Weatherford Texas Nonperforming Note Case Study

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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 Note Investors. So you want to dive into the world of note investing but no know how to get started or you don't want to pay 30, 40, $50,000 for a one on one coaching program that just completely does not deliver the deals or the funding or the access that you need to take your note business to the next level. That's why we have our one on one coaching program. I'm Scott Carson. I've been buying notes for 20 years. I've helped thousands of investors buy their first note direct from banks using either their own funds or other people's money to buy non performing, reperforming or performing notes yielding them an above average return. Now what's involved with my one on one coaching program? It's unlike anybody else's because guess what? You're working with yours truly. Not some paid student, not looking at some recycled list of stuff. Now what we do is differently than anybody out there and that's why we have such a huge success rate with our one on one coaching program. 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We are here to help you because guess what ladies and gentlemen, there is plenty of inventory out there. We're not going to focus on owner finance notes. We're going to focus on how to get people calling you with their deals or how to get banks sending you lists on a regular basis that you can cherry pick and show you how to raise all the capital that you need. Our one on one coaching program is the most complete program out there. That's why you have such a high success rate and it's cheaper than most of the others out there. And we also give you the biggest bang for the buck by helping you make the introductions, looking at the tapes, helping you bid if you're coachable. Now, not everybody's coachable. Not everybody can afford this. But what we can do is we can set up payment plans and different options for you. I encourage you to either book a phone call with me@talkwithscottcarson.com and we can talk about it. See if you're a fit and not everybody's a fit and that's a okay. 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You being a note investor for the rest of your investing lifetime. Good morning, good afternoon, and good evening, everybody. Welcome this episode of the no Closer show. As always, Scott Carson, excited to be here with you today. Today's episode is about an equity deal outside of Dallas in the thriving and growing town of Weatherford, Texas. Now, if you've never been to Weatherford, it's on the east side of Dallas. It's really kind of the path of progress with the way the metroplex is growing. And I was kind of surprised when I got this deal, when I got this asset, I should say it's not necessarily deal, depending on how it goes. This asset is one of about 30 other ones that I got that were in Florida, Texas. We've previously a couple episodes talked about Sugar Land. One, Talk about one, Lake Travis. This is the third one that was in Texas that I thought the numbers were interesting enough to take a second look and kind of walk you through what I see when I get a deal in or get a list of assets in. You know, do I see a lot of stuff in Texas that makes sense? Not really. Do I see a lot of stuff in Texas at a big discount? No. That's why I spent a little time on it. Texas, obviously, is a great state to invest in if you are a note investor, because if you can find something that makes sense, you've got the law on your side. By the law on my side, I mean I have fast foreclosure, fast evictions. As I joke about, we've got fast highways and fast executions in Texas. So it's an opportunity. If you can buy it. Right. It can turn into something that's going to pay something good. And this was the case kind of with this deal. And then we're in the process of getting a little bit more information on this, but I wanted to go through some of the numbers on what I saw with this and why this equity deal might make sense. All right. And when you get a list in, the first thing we always like to do is, is, you know, Google it, take the address, take a look at it, and what popped up online. And if you're watching this video, you'll see it. If you're listening to this podcast, you might go ahead and watch the original video, because I'll go through the numbers. But it showed a house that did match up with what? The BPO that was sent over by the hedge fund, the bank, you know, the lender that were buying this from the seller. They should a house, you know, three bedroom, two bath with a metal roof. You know, homeowners got a red truck, they had an RV now side trailer, got some toys on it. You know, decent sized piece of property. But when you start, when you asked, and that's a great thing, I asked the seller of this and I said, hey, do you have an external bpo? Do you have any title work? What do you have? They sent over their inspection report and the picture looked different. And I also realized when I googled it and found something else that the property had been completely renovated just a couple years ago. And it's a beautiful house. They get a new shingle roof on it. The driveway's been fixed. They've, you know, paint this nice kind of olive green. They've got some planters underneath the windows. They've really done a nice job, but not dating this property. And I was like, oh, this is, this is pretty good. So let me go through the numbers. Okay. It's a first lane. You guys know we only usually buy first lien. So it's a first lien, non performing note. The borrower has not made a payment since June of 2021. Now, that number makes me think they haven't paid in two years. Right, because it's June 2023. We're coming out this episode. But that's not necessarily the case because that's right smack dab in the middle of COVID All right, fair market value conservatively is 310,000. Is a four bedroom, two bathroom, single family home, 1690 square feet, and I think about a third of an acre. The unpaid principal balance, okay, the unpaid principal balance of this is 220,500. The payoff is 227,000. They're only a few months behind. Five months behind, based on what the tape told me. So this was obviously, they stopped paying in June. They took a COVID 19 forbearance agreement, which is totally fine. Everybody's entitled to that. I paid my mortgage on time and I think back, I should have probably not paid it for six months to two years because everybody else did. Right? But anyway, their principal and interest payment is just 12.25amonth. Okay. Now one of the great things I asked when I asked