All Forum Posts by: Al Bunch

Wayne Brooks - the whole reason for selling a portion of the note is to recoup operating capital for the next deal. If the numbers don't look big enough, add a zero.

One check in the mail every month for $164 may not look very sexy to some people, but 10 checks every month for $164 starts to look decent...20 of those little checks looks even better and even if I lose 10% of my buyers, I'm still pulling in over $2900 a month in passive income (not taking into account note servicing costs, foreclosure costs, and any other obvious money eaters).

Hopefully someone more experienced can help me wrap my head around this.

Unless it makes a difference, my widget in this example will be a stick-built SFR.

Purchase price $10000
Repairs $5000
ARV $25000
10% down $2500
Note $22500 @ 9% for 8 years (pmt: 329.63)
Actual rate of return 28.26%

This is where I start waving my hands around, making wild guesses and hope you just agree with my #'s.
I'd like to sell a portion of this note (let's say 50%) at a 25% discount, so the sale price would be $8437 (yes?).
This entitles the purchaser to $164.82/mo and I'm assuming a 50% portion of the underlying asset, but at what value ($15k (purchase + repairs), $12.5k($15k minus down pmt), or $22.5k (sales price less down pmt)? or does it matter?

I could obviously completely divest myself of the note, but I enjoy mailbox money and if the borrower defaults, I have no problem taking the property back and starting the process all over.

What happens if the borrower defaults? What is my obligation to the purchaser of the other half of the note.

I've got a ton of questions, but I'm hoping this will at least get some attention by the more experienced folks...

Thanks!

Michael Quarles
The list I'm working on right now is only Absentee IS/OOS - I was able to glean some interesting (to me) statistics before I started mailing that helped me shape my list. Now that I've kinda got the mailing process down, I'm ready to start doing some testing. I'll be marketing to one list for 48 months and the other for 54 months - only because I believe that's where the sweet spot is...so there's plenty of time to try different things.

At some point the cost of my time will increase to where it makes more sense to farm out the direct mail and I'll seek out a shop like yours to handle it for me..but for now I'm enjoying it and interested to see how high I can drive the rate of quality leads being generated. Increasing response rates is simple - increasing close rates is a whole other story - I want the people that are ready to be closed calling me - so that's my focus.

I was talking to someone about direct mail the other day and the conversation shifted to sales goals..eventually I gave my theory that if I mail the same exact piece out every 4 weeks to the same exact "window" of people (assuming that people move into and out of that window over time, but that the makeup stays the same) and I mail 5000 of those pieces and as a result I net $10,000 in profit every month, that all I need to do to net $20,000 is increase the size of that window to allow me to mail out 10,000 of those pieces...and to net $30k/mo it should be 15k pieces, etc. I have a feeling those numbers wouldn't exactly bare out, but I imagine it's pretty close.

He didn't buy my argument..at all. I'm hoping to prove him wrong (and learn something along the way).

Thanks for the responses!

Michael Quarles I don't think I'm understanding your statement, "More then 1000 prospect hit 3 times is too much." I'm betting though that you're not suggesting to only mail to a prospect 3 times...??

The only variables on your list that aren't (currently) on mine are 6, 6b and 7 - because I'm doing straight text campaigns with no graphics and I'm just going for repetition. I have another group I will start work at the end of the year that will get an ordered series of messages..that's a ways off though.

I'm a big fan of turning one dial at a time, so I don't want to vary a bunch of things all at once and wonder which one caused the change.

Three contacts before making another change dovetails nicely with how I'm setting my system up to work. Right now I batch 3 months worth of direct mail at a time and just deliver to the post office when my pre-determined date hits.

The budget will handle all 6000, I'm just looking for the best way to carve the list up to get the most out of it. At one point I had a pretty elaborate system devised before I realized I'd be spending more time working on the direct mail than I would working on the leads generated by the direct mail. Eventually I scaled it back and thought I'd split the list down the middle and just run 3 month races with the winner becoming the control for the next quarter.

I've read tons of articles on the 'net about doing test vs control mailings. I've taken my list parameters and expanded them as wide as I'm interested in going and that gets me just a hair over 6000 addresses I can direct mail (currently I'm mailing to 2900 addresses).

For those of you that have done test mailings, what size list would you recommend for a test group?

+1 Let me know when/where.

I still maintain in this situation a 50/50 split is the way to go. If you sub your private money guy (or gal) with a traditional lender (assuming you're doing a buy & hold) what are your profits going to be then? If they're vastly greater, maybe you should pursue that route instead.

Having more mouths to feed on one side of the equation doesn't mean that side gets a bigger piece of the pie unless that side is bringing actual measurable value to the deal. If that logic held true, the lender could reduce his risk by splitting the money he had to bring forward with a partner and actually increase his return by 8%. Using the same logic, he'd be entitled to 1/3rd (instead of 1/2) but he'd only have to bring 1/2 of the original amount to the table.

John Brackett He's not really distressed (yet) - or at least he doesn't profess to be - though he's going to need a full price offer to leave closing with any money in his pocket.

It's too thin as it sits unless I want to get a little more creative - seller carryback maybe? He dropped $7k on his right ask after I told him I can't pay full retail. If I let it sit a month until he starts doing the math to list he might drop another $8k.

I'll leave him with my direct line and wait until June when his tenant's lease is up and he's ready to list it in MLS.

Thanks for the input!

Nice.

Michael - I borrowed a few ideas from your yellow postcards and threw together a mailing list with some specific metrics - first "test" mailing (763 pieces) to out of state absentees last week and I'm closing on a sub2 next week with a 30k equity position in an appreciating neighborhood with a performing lease in place.

Total response rate so far for the first mailing is 1/2%, but a 33% closure rate (and I'm still talking to one of the 3 that called).

The in-state mailing goes out next week (2100ish pieces).