My Contract For Deed / Land Contract Notes update

[Jay Raught]

In May 2016, we purchased 4 CFD's in Ohio. I wanted to share a brief update on what has transpired since then. The CFD are located in Columbus, Akron, Toledo, and Dayton, they are no longer notes, they are now REO's....well three of the four are.

Here is a snippet of what is going on with each property.  

Columbus - after receiving collateral and the deeds in our possession, the property was abandoned / trashed and the grass was 3 feet high.  Through connections in Ohio we found an awesome realtor, and  a contractor who is handling the rehab on this property. We secured funding via a hard money loan and will put a mortgage on this when finished.  

Dayton -  What looked like an occupied property ended up being vacated recently. They even left their vehicle behind. The borrower gave up property for nothing in return.

Toledo - Working through a Deed in Lieu process, payment pending verified clean out and clean up of home.

Akron-  We know someone is living there but have not responded to the door knock so we are on to the next step in the process....

I wanted to share this story so you can see how much things can change in a few months. Even from due diligence to receiving of collateral!!  It has been interesting to say the least!!!

[Wayne Snell]

Gents, sounds like you may want to consider reworking your ROI and exit strategy calculator. I personally like the lower-value CFDs/Land Contracts. Out of the last 10 CFDs we purchased, 7 of them re-performed within 45 days. I realize that is not the norm. We expect to get the property back in many instances. But our model is to buy and hold CFDs for cash flow. We do that either by offering them an opportunity to stay and pay, or they can leave. When they leave, (whether through eviction or Foreclosure) we create a new CFD with a new borrower, or we hold it as a rental. We always have a realtor go by the property and gauge the condition prior to us purchasing the CFD. We determine the rehab cost we can absorb prior to purchase and we always assume it needs it. Are there surprises? Of course. But that is part of it. I have had just as many surprises with higher-end 1st position loans as CFDs. As a rule of thumb, we never go into a market prior to establishing with our attorneys the standard eviction (or foreclosure) cost, anticipated timeline, and various other costs such as forecasted taxes and insurance during the hold period. If the numbers don't make sense for worst case scenario or you have to make something work, it's always best to pass. Thorough due diligence is key.

As you can see from my experience, when done correctly, Notes can fully replace a six-figure VP of Marketing income such as I did...