the sellers as where's the in legal process? Texas is fast. Okay? They're more than three months behind. You can foreclose pretty much in 31 days. We file a, you know, notice basically 21 days prior to the first Tuesday the month. Well, they started the first legal on this, so they basically sent out the notice of intent to foreclose. Okay, now let me go back to the numbers in this again. Fair market value is 310, payoff is 227. There's some equity there that the borrowers do remember. You're buying the note, not the property. It's easy to fall in love with a good looking property. View. Right. So the borrower technically has $83,000 in equity. Now that's not counting if they're another month or two behind, this is, you know, they're now technically six months behind as a recording. So they're five months behind, but that's beyond the point, you know, 80 something thousand in equity. Now the seller on this deal wants 195. That's 86% of payoff. That's only 63% of fair market value. You don't want to fall in love with that 63% because you're not entitled to that full 310, ladies and gentlemen, remember that. Or this full, this full amount owed. You're only owed the payoff, okay? Which is technically about $32,000. 20, you know, 227 minus 195. That's $32,000 in gross profit. Now the great thing in Texas, foreclosure costs aren't that expensive. You're probably gonna pay somewhere between a thousand to two thousand bucks for foreclosure costs. Hire an attorney taking the foreclosure. You ain't got to go through a legal process because Texas is a non judicial state. So if you foreclose on this thing, you buy the note at 195, you file a foreclosure. You can technically foreclose probably in 60 days if you close quickly enough. Okay, now what's, what's the borrower going to do? Are they going to try to stay in a house? Are they going to file bankruptcy? They file bankruptcy, could delay stuff out. The reason you want to keep that in mind, because a borrower could do that, Bar could do that. Borrower could suddenly get some money and reinstate you. So this is why it's important not just to fall in love with one strategy. You got to know what's going on. This is why I'm waiting for a response back for my question and how the borrowers have responded. They have not. And the bars have not responded to the bank's demand letters yet. So that makes me tell me that it's probably going to go to foreclosure. Now. You're not going to take this property back. Weatherford and anything above around DFW is selling pretty fast. If you sell it, it's going to, you know, your highest bid at the auction is going to be what you're owed, which is at 227. Okay. So if you do sell the auction, you list it for full 227 or 228 or 229, whatever the payment is, you add an extra month or two on there and you might make around 32,000. Okay. After your foreclosure cost, that's not bad. That's not including any money costs, your lender costs. If you're going to split Cs or borrowing mezzanine financing or private money investor, you're given a few points to what that number is going to vary by individual. Okay, so annualize. If you buy that and you do it in 90 days, it's. Or if the borrower somehow goes out and pays you off, they go get a loan and pays you off. Or worst case, they sell a property in 30 or 60 days and pay you off. You made 32,000 between the 195 and the true legal balance, that's about a 16.4% annualized return. That's not, not too exciting if it takes you a year, right? But if you did that in 90 days, or let's just say 120 days, you multiply that 16.4% times four, because you would technically annualize that down. You did it three. 16 times three is what it's a 49.2% and truly annualized return. If you did that in 90 to 120 days, that's not bad. But the kicker here is if they don't pay you off, it doesn't go to foreclosure. It goes to. They file bankruptcy and it goes to a payment plan, a chapter 13. They start making payments. The best you're going to see is probably at 11.3% ROI if they reinstate, and that's if they bring this five or six months that they're due plus a full year of payments. Because you're basically starting from now. So you start paying on time again, right? So 18 months of payments at 1225 divided by the 195 is only about 11.3% ROI. That's not including servicing costs and not including your money costs. Now, if I was going to structure this with an investor, I Probably says it's this amount is more than, you know, it's about 195. I'd have them fund probably 200. I think taxes weren't too bad. Taxes were basically paid up to date on this. If I remember correctly. You know, hey, investor, if this turns into a reperforming note, they start paying. I'm just going to walk away is what I would do. Except I don't want anything immediately. But if the bar, when the bar pays you off because there's still that gap between the 195, what you pay for the note or the 200 and then the 227 or the 230 they owe, I don't want to give up half of that. I'd say, listen, when they pay off, just either a, give me 15 grand to buy me out of the deal or we'll wait around and hopefully they'll refinance that. Now they've got. I don't think they're going to refinance out of this deal because they're at a pretty low interest rate on this stuff. And with interest rates being higher, of course, if they miss some payments, I don't know if the existing lender has reported those to credit. Credit bureaus, that's one thing to check if the servicing company is reported to credit because if they are, they're not going to get. The borrower's not going to get refinanced at all. Okay. If your servicer is not reported the credit bureaus, it may show no mortgage lates. Maybe the borrower could go and get refinanced out. There are those solutions out there to refinance you out. But the interest rate's probably gonna be higher than what they're at currently right now. Okay. So just keep that in mind. Do I think this is a deal? Potentially, if I do a little bit more digging and getting some more answers back on the notes of default. In the servicing notes, if the borrowers told the, you know, the lender on this, the seller on this is go pound sand and go to foreclosure, see what's going on, try to track down, see what the borrower is doing in the background and go from there. So could be an okay deal. I mean, making, you know, 15 to 30 grand in 90 days, it's never a bad thing having to do any fix or flip or rehabs, but you're going to be foreclosing on this deal or hoping the borrower pays you off or you get, you take it to the foreclosure. Auction. Now here's the thing. Could you, once you buy the note.

