All Forum Posts by: Alecia Bolton

Agree with what everyone else said.  However, you might just be able to buy it from him directly, depending on where the lender is in the foreclosure process.

Make sure you factor in the taxes and that there will be potentially a lot of mortgage interest/late fees/FCL fees/etc you will also need to be paid at the closing table.

I'm coming at this from an excess proceeds (specifically in San Diego Co) and note investor background.

In CA, when the property goes to tax sale, if they don't pay it off prior to the sale, I'm pretty sure the liens are wiped out.  The way the mortgage company gets their money back is to file a claim on the excess proceeds of the sale (anything more than the taxes due plus fees).  It might make them whole, it might not.   Anything above the taxes owed is considered "excess proceeds".

For example, mortgage is $100k, taxes owed are $25k.  House sells at auction for $75k.  County gets $25k+fees, and the mortgage company has a couple months to make a claim on whatever is left.

Similarly, mortgage is $100k, taxes owed are $25k.  House sells at auction for $150k.  County gets $25k+fees, mortgage company gets its $100k, and any other lien holders OR the former owner gets a stab at the remainder if they know to file for it.

A lot of times the lender is screwed because they didn't foreclose first.

Another thing you should research if you're going to own one of these properties is if CA has a redemption period, what it is, and if a title company is going to be willing to provide title if the redemption period hasn't passed.  I bought a piece of land at tax auction in WA (also tax deed) where there's a 3 year redemption period.  Only one title company would deal with me, and I had to get a special certification from a 3rd party company for them to do title insurance (I sold it to the neighbor).  I was planning on developing it, but I'm not sure what would've happened if the prior owner came back and redeemed it.  

@Mia Crampton

I second Marco's recommendation.  I took Tracy Z's financial calculator class and it's fantastic.  I would also recommend buying a partial from someone who is reputable, as they will be around to help you if the note goes non-performing.  It's a little like note training wheels.

There are several note Facebook groups as well.  Some are strictly for buying/selling, but others, like JKP Real Estate Note Investing and Notes and Bolts from the Good Deeds Podcast (also a good podcast for notes), are good for education/connecting as well.

From a purely cash flow perspective, paying off your primary makes sense, but it's not that simple.

I would look at your mortgage's interest rate.  If you pay off your mortgage, that's the return you're getting with the profit from the sale of your investment property.  Could you invest that $70k into something that has a higher percentage? 

I'm assuming here that your current mortgage is a low fixed rate for 30 years.  Which is usually pretty cheap money.  So if you're borrowing the money at 3.5%, and you can invest in something that has 8% returns, then you're earning 4.5% returns.

You're also losing any tax benefits for deducting the interest from your mortgage.

Hi Joe, welcome to notes!

Where you live doesn't matter, you should be looking into the states that have a foreclosure process that you're comfortable with.  

I don't invest in 2nds, but I would think the 2nd would require more due diligence, if only because you have to learn about the 1st as well as all the due diligence on the collateral and borrower.  

Good luck!

Happy to chat.  I have not done what I suggested, and I definitely recommend talking to a lawyer about the right way to set that up, but I have done other methods of working with people I know.  Send me a DM and we can go from there.

I would also do due diligence on the underlying asset.  Since this is a slightly higher risk than an owner occupied property, you'll want to make sure that if you do take the property back, you will still make money.

Or you could sell it as a non-performing note and skip having to work it out.  But you'll still need to make sure the underlying asset has value.

@Chris Seveney That's amazing, congratulations.  What island is it on (assuming you didn't buy a whole island)?

I was just thinking about this thread.  I fractured my neck in August and got derailed for awhile but I'm 2022 planning now.  Lots learned this year.  I'll start a 2022 thread if no one else has by 12/1.

******************** 2021 recap

Business goals:

With partners, raise $1.5M in funds and control $1.2M in assets by year end - Spent $390k, had $860k under mgmt.  Already confirmed $1.1M in funds for 2022.

Generate $2k min. monthly passive income, $20k total monthly income - nope. Had enough for the month to cover all business expenses but then the note paid off. Had a couple months that hit $20k when a note paid off, but it wasn't consistent

Write a business plan and treat the business like a business, not a hobby that I'm grinding away at - did this. Didn't stick to it.

My impossible/but fun goal is to buy a private island as an investment. Probably someplace warm like the Caribbean. Maybe we should team up. -  definitely didn't do this. Although we'd probably shoot for Mexico, maybe Cabo San Lucas area

Personal goals:

More quality time with the kids. Start teaching the eldest about investing. - did this. Paid the kids to do property research. It's 'boring'.

Take time to focus on the things I enjoy doing and make them a priority instead of an afterthought - didn't do this

Read a business book and a social improvement book every month in addition to fiction - occasionally did this.  Was pretty diligent early in the year and then things fell apart

If there's an existing mortgage on the property, the owner can sell it with a wrap mortgage (new mortgage that wraps up the existing mortgage), but they'd want to check with an RE lawyer to see how it's done in DC.  I'm not sure how saleable a wrap mortgage would be.

If the owner owns it outright, they can create a mortgage on the property.  It can then be sold.  There is definitely a market for performing notes.  There are several places you can sell.  Biggerpockets, Paperstac, FB groups.  I buy performing notes. Pricing would depend on several things, underwriting of the borrower (did they use an RMLO?), terms of the note, how long it's been seasoned, etc.

Hello and welcome to the wonderful world of note investing.

What kind of help are you looking for?