Note Investing, SD ROTH IRA and mentor/partner.

24 Replies

It's been a long time since my last post. In the last 2 years, I have had the opportunity to buy and hold an 8 unit and flipped 2 SFR (currently flipping the 2nd). Oh, what fun. I have also joined up with a partner and we have purchased 20 SFR and sold 3. In full swing of these acquisitions, I was interested in ramping up the activity and since, I have taken checkbook control of a Roth IRA with purposes of investing in real estate. I've done a couple of hard money loans with it but I want to make it work harder. I feel like note investing is a better fit for this type of asset compared to flipping/buy and hold.

My next focus is investing in notes.  I love the idea, the risk, the reward.  

I have had my fair share of education with the 8 unit.  When I say education, I mean it has cost me many $$$ and sleepless nights.  

Before jumping into this new 'note"venture, I'm interested in a different strategy.  I'd like to partner with an experienced investor to help answer the questions, build a network and eventually scale it into a larger entity.  But first, I have to get started.  I see there are schools, classes, conferences available as well.  I would rather invest in the business of notes than throw $$$ at a seminar.  

Interested in sharing an experience and growing wealth? 

We have been buying some notes and are happy with the results. We are also interested in doing some hard money lending privately (not through a company). I have started researching and reading book. I'm finding so many ways to create passive income (some complicated and some appear easy, but too high risk). 

I am way too early to be of value to you as a partner. However, I am interested in what your strategies would be. Also, what do you think is the drawback to seminars?  

I can't tag her on here but I spoke to Michele Apt and she is currently looking for partners to JV with her!

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Originally posted by @Guy Yoes :

We have been buying some notes and are happy with the results. We are also interested in doing some hard money lending privately (not through a company). I have started researching and reading book. I'm finding so many ways to create passive income (some complicated and some appear easy, but too high risk). 

I am way too early to be of value to you as a partner. However, I am interested in what your strategies would be. Also, what do you think is the drawback to seminars?  

I'm excited to start this venture. Based on what I'm learning, non-performing seconds are most appealing. I know that is a general statement but it's caught my attention the most up to this point. In terms of a strategy beyond that I haven't fully developed one yet. Regarding your question about seminars, I've never attended a seminar but I feel I would rather invest my time and money in actual investments, networking opportunities, people resources and conversation with a mentor that would actually yield a tangible return rather than paying for a classroom type of experience. More than anything, it's a personal preference. I like to get my hands dirty, sometimes to my detriment. I have heard there is plenty to be gained from seminars and other similar events. I'm preferring to build experience via JV.

Originally posted by @Rachel Luoto :

I can't tag her on here but I spoke to Michele Apt and she is currently looking for partners to JV with her!

 Thanks. I’ll reach out to her 

@Lance Austin My partner and I are also interested in finding JV partners to invest with. Feel free to PM me.....

HI @Lance Austin I am in jackson too I thought about investing notes too.    I am thinking about doing scott carson course but have not jumped in.   

The best two options for first liens is: 1. pay a few buck to @scott Carson for his virtual note buying course. 2. Find a JV partner with the heart of a teacher. you fund the deal and split the profits. For example I just JV'd with an amazing couple and I gave them everything I use for due diligence, ROI calculators, and marketing deals. I even made a Facebook live post tagging them to announce the deal. It has 700 non-paid views and I just paid to boost it. If you need other people money to grow you will need digital marketing skills. Welcome to the sexy side of real estate #mortgagemedicusa #lienlord
Originally posted by @Jay P. :

HI @Lance Austin I am in jackson too I thought about investing notes too.    I am thinking about doing scott carson course but have not jumped in.   

 Let me know how it goes.  what will your note strategy be?

Welcome @Lance Austin ! Your philosophy is a lot like mine, that's how I'm getting into notes as well. If you're still in need of some resources or people who may be able to help get you started feel free to PM me. You'll find no shortage of note investors looking for JV partners! How new to notes are you? Have you listened to any podcasts, read books, etc?

@Lance Austin I'm in the same boat as you. Looking to get started in notes.

@Lance Austin - some good suggestions above.  I'd recommend taking an intro course from one of the note educators like Eddie Speed or Scott Carson, go to one of the conferences near you to meet with vendors and investors, and check out Scott Carson's info at weclosenotes.tv.  There's also a lot of info on Bigger Pockets.  @Adam Adams has a great blog. Interesting point on Adam's last blog post - do due diligence on your potential JV partners too, maybe spend a few bucks on a background check.

Originally posted by @Diane E. :

@Lance Austin - some good suggestions above.  I'd recommend taking an intro course from one of the note educators like Eddie Speed or Scott Carson, go to one of the conferences near you to meet with vendors and investors, and check out Scott Carson's info at weclosenotes.tv.  There's also a lot of info on Bigger Pockets.  @Adam Adams has a great blog. Interesting point on Adam's last blog post - do due diligence on your potential JV partners too, maybe spend a few bucks on a background check.

@Diane Ensminger 

"do due diligence on your potential JV partners too, maybe spend a few bucks on a background check"

That's good advice.  I will look at Adam's blog as well.  I am not familiar with him or his information.  

You might also reach out to David van Horm and Darren Eady here on board. 

Lance although your intention to invest in notes rather than throw $$$ at a seminar makes sense, be sure to get a baseline education by enrolling in a few seminars and/or working with an experienced note investor.  I highly recommend that you attend some note conferences and network, network and did I mention.........network. Like any investment niche, learn to know what you don't know then pursue that knowledge. 

