Note Case Study: Nonperforming Note Turns Performing

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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, this is Scott Carson. I'm known across the country as the.

Note Guy and I've been an active.

Note investor focused primarily on the niche of non performing notes, distressed mortgage notes on residential commercial properties for almost 20 years now. My company is we close notes.com and I know there's a lot of different things when it comes to the note world. Are you buying performing notes? Are you buying owner finance notes? Are you buying institutional debt? Like I would focus on Are you buying first seconds contract for each There's a lot of questions and it can be very confusing about what you can or cannot do. So one of the great things that we've hosted for the last couple of years that we do on just about a regular monthly basis is we host our one day class called Note Weekend. If you go to noteweekend.com you can register for our free three and a half hour class. We'll talk to you and share with you how you find fun and flip non performing notes. And yes, you can buy non performing notes from banks, hedge funds and a variety of different hard money lenders out there for your own portfolio. No, you don't have to have millions of dollars to dive into the non performing note game. We've got students that have bought plenty of deals with 2530 grand getting their ball rolling using their self directed IRA who are tired of dealing with toilets, tennis trash desks, tired of battling contractors and GCs to get properties rehabbed. We all know the market is changing and while it may not be like 2008, 9 and 10 again, it we do see a lot of distressed debt out there on both the residential and the commercial side. So if you're thinking about diving into the note game, becoming a note investor, a lean lord as you'd like to say, versus the landlord. Or you just want to figure out what it is about the sexy side of real estate in the note space. Well, check it out. Noteweekend.com doesn't cost you anything. We host it live usually the first or second Saturday of each month. You can go today. Register at the website noteweeking.com Register for the next live class we host. You'll get sent A replay to the previous class so you can start learning about the note business today. No questions asked, no credit card needed. This is a great way for you to dip your toes in the water and see if it's warm because I guarantee going through art three one day class, you want to dive into the deep end and become a note investor. So check it out noteweekend.com you can also go to our website. We close notes.com check out our podcast. Check out our YouTube number one YouTube channel. We are here to help support you. Whether you're experienced investor or you're brand new investing Note weekend is a great place for you to get the ball rolling. People often say we cover more in our three hour class than most people cover in their three day class. So check it out. Love to have you be part of our note family but get signed up today@noteweekend.com thanks and have a great day.