Since there is a little bit of.

Equity, could you go to the borrower and offer them cash for keys? Of course you could do that. Say hey, I'll give you 20 grand a walk or otherwise I'm gonna foreclose and you're gonna get 220 at this. Remember the value on this is 310. You know, we'll give you 20 grand to walk. Then you turn around, list the property and sell it. You could do that, but most people are gonna fight for that equity. And with these type of incomes they're probably. Like I said, it doesn't take much to hire an attorney to file bankruptcy to drag this stuff out. So just keep that in mind. It's really kind of a skinny deal. I think at the 86% of the payoff it's a little high. I'd rather be at like 1 below 190 for me to take this down and be a little bit more cushioned. But like I said, you really need to do a little bit deeper dive and take a look at what's going on. And any type of servicing not to go from that. I haven't been given that yet and that's what I'm working on reports. But you know, not a bad looking property. This is, you know, it's going to keep appreciating. If you want to turn into rental, you could. I don't know exactly what the rent rates are, but it's obviously more than what the existing mortgage and piti payment is on this. But it is owner occupied and that's why I think the borrower is going to fight you on this to stay in their house. And like I said, they've got only six months behind. It's only six, seven months. That's 8,500 bucks to a thousand bucks. If they come to the table, they bring 10,000 bucks in, they can reinstate and then you've got a, and you got to reperform. You don't have to hold on to for 12 months to get a, a double digit return. So I mean if you like these types of deals, reach out to me. I may have some available for you. If you want to learn how to do these types of deals, definitely schedule a call with me@talkwithscottcarson.com I'd be glad to see what your goals are, what your kind of money looking to put to work. And let's see if we can't find something out there as Always. Guys, we've got coaching, we've got classes, we've got upcoming live class that you want. Definitely take an opportunity to take a look. If you like Dallas area, you like Texas notes, that's great. Don't rely solely on Texas as your 1 market. Definitely. I love Texas. If I can find deals on it, great. But it's as a note investor, you got to really be focused on three to five states. And I don't put Texas one of those five states. It's always the cherry on top. Because if I just focus on Texas assets and be struggling. I can't tell you how many times I've had conversations with investors here in Texas. We're looking for Texas deals and they can't find anything. They can't find anything. They can't find anything because they're just focused on like one part of the Lone Star State. And if you do see something great, you can probably flip it. You could probably make some money on it. I could probably, you know, if I get this under contract at 195, which I could today, did I flip it to 200 to somebody, yeah, I can make 5, maybe 10 grand on a wholesale fee to an investor in the back end side. It wouldn't be a bad thing. I mean, if they, if they reinstated. Let's just say that, let's say the 12, 25 times, let's just say 18 months and divide that by 205. 205,000, that's still a 10.7% cash and cash return before servicing. So not a bad day for somebody if they're using their own money and you've got that difference in the equity, you've got still 32,000 roughly, give or take a little bit on the equity side between what's owed and what you paid for the note. So potentially deal or potentially dud, you make the decision what your money costs are. If you're using other people's money, it's probably a little bit too skinny of a deal. If you're using your own money, hey, this could be a pretty decent deal. Decent equity, decent LTV, and could be a decent ROI for your own funds, your IRA or retirement accounts. So for more information, check out weclosenotes.com or reach out to me directly@talkwithscottcarson.com but thanks for listening, guys. Have a great day. Bye, Sam. Sa.