Session 7 - Real-World Note Tape Analysis: Unlocking Profits & Smart Strategies for Small Notes

All right, I want to work go through this tape that one of our coaching students just got this week. Collins, a realtor out of Denver, Colorado. He was doing some marketing out to some of the lists we were talking about. And one of the contacts that we gave him that runs a hedge fund sent him this list of low balance notes for him to take a look at. Okay. And it's an all or nothing bed. The seller wants to move the whole tape at once. Doesn't really want people to cherry pick from it. I'll give you the reason why. So it's a 12 first liens here. All right, so let's see. Make sure you can see my screen here. I think you guys can. All right, so here's this, here's the spreadsheet. You get the borrower's name, which you'll often get that if it was modified. Most of these were not monitored to 11 of them. Conventional loan amount, fixed arm rate, all that good stuff. Original loan amount term is anywhere from a six month to a 180 month term. I think that he means by six year by that if the balloon's in 20, 30. All right, balloon date, date of the note, first payment date, due date, maturity date. You can see some of these have maturities all over the place. Anywhere from as little as 27 is the first one as late as 35, 41. Okay, so he's got 16 years left me current assurance rate. So you can see anywhere from like a ace. What did I see? 6.5 up to 9%. They've all paid relatively recent, all in the last month or two. I don't think they're delinquent by any means. The imagination. We'll have to double check that. But here's a current tni monthly payment, kind of small amounts. Okay, that's. Oh, that's taxes, interest. Here's a current P and I payment. All right, so let me show you. So the current principal balance is basically $138,000 pool is what's the balance on it? Okay. And based on the cash flow PNI constant. Right. Now let's, let's summation all this stuff up. Now. So it's bringing in 2294amonth. Okay. Yes, Mr. Skyline, we will be running numbers to see what it's like to foreclose and flip some of those properties. Yeah, we'll go through that more so tomorrow and on Sunday for sure. I just want to go through the cash flow basis side of that today to see that. But yes, if you hit the foreclose on some of these. We'll go through that number, those calculations. I don't want to hit that all with you today. Today's about how can we build cash while we find these deals. And that's the first thing I want you to take home is if you're into notes just to take foreclosures down and take foreclosures back. This is probably the wrong business for you. You're going to make a mistake like that. That's the biggest mistake I made my first two years was buying notes and just foreclosing on everything. Well, when I foreclose everything, you got servicing costs, attorney costs. Then you've got repair costs and more legal costs if you don't sell it at auction. All right, well, if I look back at my portfolio, what I foreclosed on, I probably could have modified or reinstated half of those, gotten cash flow in the first 60 to 90 days, and then sold the notes off after 12 months without ever having to foreclose. And legal, I would have made a whole lot more and not spent as much. Okay, so keep that in mind. Now. Yes, there are some notes you're just going to foreclose. If they're vacant borrowers, dead foreclosure is the strategy. You're not going to get a dead bar to come back from the grave, start paying you. Okay, but that's the thing to look at is you want a mixture of both. Okay. Anyway, going back to this, so 2294amonth coming in. And there's 13 notes. Sorry, 12 notes on this. So if he's paying 12 times 25, that's $300 a month in servicing costs. So that lives in Leum. A net of this. Boom, boom. All right, and so if that's 12 months coming in, it's going to be about 24 grand. Well, what happened there? Okay, Yeah, okay. Okay. That times 12. Okay, what is going on with my math here? Oh, I have my num lockup. Okay, so let's do this again. It's equal to that times 12. All right, so he's bringing in 29. Sorry, 23,000 if he buys these and he's used his own money. All right, now these are low balance loans. I mean, you start getting. You're not making as much money. If you divide that by 12, It's. It's less. It's, you know, that's not much per note. 1900 dollars per month, that's what, 150 roughly. Give it a little bit. All right, so what do you. What does he have to do what does he have to pay for this? So let's figure this out. So I told him, I said, well it's 138. Why don't you offer 50 cents of the dollar? Let's just say 70 grand. All right? If you offer 70 grand is equal to. 34% cash and cash return. Would you do that deal? Now remind me, you're going to have some of these that are going to pay off sooner than later, right? So let's go over here. Current principal balance. See like some of these are like four grand, five grand, six grand. It's not real desirable, you know, 50 cents of the dollar, that's what you're going to do. He's like, I would use my self directed IRA to do this. He's got that money in an ira. Well then that's a pretty good yield, right? Because if you offer 50 cents. And let's do this here real fast, let's just go here say 50%. The reason we offer 50% is consider so low balance, right? Divided by two. There you go. He could buy some of these with his hsa. He could buy some of these in his kids son's Roth. He put some of these in his solo 401k. Okay? And that's the, that's the thing. You guys gotta look like if you've got some money sitting on the sidelines, there's opportunity. You don't need to have a million dollars. Right, Judy? I'm sure Judy would be like, I wish I came across that deal. I would roll that into my, my self directed IRA in a heartbeat. Right? Yes, I do. Yes, I do. Okay, but so that's the thing. So is that still, is that a good deal? It's 50. Heck yeah, it's a good deal. Let's, let's figure this out. If he does it at 80, let's say if it goes to 65 or 60, 67 cents is equal to this times 0.672/3 of the dollar. That's still going to be a phenomenal. 