Good morning, good afternoon, good evening everybody. Welcome to this episode of the Note Closure show. As always, Scott Carson excited to be here today. I'm really excited for this episode. This is a another case study on a recently closed deal that one of my one on one coaching students closed on last month and it just worked out perfectly for him just as last Friday. And I get really excited about the success that our students are having in closing not just one deal but multiple deals, but also making really great above average returns whether using their own money or other people's money. So let me set the stage for this deal. This investor, very seasoned investor, done a lot of stuff but new to notes. This is his first note that he bought and he was when he got into the coaching, he wanted to focus on performing as we were looking at performing notes, making some offers. He's from Arkansas, Little Rock. And what's great is when we get listed we don't often see a lot of stuff in Arkansas. I mean it's if we do it's 1, 2, Z. And he was not opposed to buying other states. But when something pops up in your state, it's kind of the place that you look at first. I think we all agree to that, right? Well, lo and behold, come first part of December, we get this tape of 245 assets and it's got one asset in Arkansas and I don't recognize the city but it turns out it's just like 15 minutes from his house. This actual asset. Like okay, yeah, I'm like, do you want to pursue this? Like yeah, I think I take a look at this. This is so close I'm like, okay, great. So he takes a look at it, he drives out. It's kind of rural. Zillow doesn't give any images to it. You can see that it's kind of out in the middle of nowhere. But he's not opposed to it because it is close to where he's at. So he tries out to take a look at it. It turns out it's based on the things that we can find. It is 17 acres, okay? It's a double wide on 17 acres of land. And let me give you a little bit of the numbers, the background on this deal. Okay? When we looked at it, $86,000 is legal balance. Now, if you're listening to this, you're not going to see the slides, but we have the video. We're walking through the numbers on the slides. You're going to see. So when we looked at the spreadsheet, had an $86,000 legal balance. They owed over. Well, they owed 86 grand and some change. The fair market value. And my student's very, very familiar area. He's like, hey, you know, their fair market value of the area is accurate, 110,000. I was like, that's a pretty good deal for 17 acres. He goes, well, if we buy this and we do end up having to take it back, I'll probably keep the woods. It was had wooded land and the 17 acres, I probably subdivide the mobile home on one lot and keep the rest in woods. I'm like, that makes sense. You know, if you can buy something with acreage on it, why not? And I totally agree that. So $110,000, fair market value, pretty good, right lot. Was that eight grand per acre or something like that? So we got, we went back and forth heating on this little bit back and forth. But we got the. We originally made an offer at 55, and the asset manager said, hey, I've got an offer right now at 56. I said, well, if we accept 56, will you say yes to it? And he's like, yes. So we bumped it to 56. Bid accepted. Great. All right. Like I said, the borrower hadn't paid in a couple years. And so our student, he actually drove out, took a look at it, it was gated off. He was able to get through the gate and looked like it was vacant. Mobile home looked to be in good shape. So he's like, that's a bravo. It would rent for about 800, $900, maybe a thousand dollars a month. But it wasn't Occupied. And as we were doing our due diligence, we found that there was a February. No, Not Ferry, sorry, January 14th, foreclosure date already set. So you didn't have long to wait, which is awesome, right? If you're buying a non performing note, you want to wait two years, three years, you're buying in Newark, New Jersey. You know, we don't necessarily like to wait a year. I mean, we've had to do that in some cases, especially in Florida or South Carolina. But this one, Arkansas usually has a pretty fast foreclosure process. Why the asset manager of the fund hadn't already done the foreclosure, I don't know. But they were willing to sell it to 56. We're like, that's not so bad. Okay, it's roughly about 50 cents on the dollar of value. All right, so, and the borrower's monthly payment is like 428, 490amonth. I'll have the number here in a second. So the whole goal of this is to buy it, finish the foreclosure. And my student was happy keeping the acreage and the land and going to go on that route. But we also, if the bar did come to the table and want to modify it, he wasn't opposed to doing that either. Remember I said his first priority was to buy a performing act? Well, nothing goes by servicing gets transferred to Kobe Financial from the existing servicer. He's able to retain counsel. It turns out the attorneys in little rock about 10 minutes from his office. So he's able to retain the servicing. I mean move servicing, but retain council. Council was going to finish the foreclosure if he reaches out.

Suddenly, lo and behold, a month goes.

