All Forum Posts by: Mazen Al Ashkar

If you foreclose and the property becomes yours (aka REO), then you can sell it for whatever amount you want. In your example, you can sell for 100k and enjoy the additional 20k.

If you foreclose and someone else bids at the trustee sale, they can pick up the property as long as they bid the minimum amount; obviously, when there is equity, you can put the minimum bid amount to equal the total payoff you have, which in this case, we assumed is 80k. You cannot put the minimum bid amount to be 100k because you are foreclosing based on the fact that you are trying to collect your debt (payoff).

@Jeff L.

Let's keep something in mind here; as a note investor, you have multiple options (aka exit strategies), one of them only is foreclosure. Another exit strategy is doing a loan modification and making the loan performing, so the UPB is important to keep in mind if you end up making the loan performing. Therefore, to recap (using your example):

Market value: 100k

UPB: 80k

Purchase price: 40k. 

If you do a loan modification, you would be doing it based on the 80k not the 40k. 

if you go to foreclosure, you would be getting the 80k (amount owing to you) + fees, etc...

If you do a deed in lieu, you would get the title and decide to rent it, sell it as is, fix and flip it, etc...

if you authorize a short sale for 81k, then you would be getting the 80k and borrower will get 1k (Assuming total payoff is 80k). 

Hope this helps clarify it. 

Thanks,

Mazin

 Hi Linda,

The simplest answer i can think of is:

1) Banks need to keep reserve funds based on a percentage of their bad debt (Non-performing) loans. Therefore, the more NPLs the bank has, the less they can support their other customers, as well as keep the economy liquid (If we're looking at a bigger scale).

2) Also, the bank is not in the real estate business, therefore, they really do not go through the foreclosure process, even they end up having REOs, they do not want to lock up the house, put insurance, protect the property, etc...

3) They can easily sell-off the loans (Get ~50% from Note investors like us) and also write-off the loans at the end of the year as a complete loss, which could help them big time with taxes, etc...

Hope this helps. 

Mazin

@Jeff L. and All, i have two items to add as additional factors to keep in mind, in addition to all of the good feedback provided so far; 

1) Keep in mind that as a Note investor, you are entitled in a foreclosure to total Payoff on the loan (i.e. any money remaining over the loan payoff, costs and penalties, plus selling costs are returned to the borrow). 

Example: I just bought a 1st lien in SC for 13,500; it had an UPB of 26,000 and the house value is 50,000. Therefore, LTV is 27%. The only way i can take advantage of the equity is if during the trustee sale, this property doesn't get sold to anyone else and become a REO under my name. Then i can enjoy the equity.

2) Also, i really think you should keep in mind that dealing from a 1st position is different than 2nd position. I know you're taking the 2nd position into consideration when calculating total equity but if you are a hold of the 1st position. If the 2nd wants to foreclose, they have to satisfy the 1st. If the 1st forecloses, then you will wipe out the 2nds. The only thing that's critical is that you satisfy all unpaid taxes. 

This is the main difference you'll notice when entering the note world; there are 2 main numbers we play with. 

1) The Market value or BPO value (Broker's Price Opinion)

2) UPB (Unpaid Balance)

You would usually bid ~50% of the lowest number between the two.Z

Hope this helps. 

Mazin

@Farakh Zaman, reading through this post, i loved the great content being put out here for you by the community!

I second everyone who suggested, ABSOLUTELY, DO NOT GIVE UP!

Like Milton Berle said: "If opportunity doesn't knock, build a door". 

The only comment i would add here and i may be biased because it's my line of business now, is to start looking into another strategy of getting into real estate. 

To give a different spin from what's suggested here, maybe it's worth your time to consider,

Switching from 

- BRRRR in properties:

(Buy, Rehab, Rent, Refinance, Repeat) 

to

- BRR or BRRRR in Notes:

BRR: (Buy, Re-perform, Repeat)

BRRRR: (Buy, Retain property, Rent, Refinance, Repeat)

Trying to be creative here but the point I'm making is that with notes, i believe you can easily achieve your expected returns and the flexibility to accommodate your travel schedule.

Hope this helps.

Cheers,

Mazin

Steven, if i may, I would encourage you to look into it with a different formula which i learnt from Gary Vaynerchuck (JAB JAB JAB, Right Hook). He mainly uses it for the idea of focusing on bringing more value before expecting to receive benefits from the market (i.e. bring at least 3 times more value than you expect from the market). I'm referencing it here because i think you should use it as (Steady, Steady, Steady, Right Hook). In other words, before you go MORE MORE MORE or LESS LESS LESS; what i found worked for me, was the ability to take a step back and re-calibrate my strategy to be able to move much faster/smarter on my next sale/move. My main message that i'd like to suggest to you is that i agree with you that some folks may make it seem too easy but i can almost guarantee you that they had a lot of lessons learnt before they established a smooth business model that worked for them. 

Hope this helps.

Mazin

@Scott Carson you are welcome and congratulations again on a very successful event! 

Thanks for your input @Daria B. 

Agreed!

I posted the below in another forum and got a lot of good feedback so i thought i will share it with the BP community as well! Please comment and let me know how your experience has been. If you have not been able to take the first step yet, then share with us what's stopping you! 

We are a very small community and everyone is always very reachable and friendly as you probably have noticed. I'm hoping the below can bring at least 1% of value to the table, . I know, myself, I asked a zillion questions before i bought my first note. Here's my "lessons learned", recommended next steps or at least what worked for me:

1) Not sure if there are any Tim Ferris fans in here, but when i started investing in notes about a year ago, i had just finished reading the 4 hour body and 4 hour workweek. Back then, i was in pure "Analysis paralysis" mode, couldn't move forward, was worried about putting my first investment in. The main idea i stole from Tim Ferris is the 80/20 rule which helped me understand that i need to know just enough to be able to take my first step, i don't have to know the entire note world before investing in notes, i need to know just enough to be able to make my first move.

2) Always ask questions, like i said, there are a lot of experienced note investors who put out alot of great content out there to help other investors.

3) I definitely recommend you take advantage of any courses offered here or anywhere else. There are alot of good teachers that can help you make that first step.

4) Try to JV! (Joint venture). That was actually my learning experience, I JV'd on my first note and learnt a lot through the investor who was managing the note! This will work for those who don't mind taking a leap and growing their wings on the way down - Les Brown :)

5) Don't go BIG! Some might argue this point, but in my opinion, if you have big capital to invest, try to walk before you can run! Get one note or maybe two notes at the max; Go through the experience of bidding right, due diligence, recording, workout/exit strategy, measure your success, re-calibrate and do it again with a higher number of notes, now that you have a bit more knowledge of what went right and what went wrong!

6) Always remember to have fun! I've seen many real estate investors recently who switched to notes because of the high returns but then ended up not enjoying the business of paper! Things move super fast in this industry and you need to be flexible and ready to absorb a bit of chaos and quick closing!

7) ALWAYS GIVE BACK, AS SOON AS YOU CAN!

Happy note investing out there.

Feel free to reach out with any questions you may have and i will do my best to answer!

Hi Jeffrey,

Welcome to BP. I'm from Montreal too, mainly invest in mortgage notes in the US. My first reaction to the options you have on the table is absolutely keep the triplex! Especially, with the way you describe it as a well-maintained triplex and cash flowing 3700/month. As a matter of fact, if you want help buying the other 2 out, let me know, would be happy to consider investing with a partner in Montreal in a triplex. 

Cheers,