When I designed my JV program this past year, I created an private educational webinar program just for my JV partners which spanned 6 weeks and provided them a list of resources and examples to get their feet wet. From my POV, the more a partner understands the fundamentals of analysis, due diligence and exit strategies, the easier my job is to have them understand a good deal when I bring it to the partnership.

Bob

If you decide to learn note investing by doing I suggest referring a few notes for a referral fee at closing.  Once you understand the process then consider note investing for your own portfolio or with retirement funds.  

If you decide to joint venture in buying a note with someone be sure you are listed on the Assignment of Mortgage (or Deed of Trust), Note Endorsement/Allonge, and other documents that prove ownership.

@Lance Austin , I really agree with @Bob Malecki .  You need a baseline knowledge to be able to evaluate potential deals.  The Carson and Speed intro classes will give you that baseline knowledge.  Maybe Bob's program will  also give you that knowledge.  Check it out. 

Yes, you can dive in by buying something figuring that you'll learn - but you pay for the education one way or the other.  I bought a performing note figuring it would be fine.  It probably will be, but it's a pain in the butt (forced place insurance, behind on taxes), and I paid too much.  

"If you decide to learn note investing by doing I suggest referring a few notes for a referral fee at closing."

What do you mean by this, @Tracy Z?

@Marshall Easlick   I also agree that you need a baseline of knowledge to start buying notes.  One way to achieve that is by reading or taking courses.  Another way is by doing.  It just increases the potential for making mistakes you might otherwise have avoided.  So the best course of action would be a combo of both.  

If you first find and refer a note to a seasoned or institutional investor you will learn the process they go through before funding a note.  That will include due diligence, pricing, underwriting, calculations (ITV, Yield, Discount), required documentation and closing.

Referring deals to an investor for a fee at closing will supply insights and knowledge, enabling you to earn while you learn. We all have marketing costs, overhead, and personal expenses so referring notes to "earn a living" or a cash fee at closing makes good sense. (As a side note when earning a referral fee I like to keep the deal outside of a self-directed IRA and use the SDIRA for truly investing or buying the notes.)

Here is a sample deal of referring a note to earn a referral fee:

This transaction involved the sale of acreage in the Tampa, Florida area. The transaction had closed with owner financing and the seller had collected one monthly payment when the note was sold to an investor.

Here are the details:

Sale Price $237,640

Down Payment $ 98,640

Original Balance $ 139,000

Terms: 6.5% interest, $878.58 per month, all due in 5 years

Investor Paid $120,141.27

Seller Received$115,141.27

Note Finder Referral Fee $5,000.00

A $5,000 Referral Fee was earned for locating a note seller and matching with a note investor.

So what does an average referral fee look like? While it varies by transaction size and complexity, referral fees are generally 3-6% of the amount invested.

@Tracy Z  I see what you mean, thanks for clarifying. I guess I was just confused by a little ambiguity in the statement itself. 

 It sounds like you're saying that the intermediate person in that deal was basically wholesaling without a double closing or assigning the contract, if you could even call it wholesaling without either of those things happening.

The deal was closed with owner financing and it was sold to an investor after one payment. So, the person who obtained owner financing basically brokered a deal between their investor and the original owner for a $5,000 commission but they also took assignment (is this the right term?) of the note?

I don't really follow the math in your example. Would you mind elaborating a little?

How did they come to that number for the down payment?

How did they come up with that monthly payment number?

-Marshall

I fully concur with Tracy that, far and away, learning how to find and then refer note transactions to institutional investors is an excellent, risk-free way to learn note investing from ground zero (for someone with little or no experience). If you find the RIGHT investors to work with, you will find them to be very receptive and also very helpful in guiding you throughout the entire process. You just need to make sure that learn how to prequalify and SUBMIT notes the right way, i.e. you need to be thorough and complete. Absolutely, having a "mentor" or someone experienced to guide you is a big, big help and will GREATLY cut down on your learning curve, saving you a great deal of time AND you are earning referral fees with zero risk because the worst that can happen is that a potential deal does not go through or gets rejected and you are out $0 but at the same time, you are gaining invaluable knowledge as to what's good, what's bad, etc., so that you can learn to "key in" on the good notes.

I have to tell you that I'm a big believer in referring notes to institutional investors and I'm not exactly the new kid on the block--- this is the way I learned myself starting way back in 1996.

To this day, I still work with my preferred (national) funders on a regular basis AND I can tell you unequivocally that they are constantly looking for new referrals but one of the key frustrations they continually relate to me are inexperienced brokers who sloppily submit incomplete quote requests or, worse yet, simply "copy and paste" note information they picked up from some "daisy chain" that will go nowhere. This is a sure way to lose all cred with a potential funder.

In short, there are plenty of good potential deals out there that you can make money on, but not as many good quality referrals from the outside as my preferred funders would like to see. These funders typically do not employ their own marketing or training departments and thus rely on organizations like mine to find people willing to learn and help them develop the skills necessary to get them FINDING and referring quality note transactions to them.

And, yes, FINDING them is key, and IMO your #1 most important task, if you are looking to get into this at little to no cost with no risk, is MARKETING and I am NOT talking about going to FCI Exchange and trying to find deals that way.

Anyway, if you want to know more about getting into this, feel free to PM me and also if you want to see how easy it really is to REFER notes to funders you can go to my profile where I put together a video about it that you may find to be informative.

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