By and we get into roughly the week of the foreclosure auction. Lo and behold, his servicer calls him on the phone, says, hey, the borrower just contacted us. They would like to bring some money to the table to keep the property. And my sister's like, okay, how much are you looking to bring? And Toby Financial says the borrower is willing to bring 25,000 to the table to get the bar, get the loan back on track. He's borrowed money from his friends and families and stuff like that. He really doesn't want to lose the property. And the foreclosure is set to take place in just a couple of days. Would you be willing to extend the foreclosure myself? Like, yeah, of course you could do. So he calls the attorney, tells the attorney, hey, don't foreclose, let's pause a while. Let's make sure this deposit comes in. And lo and behold, guess what? The, the deposit comes in a 25,000 just really days before the January foreclosure set for 2023. So that's a pretty, pretty good day. All right, 25k to the table, if you look at the numbers. And now once he's brought the money to the table, wired it in, basically reinstates the loan, and the monthly payment is going to be really good as well. But if you look at that 25,000 income on a $56,000 investment, that's roughly a 44% cash and cash return in 45 days. Now, if you annualize that, you annualize that, that's pretty freaking good. That's over. It's almost a 300% annualized return in the first year. That's not to mention the monthly payments basically starting to make the $428 a month or the $490 a month coming in after year one, even if they get another payment for the rest of the year. But after it's at least about a 300% cash and cash return is first year. And then after that, it's going to be roughly about a 9.2, 9.3% cash and cash return after year one. Now the borrower stops paying, guess what? He'll foreclose. He'll start the foreclosure process again. But this is great. Now, what happened with this? How did this bar get back on track? Well, partially, you have borrowers that sometimes hide their head in the sand. They don't want to lose it. They've lost their job, they've been out of work, they've gone through a divorce. It seems like this bar has gone through a couple things, but sometimes having a different servicer that reaches out will be helpful. So you got to give a big kudo to Eric Covey and his staff over at Covey Financial and just being able to pick up the phone and get a hold of my student on an untimely fashion. But you wish everything turned out this way. I mean, worst case, if he had to foreclose, guess what? He ends up with 17 acres and a double wide 15 minutes from his house. He'd sell the double wide for 25, 30 grand and keep the rest in the land and it's wooded. He could sell the, he could sell the, you know, the timber if you wanted to. 17 acres is a pretty good sized plot. But this borrower wants to keep it and was able to come to the table. So this is a true win win across the board win for my student who's just doing a great job. He's got two more performing loans approved upon. He's gonna be closing on three or four deals in his first 90 days. This is a great deal. You wish you could hit him out of the park like this all the time. Unfortunately it takes Nick and a lot of offers. He made a few offers before that weren't accepted, but guess what, you're able to find something that makes sense. He went out and took a look at it. He was very comfortable with the property and he's comfortable with whichever strategy he had to foreclose. He's comfortable with his borrower would would have modified. He probably would have taken less than 25k to get the bar back on. Tracker modified the loan but the bar offered up 25k. So he's gonna offer up 25k. Why not take it? It's also more skin in the game from the borrower who's probably less likely to fault going forward because they put the money in and gotten back on track. And you know, that's the beauty. You want to work with borrowers to try to keep them in their house. And this is what we love about non performing is that he was able to get a property well below value at a sizable discount below what was owed. And there was a no lose situation for my student. Either takes the property back, which is 50 months from his house, which is nice, or he modifies the mortgage in some sort of fashion. Didn't expect on a full reinstatement. But hey, that's great. You know, he would have been glad to do a trial payment plan, have the bar making a payment to be yielded a double digit return to him. Bring some of the rear just down, start paying the existing payment, get back on track. And this is, you know, collateral files clean. We review the collateral files why he funded on this. Wired in the funds in it is a true win win scenario for it. So kudos to my students. You know, we love seeing our students close on deals like this. That makes something happen and they don't always go this smooth in 45 days of a strategy. But guess what, you know, the more offers you make, the more things we've had borrowers get reinstated within a week of closing. We bought a note one time that we thought we're going to take six months to foreclose. We end up able to foreclose in two weeks because the seller transferred the wrong loan to us. That was a two week foreclosure versus a six month foreclosure. So we ended up buying both the deals. So you know anytime you make a great deal like that great return, that's phenomenal. Those results are not typical. We make the disclosure typical deal takes longer than 45 days to get re performed. But guess what, hey sometimes you have lightning strike and it's good to be on that end of the the return. So kudos to our students. He's kicking ass and taking names. We love our one on one coaching students. If you'd like to find out more about our coaching, hey feel free to reach out to me. Either drop me an email@scottclosenotes.com or Schedule A call to talk with me about it at talkwithscottcarson.com but pretty simple servicers lined up now it's going to be it's only $15 with servicing because it'll be performing now. So this is a great deal. And our student, he used his own funds to fund the deal. So it's all money going back to him and he's still at the point where he could a if he wants he could refinance out his funds with somebody else who wanted to make a 5 or 6% return on investment. And our student is actively, I think he's pulled every, every county IRA list in all of Arkansas has his VA skip tracing to find those people. So he's going to raise a sizable amount of private capital to go out and close in some more deals. So stay tuned for some more updates. Guys, once again we identified this deal that was close to him. The price made sense, the value of the property was there. He was comfortable potentially foreclosing and taking the property back. If you're not comfortable taking a property back you probably shouldn't be buying the note if that's what's going to end up happening. If you're looking for performing notes that's great. This wasn't occupied at the time. It was vacant taxes, a little bit of tax behind but the bar is paying the taxes to bring that up up current on top of the 25. So also he's will also be paying force place insurance or insurance to make sure everything's happy that so it's a, it's a really slam dunk deal for our buddy Keith. So guys gals go out, take some action. This is the beautiful thing about non performing. You get some amazing returns. You just got to sort through them and work it like anything else and be coachable. So go out, take some action. Break, and we'll see you all at the top. Bye. Here's. Here's wishing you higher returns as well, Sam.