Starting Out as a Note Finder
Hayward, CA · Member since 2013 · 7 posts · 0 votes
A few years ago I had bought into a cash flow system that introduced me to the note finding business. I started out going to the county recorders and collected leads and tried to find note holders. I didn't stick with it due to my circumstances and I never made any money. I am thinking about starting again with being a note finder and later on investing in notes. Can someone tell me what the process is as a "note finder" or note broker after you collect the information on the note? What legal documentation will I need as a "note finder" to conduct business between the note holder and investors?
Glen Stone - Most likely you bought into the Russ Dalbey, Winning in the Cashflow Business program off a late night infomercial. Russ got shut down and is no longer selling his pie in the sky. I worked with several folks that had paid over $30k for his teaching and still have no clue what they are doing. Books are written on this subject and, there is more than one way to skin a cat! There are all kinds of notes out there; real estate notes, automobile notes, mobile home notes, business notes and, notes secured by most anything that can be financed or held as collateral.
The idea is to find a note holder that needs a lump sum of cash now vs. collecting small monthly payments over time. You then collect information from the note holder such as the sale price, down payment, note amount, interest rate, term, date of first payment, number of payments made, number of payments remaining, current balance, property type, address, owner occupied or not? etc.... It is important to collect enough information about the note to paint an accurate picture for the note investor. Always get a copy of the Promissory Note and always double check the numbers against an amortization schedule. You also want to check out the tax values and provide some comps and pictures if possible.
Once you have compiled an accurate Quote Request Form and short due diligence package together, you will send this out to a couple of the most likely buyers. (Get to know your potential buyers prior to sending them quote requests as it would be a wast of time to send a real estate note to a company that only buys business notes and vice versa) You will take the best offer, DEDUCT what you would like to make, and present this number to the note seller. The Deduction or discount is how you make your money!
Some Note Buyers will handle all of the details from the point where you have a verbal agreement with the note holder. You just call them and tell them you have a deal and let them know what you agreed on.
Others will want you to wrap the note holder up under an assignable Sales Contract. They will want you to collect all of the note documentation such as the deed, credit application, bureau report, proof of insurance, payment history, etc. Since this is a buyers market, and the buyers make the rules as to what their process is. If you collect and compile a complete and accurate worksheet and initial package, you will find that your quote requests go to the top of the list and are taken more seriously. This goes a long ways in getting investors to help you with the process. I hope that helps.
Glen Stone - Most likely you bought into the Russ Dalbey, Winning in the Cashflow Business program off a late night infomercial. Russ got shut down and is no longer selling his pie in the sky. I worked with several folks that had paid over $30k for his teaching and still have no clue what they are doing. Books are written on this subject and, there is more than one way to skin a cat! There are all kinds of notes out there; real estate notes, automobile notes, mobile home notes, business notes and, notes secured by most anything that can be financed or held as collateral.
The idea is to find a note holder that needs a lump sum of cash now vs. collecting small monthly payments over time. You then collect information from the note holder such as the sale price, down payment, note amount, interest rate, term, date of first payment, number of payments made, number of payments remaining, current balance, property type, address, owner occupied or not? etc.... It is important to collect enough information about the note to paint an accurate picture for the note investor. Always get a copy of the Promissory Note and always double check the numbers against an amortization schedule. You also want to check out the tax values and provide some comps and pictures if possible.
Once you have compiled an accurate Quote Request Form and short due diligence package together, you will send this out to a couple of the most likely buyers. (Get to know your potential buyers prior to sending them quote requests as it would be a wast of time to send a real estate note to a company that only buys business notes and vice versa) You will take the best offer, DEDUCT what you would like to make, and present this number to the note seller. The Deduction or discount is how you make your money!
Some Note Buyers will handle all of the details from the point where you have a verbal agreement with the note holder. You just call them and tell them you have a deal and let them know what you agreed on.
Others will want you to wrap the note holder up under an assignable Sales Contract. They will want you to collect all of the note documentation such as the deed, credit application, bureau report, proof of insurance, payment history, etc. Since this is a buyers market, and the buyers make the rules as to what their process is. If you collect and compile a complete and accurate worksheet and initial package, you will find that your quote requests go to the top of the list and are taken more seriously. This goes a long ways in getting investors to help you with the process. I hope that helps.
Don't get me started on Russ Dalbey. I'm glad that POS is no longer in business but I'm sure down the road he will start up yet another scam. Once a scammer always a scammer.
By the way listen to Marc. He knows his notes!!!
Would this include notes due to land contract sales? (Sorry if this question seems basic, I just don't know.)
Thanks Marc, that information was helpful. Russ Dalbey is the one that informed me of this type of business so I have to give him some credit.
Dawn A. yes Land Contracts are another form of seller financed real estate transaction. We use them all of the time here in Michigan
Glen Stone I figured that your information regarding the note business came from Russ Dalbey based on the lingo you use. Cashflow System and Note Finder are terms that Russ coined to make the business seem easy. The problem is that is not EASY and, it is not "just find em, list em and make money!" Russ was great at giving out just enough information to confuse one into thinking they needed more:)- The proof is in the number of people he sold classes and books to that still have no clue what the note business is all about.
