524 square feet. It was built in 1982. Okay. On a third of an acre. So it's not the biggest of properties, but based on the condition, it seems like it's a lot bigger than a third of an acre now. It's semi rural now. The great thing about it is the hedge fund, the seller came back and told me. He's like, yeah, we're looking for about 100 on it. I was like, 100 on it. Okay. You know, seeing the legal is 187 now they. Their BPO. One of the great things is I asked, hey, do you have any type of interior inspection report, a BPO that you could share with me? And they did. They sent me their bpo, the exterior bpo. They also showed me an interior inspection. I could see that there's a lot of stuff in the house. Not trashed out does. I could tell that the roof was in bad shape because there was mold in one of the upstairs bedrooms and it needs some work. So I did like that doesn't really, you know, you change that, you strip down some sheetrock, you put a new roof on. The bones look pretty decent from what I could tell. So we went ahead and looked at it, and so here's the map, which I thought was interesting because when you look at BPOs, always look at the map and look at where the comps are at. Now, the comps that they value this property, 120,000 is nowhere near the property in red. Okay, so you see i35 going up there. You know, Gerald Bartlett Granger. I mean, this is Georgetown here. This is probably the closest comp number three down here. But the thing is, there's nothing nearby. I mean, so the comps are skewed completely. This. This could actually be worth a whole lot more than the BPO saying, I'm 120. So I reached out to my buddy Boyd, who's a local realty here, said, hey, can you just do a quick CMA for me? Can you give me a bit of an idea? Here's the address. Here's the zip. Here's the bed, bath, the square footage, the lot. Can you give me an idea of roughly what comps would come back at? And he came back and said, okay, Scott, it's hard to tell, but I could see actually being worth if it's in good condition. There are comps in the 295 to 325 range. I'm like, oh, that's a sizable increase over the as is value of 120. Now. I was like, oh, there's some difference if there's enough room in there if you really want to rehab this property, give or take. But the thing does concern me is there's no comps nearby. So that comp I would have loved to see. Haven't sent it to me. He just pulled a quick CMA and didn't email it out to me. To me, the location says, well, that we have that number in between the two. Now, another thing is curious about this deal, Tom, is the lender told me it goes to foreclosure next Tuesday. Right. So today is Wednesday. I got the list on Monday afternoon. I drove by yesterday on Tuesday. And no, wait, I'm sorry, today is. Yes, today's Thursday. I'm sorry. Got the list Tuesday, drove by it yesterday. Wednesday, it goes to foreclosure basically in four days. The first Tuesday of the month. All right, first Tuesday of April, it's going. So that could be a quick foreclosure. You know, you buy it at 100, you try to sell it below the 180, hoping that somebody will bid on it at auctions is a potential aspect. Okay, so let's do the walkthrough. Let's go through, through. And so you can kind of see my walk around video. Kind of see what I'm sharing. I don't know if the audio will pop up for you. I still haven't figured that out. You figure that I would know by now how to do that. Okay, so let's share my screen here. All right, stop, Share. Hang on here. All right, stop. Share. Boom. And now let's go and share. Here we go. Pull this up. Boom. There we go. There we go. Perfect. All right, so let me maximize my screen here. And let's play. So this is me walking up. First thing I did. As you can see, you've got some nice outside, but they're building new homes to the right of it. As you can see the photos, there's a lot of junk in this property. You know, where they have all these bedrooms and stuff. I was actually expecting it to be an actually worse situation. You know, the sheetrock, you can see a bit of mold there coming in from the roof. Roof needs to be redone, obviously. Kind of steep stairs, but this was all bedroom furniture. You even have the grill right there. So walking through this, the AC H vac was still there. Here's another bedroom. This is the worst mold damage on it. On this one. You can see what's Going on through the. Through the insulation, you know, just a bunch of. Just stuff just thrown on top of each other. I mean, like a smorgasbord of old furniture wood and stuff. Like an old, old chair in there. You walk to the kitchen. You know, it was outdated, obviously, but the fridge was okay. I mean, it had a lower drop ceiling a little bit there. I probably would knock that out. Cabins aren't in bad shape. You know, you got an outsourced doors there. You've got kind of a weird. You can see the back side there. Not bad view. You know, older kind of pantry style. And as we walk through the house and go to the stairs, you know, like I said, the stairs were a little steeper, which kind of surprised me. You know, it didn't look too bad. I mean, you got. Obviously you're going to rip all the sheetrock out if you can and rehab this. If you were going to do that new carpet would need. Once you get in here, bathroom's okay. Older, outdated. That's what I found. Extreme as a speaker system in the actual bathroom. You know, it's a different, different take on a fart fan. Upstairs, other bedroom, you know, didn't look too bad. They're kind of smaller. Yeah, I thought there might be somebody living in it, but nobody, you know, had been squatting or anything like that. Neighbors were not. Neighbors are not right next door. Cross over there is not too bad. And going back down something like it could be worse. It's just going to take a lot of work. And you know, new roof these days. I like the windows there in the living room, but it's kind of smaller. Yeah, that's what they were saying is that it's probably a tear down, you know, yards good size. Looking back there, I'm walking outside, you can kind of see a little bit more stuff there. Obviously some construction going to the right side. This is me walking towards the side of the house now. So you can kind of see up the roof. We've got a tarp on it. You know, whole roofing needs to be replaced