Nonperforming Note Case Study - Sugar Land, Texas

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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.

Hey real estate investors. If you have ever wanted to dive into the sexy side of real estate and become a note investor and not just somebody that owner finances properties or buys and sells on terms, but somebody who's actually buying debt from lenders, mortgage bankers, hedge funds on distressed real estate on both residential and commercial properties. Now is the perfect time. And guess what? We have our upcoming three day workshop here in just a few days on July 25th, 26th and 27th. That's right, that's a Friday, Saturday, Sunday. You can join me live on Zoom and our Note Buying for Dummies workshop. We'll go through the Fs of how to find fund and flip non performing notes at huge discounts without having to use your own money. And we'll show you all the different ways you can make money being a note investor. Day one's all about how we find these deals from banks, hedge funds and how you can automate the process of connecting with these people and get tapes and listen to you over and over again. Day two is all about raising capital and marketing. We'll show you how to tap into thousands of IRA investors who are looking for deals to fund and how to communicate and how to contact them and get them to fund your deals. And day three is all about the flip the exit strategies. Putting deals together. We'll mix in due diligence. We'll mix in the marketing side along with the structure side. So much stuff in three days live on Zoom with yours truly, the note guy, Scott Carson. Make sure you get signed up by going to Note buying for dummies.com or click on the three day workshop tab on our workshop. Get signed up today as we're still running discounts and you too can soon become a no buyer.