You need to be excellent at collecting information, checking numbers and facts and, at negotiations, to make any money in the note biz! You can give Russ all the credit you want but, you won't be able to give him any more of your money, at least for a while!!!
http://www.ftc.gov/opa/2011/05/dalbey.shtm
Great post Marc! All newbies should read the link you provided and realize that the FTC can hammer any guru, not just about notes.
I believe this was the guy in the mid 90s that came to town with a sminar. Not much time for questions but I got enough in to blow his scheme, I left and waited in the parking lot and handed out my business cards. People from 100+ miles away came. I'm sure I had more business out of his seminar than he did....LOL!
No, I'm not just a dream killer, but I really don't like scams!
If you want to get in the note business, get with someone already doing it, like Marc. Good luck!
When I first heard about the 'note finding' business it was more than a few years ago and it seemed like a fresh idea. Is there a need for a middle man in today's Real Estate note business? In the future I might look into investing in these notes, but in the mean time I would like to know if spending time finding note holders would be wise in today's world of Real Estate.
Glen Stone there are a number of cashflows out there to work on as a bird dog, if you know the right buyers, are good at collecting facts and negotiations. There are business notes, lotto winnings, structured settlements, mobile home notes, auto notes, just to name a few. There are more notes out there than anyone could EVER hope to buy, find, bird dog or broker. All you need is a solid plan and SKILLS!!!
Hey Marc Faulkner, I really enjoyed your response to Glenn Stone on this forum. I am a "newbie" to the realm of note buying investing and would like to just learn prior to application. I went to your website and it was and is very informative. But what would I need to get started? My understanding being a note broker is a great place to start to gain the knowledge and be able to apply. Is this true?/ What do you think? Could you please advise where should I start and do you have any information to help me get started?? I live in Phoenix, Arizona. I would like to start in my own back yard. I will be looking for your reply.
Roy, or anyone, while the paper game may sound easy, it's not a starting point for investors, buyers of notes. You really need to understand the collateral issues of any secured obligation, if you're buying car loans, you need to know the car market, values, means to secure and dispose of them. In RE that means being able to value the property, access condition, understand the market, the issues surrounding foreclosure and disposing of the RE, that means listings and/or settlements. So, you really need to know RE before you can really understand the notes financing properties.
Now, just finding notes, that decission is up to the due diligence of the buyer. So finding a note you may not need so much of the RE or vehicle knowledge, but that means you'd always be locating deals instead of getting involved so much yourself. OTH, if you could access the collateral that would be a big plus for your fee if you could demonstrate a good command of those aspects. Be careful though how you present RE valuations without a licens too. :)
One good place to start is by doing court house research at the Register of Deeds. See what transactions are getting recorded and who is holding paper. You will write down as much contact information as possible and then look up phone numbers from this information. You can then contact these folks and see if they would rather have a lump sum of cash now vs payments over time!
Glenn
If you have money, it is not hard to find people that own purchase money mortgages secured by real estate they sold a couple of years ago. Better yet, if you can find people that their heirs held a mortgage a few years ago, now you have found a vein of gold.
If you have money, you find an heir that just inherited a $10,000 (current balance) note at $132.15 per month with 120 payments left. You offer the heir $7000 and he says yes. He assigns the mortgage to you. Compute your return on that. If you don't know how to compute your return, you don't need to buying any mortgages.
Most of the retail courses that I have seen try to teach you how to "control" notes so you can sell them at a profit. This is extremly difficult to do in real life. There are too many variables. How do the retail gurus tell you to verify the current balance? Are you going to take the morgagee's word for it? You have to get an estoppel letter from the morgagor. I can tell you what I would do if some stranger contacted me to verify the balance on a purchase money mortgage that I was paying on. I would call the mortgagee and ask him if he was considering selling that mortgage at a discount. If he were, I would outbid any buyer he had. Even if you had an iron clad assignable purchase agreement, the mortgaor is not purchasing the loan. He is paying it off. There are lots of variables that make this sound better from a podium than it is.
If you have money, you make the offer to the heirs. They say yes. You get to closing before anyone has time to think this over.The key word is if you have money. If you don't have money, this is way too difficult. Buying houses with no money is a lot easier than buying notes with no money.
Glen Stone I am not sure why you would want to give Russ any credit, unless you actually made some money using the information he sold you? Just saying!
I got lots of notes without putting money in, my credit and ability to pay was seen as a much safer bet, small discount and interest spread and you continue to march. Am I going to teach newbies, I don't think I could without a two week bootcamp and they'd need to walk in with note experience, a note for a note, probably should not have mentioned it, some guru will get ideas.....
Not having your money means using OPM, when you do that and you place yourself in as a straw man, you're brokering, so you'd need a different agreement to just finds notes, you can't hold yourself out as a broker to a seller either. Not being the principal will make it hard to get note holders to pay attention to you, so you will need knowledge.
:)