there, basically. Yeah. And then walking toward the back of the house, you know, the fence is gone to the right side. But you know, look at the back of the. You don't have a lot of bad views. It's all farmland and a good size, you know, backyard. Now the thing that you know, you can see a bunch of dump trash over behind it there was. There, I don't know, is it concrete, peach trees. And as you spin around, you see an arbor over There kind of really nice. And then let's just pause it there. So that deck up there, you know, I went up to it, I didn't crawl onto it, I didn't know how old it would be. But there's nor no door to the patio which I found interesting. A two story deck with no door to it, you have to go up the stairs is the only way to get to the patio which is okay, it could be worse but I found that a little bit interesting. But the whole deck would need to basically ripped out and redone because it just looked like it was pretty rotted. So that's the property. I mean like there's some pros, there's some cons to it but like I said, it's probably more so you know, what would it take to tear it down? I mean even this little building over here to the right side, not the garage, but the storage building was just stacked full of wooden stuff in there. That just didn't make any sense in a lot of cases. So if we go back here to the, you know, presentation here, let's go back to the PowerPoint. We'll go through some numbers here with you. All right, so walk through the property. Can't see what it is. Now let's talk about that. What's the possibility? Well, if you could buy this, there's really only two strategies with a reverse mortgage. You buy it and either sell it at the foreclosure or you turn around in rehab. And of course the ARV based on comps is CM. You know, the comparative market analysis came in around 295. On the low side, I think it's probably less than that because based on the where it's located, the, the lack of zoning, a little bit more rural. You're probably not going to get too many full priced offers like you would on a house if it was inside of actually George 10 cent on the outskirts. Okay. But a full rehab needed. You know, the seller provided a BPO and the inspection report which showed some photos. The inspection is a little outdated. Of course. The door is wide open. That too. So tried to shut the door but it wouldn't stay shut. So you could buy this at foreclosure or buy the note at a hundred now and then turn around and at the foreclosure, hopefully it sells for more than 100. You know, 150 might be something to think about. If you put 50k in your pocket, that's a pretty good day. If it's sold in a week in less than a Week. Right. The thing that concerns me is the rehab stuff. You didn't sell it. What would you need to do as far as rehab? And like I said, if you're replacing the roof, replacing the Sheetrock, new kitchen, it's a complete, you know, almost a tear down for the most part. It's a lot of work to that. It almost be easier to tear it down and bring in a modular home on some sorts like that because lots are about. They're going to be worth, you know, under a hundred. So you got to figure out what's you're possibly getting. I think 295 is way too high a stretch based on walking the property and seeing the neighborhood, stuff like that. But think about could you sell it? You know, would it sell for 150 at the auction? You know, maybe, you know, they're hoping to get 100 for it at the auction, so they bought it less than 100. So could you get 124? Probably not. You know, I don't think you'd be able to sell this at auction because investors driving by would see that it needs a lot of work and you probably end up taking this back. And I don't necessarily want to be in a rehab project this big on the outskirts of town for the most part because it is going to be harder to get somebody to go out there and roof. It's going to be harder to get somebody to come out and put Sheetrock in just because it's on the outskirts of town. I mean it's not impossible. But this is more so a project for somebody who likes doing heavier rehabs. This is just too heavy a rehab for what I'm focused on as a note investor. Obviously reverse mortgages, that's the play. Foreclose and sell it at the auction or take it back. But I prefer a much more cosmetic rehab with the cost of things these days, you know. And what does that mean? That's paint, carpet for the most part, maybe new appliances. This is basically tear it down to the studs and build it back up and go from there. So this is a, in my opinion, a no go on Green Acres. If you know somebody who likes this kind of stuff, hey, feel free to let me know. Do I have some relationships with people that like this kind of stuff? Yeah. If it doesn't sell at the auction in four or five days, guess what I'm gonna do? I'm gonna reach out because then at that point's an reo. I'll know which way it really needs to go. And see what they're looking to sell the property. If it doesn't sell, then we might be able to make some magic work versus the unknown of going one way or another. Excuse me, but that's, you know, that's a deal, you know. Is it a good deal? Not for what my normal portfolio is. Is. Can it be a great deal for somebody? Yeah, it could be definitely an opportunity. But it's been vacant for a while. Like I said, the yellow, a kind of angle frame there, not too bad. You know, it needs a lot of TLC out there and it's just really too much TLC for what I'm wanting to do right now. So anyway, I hope you enjoyed that guys. That's the Green Acres case study there for you. A little bit of a walkthrough video. Hopefully the audio didn't sound too bad for you guys. If it didn't, check it out. Watch the full video if you're listening to this episode. Thank you for so much for always listening. Are always watching. We are here to help you take your business next level. We're always getting new assets in, so feel free to reach out to us if you're part of our WCN crew, our monthly membership at $97 a month. You get access to these tapes as they come in and you have an opportunity to bid on them, ask questions or have me walk through them with you as well. So go out, take some action everybody and we'll see at the top. Bye everybody. Hey real estate investors.

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