All Forum Posts by: Bill B.

I didn't see anything regarding property taxes.  If there are delinquent taxes and the property is sold at auction to recover the back taxes, your loan is wiped out and you lose your entire investment.  I'd also pull an Ownership and Encumbrances Report (O&E Report) to show any and all liens against the property.  Liens can range from IRS liens, to mechanics liens, judgements, etc.  

@Jay Raught 

My preferred exit is having the borrower pay me a heavily discounted amount to what was the UPB of the extinguished loan; which is also somewhere around 70%-90% of the FMV. This also keeps the borrower (former borrower) from adding an FC to their BK. The borrower (former borrower) and I both win. They keep their rental, debt free, and I make a nice return in a short time.

A DIL is also acceptable.

I've also spoken with a realtor in the area.  He says that I can probably wholesale the property as the inventory is quite thin in the area. 

@Joshua Andrews @Sandy Uhlmann @Jay Raught

Hi,

Sorry for the confusion.  

I do not own the note and am performing preliminary DD.  Using a servicing company is my preferred way to contact borrowers because I don't want to violate laws inadvertently. (I don't like tap dancing in mine fields.)

That all said, it is always my intention to understand processes fully and to broaden my knowledge.   I fully understand that a discharged debt can no longer be collected and that contacting a borrower whose obligation has been discharged is violation of law.   

I want to reiterate that the discharged obligation had an UPB of 5 times the FMV. My intention is to purchase the paper at a discount of at least 50% of FMV. So, I'm far from taking advantage of this borrower for allowing them to extinguish a lien on what must be a rental property (the borrower lives several hundreds of miles away) for somewhere around 25% - 40% of the face of the now discharged obligation.

That is the crux of my question.  When you are standing on an island, but can see the mainland twenty-five feet away, how do you "get there" without getting wet?  How do you say "pay me to help yourself by not adding a FC to your BK" without saying "pay me"?  What are the "magic" words?

I hope this clarifies my original post.

Thanks again for all input.

Bill

Hi,

I'm doing DD on a note.  

• The property is NOT owner occupied.  The borrower lives in a different state than the collateral securing the note
• Pacer shows that BK 7 was discharged and closed in February of 2015, over a year ago
• FMV of the property is 1/5 of the UPB on the note
• Taxes are current and paid by the borrower
• preliminary O&E shows nothing outstanding on the property besides the 1st lien that I'm contemplating purchasing.

The questions:

• With BK closed, can I contact the borrower directly WITHOUT initiating FC?
• I've learned enough to understand that I cannot try to "collect" on the debt, because that was discharged by the court.  And my real and sincere desire is to do everything ethically and legally.  I just don't know what I don't know.
• How do I "say" that I'll take payments or a "short payoff" in a way that won't violate the law?  What are the "magic words" that won't run afoul of the Federal Courts of the United States of America and still "collect" on the debt I may own soon?

Thanks to all for reading this and any insight you may be able to provide.

Bill

Hi,

I just stumbled on this thread.

We own 24 acres in Southern California, planted with avocados.  We do not have the pockets to carry the downturns in the hit and miss world of farming, so we have it leased out. 

Our lease is "split profit".  

That is, the lessee pays ALL expenses (water, irrigation labor, minor maintenance and repair of irrigation systems, picking, hauling, pruning, pest control, weed control, fertilization, etc, etc) and any profit is split 50%-50%.  It is important to note that we are responsible for any capital expenditures.  (planting/replanting large numbers of trees; upgrades to the irrigation system; major repairs to road, etc)  The drought has made it very difficult for the lessee in the last four years.  But, zero dollars have come out of our pocket in that time except for mortgage payments.  

I know other farmers that lease out their land for a fixed fee.  Being SoCal, the price per acre is a bit higher than the amounts listed previously in this thread.  I know of one farmer getting $2,000 (or a bit more) per acre for flat row crop land.  (all land in SoCal must (MUST) have irrigation)  He carries zero market risk and zero out of pocket.  

But please keep in mind that farm land in Ventura County can sell for as high as $77,000 $80,000 per acre.  (the last time I heard.)  There are more deals at $40,000 - $50,000 per acre for established orchards.  

Side note, we paid just under $25,000 per acre in 2001.   There is a lot more to the whole picture (water, topology, etc) that is far less pertinent to the question, but would impact some of the numbers, but not too much. 