Foreign Good morning, good afternoon and good evening everybody. Welcome to this episode of the Note Clothes Show. As always, Scott Clarkson excited here with you today. I've got another case study. I talked yesterday about one Lake Travis that we're working through. This case study is also in the great state, the great Lone star state of Texas. This one's not located as close to home, but it's still in a really phenomenal area of Sugar Land, Texas. Now, if you're not familiar with Sugar Land is. Sugar Land is in Fort Bend county, which is just just south of Houston. This is a very nice area of the Houston Metroplex and actually it's another gorgeous property. If you're listening to the audio, I highly recommend maybe click over and watch the video on YouTube. The link will be in the description below to this. But this is just a beautiful house. Just to give you a bit of an idea. Two story red brick house, three car garage, four bedroom, four bath. It's got an amazing pool on the outside with a nice backyard too, some fruit trees. It's just literally landscaped. Amazing hot tub, everything. Connect the pool. And what's great about it is the it was listed for sale a few years back. All the old listings are still up on the online. So I was able to literally search for the address and I'm not going to give away the address, but found what the property looked like and it is just absolutely manicure Wayne's coding throughout looks like laminate, hardwood floors, just absolutely gorgeous house. Kitchen, granite countertops, just absolutely beautiful there. But anyway, to give you some numbers on where this thing is, like I said, it's four bedroom, four bath, 3,000, just under 3,100 square foot, three car garages, detached pool and a hot and spa on the backyard there. Just on 0.28 an acre. So just under 0.3 acres. House is built in 1994. It's not that old. It currently has a fair market value of 550. That's conservative. That's what the BPO came in from the seller, the hedge fund that we got this from. Now the numbers on this thing that just kind of drive me bonkers. But it is what it is. The principal and interest payment, just the part of the P and I payments, 1189amonth. Okay. They've got a really low interest rate, 2.75% interest rate. Okay. The unpaid balance is 339. All right. So they've got quite a bit of equity. The payoff on this with back payments is 350k, so 200k roughly, give or take a little bit in equity. Last payment made was November of last year. So they're literally coming up on. They're right at seven months behind right now. Let's go through some more of the details and I can give you some of the inside information because I, when I saw this, I was looking at the numbers like, okay. You know, I initially don't like to chase equity deals because most time the bank wants or the seller wants too much. But the sellers on this aren't that far off. Now, they haven't filed. Well, in Texas, we don't have a notice of default, but they had, they did send out a notice of intent to foreclose letter and that expires roughly in about two weeks. Okay, so even if they started file the foreclosure process, this wouldn't go through till probably August. Okay, now you can't reinstate. Now, what's always great about having it direct the bank and the seller, the hedge fund you're dealing with, I say, what's going on with this? And they came back say, hey, bar one to reinstate. Played games for 60 to 90 days, couldn't reinstate, ask for a loan mod. And. And I'm like, you're at 2.75. What do you expect it to go from a 30 year to a 40 year? It's both. There's no deceased like the previous. They're both owner occupant. They live in the house market. Rent on this property is 3,000amonth. Okay, that's on the low side. It might be closer to 3,500, which would still allow them. When you look at a total PITI payment and you look at taxes of being roughly $6,700 a year, which is ridiculously cheap compared to what we pay in Austin. But the borrowers just haven't followed through. And they're starting to play coy with the hedge fund. They're not responding. They asked for a loan mod. They said, the loan my paperwork to see what they fill out. They haven't filled it out. Send it back in. The notice of intent to foreclose letter expires here in a couple of weeks. They got to do something now. The taxes are current, no back taxes owed. Everything's paid up to date with that. HOA is only about $97 a month on this one too. And when the seller told me that, hey, you could pick this note up for roughly around 300k, I was like, that's about 50k in profit before foreclosure costs. Now, I don't know what the hedge funds paid an attorney. Foreclosing in Houston only costs about 1000 to 1500 bucks. My concern with this would be, okay, a, they file bankruptcy to delay this or you know, they tried to, they bring the full amount past due to reinstate it, which would be a pretty good deal. Now if they reinstated, it's not that exciting because it's a low interest rate. Obviously it's only about a 7% annualized ROI in the first 12 months. If they bring this, you know, at least six months to the table plus 12 months, it's 18 months. 18 months. 1189 divided by my 300,000 is only a 7% ROI. Not very good. Now if they file bankruptcy and drag stuff out, you're looking at that's probably what you're going to see. Same thing, 6 to 7%. Now if they do sell the house, which is would make sense for them to do. They can't afford this now. Bars out of work. I did a little Google search and found out the bar used to be in staffing and recruiting. And that's obviously a tough, tough business site right now, which I don't understand but it is had an llc. LLC has been expired for a couple years and paid franchise fees. So they out of work obviously. 1189 or 3000. Less than $3000 a month in a monthly payment like 2500 PITI. They could be making some on this or even Airbnb the way these rooms are set up to try to make some income off this. But making 45, 50, basically $50,000 profit gross on a $300,000 investment, that's an annualized. If you do it, if it took you a year, it'd be 16.67% ROI. That's not bad. If you did it, if it took you six months from the time you bought the note to the time you actually got paid off, either through a, the sale of the property and you being paid in full of the 350 and some change because there's more months being added to it. If you did in six months, that's a 32, 33% ROI. That's pretty good. This is, that's what makes this deal something that I'm looking at to do possibly longer. Now of course I got to pay money off this. I would probably find an investor. If you're going to do 300, you might as well just bring them on. Create a special purpose LLC for this one deal and then just go split these and make 20 grand each on the deal. All right. The thing about this is, I don't know, force, place, insurance. I have not gone into the due diligence aspect of that. I haven't looked at the foreclosure notes like I was able to look at yesterday. We haven't got. They didn't send that over to me. But they did get an inspection report on it. They did pull their comps. The comps are strong on this. If you did take it to foreclosure auction, it likely would, you'd sell it for the three you, you know, 349, 350. Do a full payoff as your opening bid. And it would probably sell at the, the Fort Bend foreclosure on the first Tuesday of the month. So you know it's, it's one of those deals, you see this stuff, your heart goes out to people that have a low interest rate and it's something that's desirable. I mean this could potentially another avenue would be a. If they don't want to take 300 like they say, maybe bump it up. You could potentially reach out, maybe do a subject to deal. Now the bar's got a ton of equity, they probably want to sell but instead of losing it to foreclosure, maybe you set out hey let me take over payment subject to let me, you know, let's, let's get this sold. Maybe I don't know if it needs some work or if you don't have the money for commissions which they do with the equity. Let's do a wraparound like I said. Market rent rates at minimum 3,000 to 3,500. You're going to make some money on that or you turn around and owner finance it at 500. Let's just do some numbers on that. If you did an interest only loan at 500,000 it's worth 550. But if you had somebody put 50 grand down 500000 just say times 0.06% that's 30 grand a year. Divide that by 12 months, that's I'm sorry 30 grand. My calculate course is like that. So 500,000 times 0.06 that's 30 grand interest only payments. Divide that by 12 months, THAT's 2500. Just the interest only payments, not including the taxes, the insurance. So you know. Yeah, that's including the 50k cash down. So you could turn around, do a wraparound and come out smelling pretty clean without having to do any of the expenses of property management, anything like that. You know, 6% decent. They put 50 grand down. You might go a little higher depending on the person's credit score. But that's something to think about in a subject to deal. Now am I going to share the name? No, I'm not sure. Am I going to share the full address? No, I'm not sharing the full address with you guys. This is a potential deal. But that's why I say I like to give you guys a bit of an insight. When we get individual deals and break down the numbers so it's no nonsense and helping you understand that there's some opportunity here with stuff that we're seeing. We are seeing stuff distress, we're seeing stuff that's coming across our plate. That's not ugly assets, it's pretty assets. It's low interest rate stuff. It doesn't really make sense for reinstate or modification but it does make sense to take the asset back and either foreclose, cash out, even do cash for keys to the borrower. That could be something to think about on this deal. Give them some money to walk. I only give money grand but you give them 50 grand a walk and you can still sit pretty good depending on what their motivation is. Now I don't know what's going on with a couple. Husband had a unique name and we're able to find where he was. The wife had a very non original name that was a million when it comes to searches so but it's saying it's occupied for both but I haven't seen the story besides that they're playing kind of hide and seek with a bar right now. So these are the kind of deals we're seeing. If you're interested in wanting to get involved in stuff like this, hey feel free to reach out to me. Go to our website@weclosenotes.com or you can always go to as I like to say book a call on my schedule@talkwithscottcarson.com and let's let's see if you are ready to get rock and roll and put some lazy assets to work everybody. But thanks again for listening. Like I said, if you're listening would love to see photos of this property. See me actually break the numbers down a little bit easier versus trying to do all your head check out make sure you watch the video replay and make sure you subscribe to our YouTube channel. We close Notes TV but otherwise have a great day and we'll see at the top by.