26%. Start low, let them counter in. Okay? Now they counter back to, you know, 65, 67 cents a dollar. I wouldn't try to squeeze difference in between. That's still a phenomenal $0.26, 26 cash and cash return. I wouldn't split a deal like this. I wouldn't raise capital for something like this. I would just, you know, buy it with your own funds. Unless you had one investor that came in and funds the whole thing. I would not Try to nickel and dime, put, oh, I got an investor who's got five grand or ten grand. You do not want to raise capital from folks that have 5, 10, 15, 20 grand. Really? Anything below 25 grand is a no, no. They're gonna be the biggest pain in the ass. Tell me how I know. I know. Okay, Honestly, when you start off friends and family, you say 25 grand, but most of the time you're gonna want to see people bring at least 50 grand or more to the table. Okay, prefer a hundred and say it makes exception. Most people will invest 100 grand or more. I'll let you slide in for 50k if you're gonna bring some more to the table on the next couple deals. But this is a deal like this, boom. It's not exciting. It's, it's not. I mean, they're, most of them are in Michigan. All right, Couture, Wisconsin, you know, same thing goes, you wouldn't buy something one, one month, it turns out it's a piece of trash. I wouldn't waste your time. But the value on these, they've all got values above. I mean, the current low u BPO based of earlier this year is, look at this value. If you add, if you summation all these up here, it's a $1.8 million portfolio. You're in the first lien position. These people are not going to, you're not going to, they're not going to provide. Getting wiped out. Okay, great. Offering a 10% discount to pay you off sooner and be done with it. That's an easy way to do that. They're just too small balances really to bring any other individual money partner on. But still, that's a, you know, he's going to put some money, he's going to get a good yield on this stuff. It's going to pay in three years. He's going to have his money paid off, if not sooner. Four years. And most of these have longer than maturity dates. Yeah, four years, two years. Seven years. Four years. Five years. No, sorry, that's. Sorry. 27. That's gonna be two years, a year and a half. Sorry. Five, three. No, that's. Man, my math is off. Sorry. Seven, 26. Yeah, seven, five, six, nine, four, nine, four, seven, eight, 16 and 11. So that's okay. I mean, that's the thing to look at, the balances on this stuff. Yeah, the bigger balances are gonna be the longer term stuff. So that's the beautiful thing. Okay, what questions do you have about something like now what do you think you. You're gonna obviously part your due diligence process and we're gonna go through a longer. Dude, we got a longer due diligence form for you guys to dive into. It's easy to go through what you look for. We'll walk you through that step by step tomorrow. And then we also go through to raising the capital, finding money and going from there. But you know, the reason the capital side, guys, I mean it. Can I get a money sign? If that's what's holding you back from making offers, whether you're watching on the live stream here, Zoom or YouTube. What. What's the biggest holdback? Is it the money or the experience? Yeah, the. Exactly. Experience. Judy, you've got some experience. You just don't give yourself credit as much as you shoot. All right, Experience in buying notes. I get it. You're a. A circle. Okay, I'll explain what a circle is tomorrow. All right. To you guys. You'll like that. People learn differently. And I always say there's four types of blooms. You got circles, you've got squares, you got triangles and you got stars. All right, now tomorrow we're going to go through and you're probably going to identify which position you are, which shape you are in. Learning I pretty much already know, but we'll go through that. You just need somebody to walk you through a couple of Judy and then you're off. Rock and roll. And that's why your coach said we're going to help you rock and roll and knock this out of the park. Okay? This plan of buying these smaller bounces, you know, that's what Cal Ewan is doing. Cal Yun's a guy at a Cannon coaching student of ours. He's, I don't know, bought 15, 16 performing notes making 17%. He's got investors happy getting 8% and he takes the other 8%. He's boss from non performing. He made his ever biggest. He made his biggest ever deal working with us of over six figures. $135,000 on a non performing note occupy. We tried to get the borrower to do a modification, try to get to do a reverse mortgage. Then we went to a dean Lewin, still gave her 75 grand and he still walked with over 150, 125 grand in profit, helping the borrower walk away from a ton of equity. Those kind of deals exist and can happen. You just got to know where to look and go from there. So. All right, so I'm going to wrap. We're going to wrap it up for today right where we're at. We've gone through a little bit faster than expected but that's okay. It's Friday night you guys. I don't want to kill you too much. Tomorrow is going to be an intensive day from 9 to 5 maybe 9 to 5:30 tomorrow night based on where we're at. But I think we're at a really good stopping point for the day here for you while you go have a Friday night happy hour with your friends or whatever it is. Come back tomorrow. Like I said 9:00am Central Standard Time here in Austin. We're gonna rock and rollin both guns blazing diving into the raising capital more on deals, more on due diligence and structuring these deals so that you are rock and roll and kicking ass and taking names. All right, thank you for a great day one. We'll see you guys tomorrow bright and early and bushy tailed and go from there. All right have a great evening everybody. We'll see you later at the top.