So, as always, all real estate is LOCAL.  

I hope this was helpful. 

Bill

I'm not aware of a book.  

If you don't want to spend money for training, I'd find a mentor at the local REI who will accept your work as "tuition". (the "learn by doing" is priceless)

I have attended Scott Carson's training.  He is fair, and fairly priced.  www.WeCloseNotes.com is his website.  

To be clear, Scott offers "higher" options.  But, he provides good value in his "entry level" materials.   Also, search WeCloseNotes on Vimeo.  Scott has a LOT of free info available in videos on that site.  

Even after training ("free" online, or paying for some classes) I'd STRONGLY suggest that you connect with a mentor.  There are a LOT of moving parts with notes.  You can slam your hand in the door far easier than you could ever imagine.

I hope this helps.

Scott Carson is a good teacher and provides good value for the price he charges.   He has a three day seminar that begins this Friday.  I believe the website to sign up is www.weclosenotes.com.

I went to one of his three day seminars last year and learned a lot.  Also, Scott provides a lot of free education on line.  Look for his Monday Note web casts.  I do not get any compensation for this referral, I'm just informing based on my own experience. 

That said, I believe any training classes give you enough information to make you dangerous.  There is a LOT of nuance in finance of which notes are a part. This is not meant to scare you away.  You need a mentor for the first several deals unless you have compensating experience.  If you need a mentor, your local REIC is the place to start.  And, as always, BP is irreplaceable.

I hope this helps.

Hi @Steve Burt

After you identify the servicing company (there are several) contact them and let them know you are preparing to invest in notes.  

You can find them by searching "real estate loan servicing companies".  I won't recommend one over another as your needs may be far different than mine, AND I'm new enough that I'm still learning, too.   And, as always, due diligence, due diligence, due diligence before establishing the relationship. 

They will forward an agreement that spells out their services and the fees for those services.  After you execute the agreement, they establish an account for you.  This is not a difficult process, but it can take several days and you don't want to have to find the vendor and establish the account when a note seller is expecting you to close the purchase.  

I learned the hard way that it is important to have this set up before purchasing the note.

Importantly, you should not incur any fees until they start servicing notes for you.

I hope this helps.

@Wayne Brooks

Thank you.

I'm embarrassed by my having left the repairs out of the calculation.  I know better than that.  The offer on this note is dropping quickly.  

Again, I appreciate your time and effort.

@Wayne Brooks Thank you for your reply!

The max purchase price is $21,000 max.  I'd offer less.

Total back taxes from the County Website are $4,123.  These represent 2012, 2013 and 2014 taxes.  The 2012 taxes are the greatest exposure.  They were paid with a certificate and that certificate holder can now apply for title.  That has not yet been done, and the clerk assured me that if the application was made today for title, the process would take until some time in October.  Paying $1,415 to cover the 2012 taxes would take this issue off the table.....and leave $2,708 ($4,123 less $1,415) in reserve.  I've included the entire $4,123 to be conservative.

There are no junior mortgages.

There is one lien for $578 

The remaining $5,299 would cover holding, servicing, and misc costs; total costs are estimated at $31,000.

An ARV of $65,000 is reasonable based on my own research and on an AVM. I have a full BPO on order to confirm.

The house is in need of repair. Selling to a fix and flipper at 65% of ARV calculated to a sale price of $42,250. My previous post used the sellers CMV of $40,000. Using $42,250 is still a conservative CMV, so I'll use that for the rest of this post. Also, I'm working with a local realtor to confirm CMV, in addition to the BPO mentioned above.

An exit at $42,250 (conservative), less max costs of $31,000 (also conservative) yields profit of $11,250. Seventy percent of those profits going to my JV partner equals $7,875 or 25.4% to the investor.

I've estimated all numbers conservatively with the intention of under promising so as to "hit the mark" or over deliver.  That said, and as I've already stated freely, I'm not an expert......yet.......working hard on it though......

Due Diligence reveals that this was probably a newbie investor that got burned big time in the recession.  Specifically, the same people have at least one other property in the area that is also in trouble.  My thought is that they would jump at a DIL.  But, I could be wrong.

Wayne, I'd appreciate any other comments, or, better yet, a willing JV partner.