All Forum Posts by: Alecia Bolton

I use something I built out for myself in Clickup.  It works pretty well for my portfolio.  

You won't really need a unique chart of accounts for note investing.  The only place it might become custom is where your notes are assets/liabilities.  But you'll be setting them up like rental properties from a bookkeeping perspective.  I use the TX bookkeeper @Chris Seveney is referring to for my main entity, but I use WaveApps for all my other entities, and they have a free plan, and also a wizard that can help you set up your chart of accounts. 

For tax purposes, you really just need to have everything aligned to the schedule E categories.  Any further detail is because your business wants to see more detail.

DISCLAIMER: I am not an accountant or a bookkeeper, nor do I play one on TV.  I do manage the books for a couple of my own businesses that are under the main business.  I would be comfortable doing that with a note business as well, but my main entity is currently complicated.

I can share one.  It's a fun story and it's how I got interested in notes.

I bought a vacant, land locked (no easement) lot at tax deed auction (Washington is a deed state).  I did go look at it, knew it was accessible by dirt road, and did a lot of research into who owned the easement.

Won the auction, paid a tax title company to get clear title (right of redemption is 3 years).  And then sold it on owner financing to the new neighbor who thought it was part of their property.  I was planning on suing to get an easement and then developing the lot.  

But I knew that in the state laws regarding land locked property, and I knew how much of the property I could build on, and how big a house I could build.  I tend to over research, which is one of the reasons I love notes.  

It's 5 years into payments and going strong.

Weirdly, this was just posted.  So good timing asking this question.

https://www.biggerpockets.com/forums/70/topics/1214370-alaba...

 What Chris said.  I do hypothecation and only have the partial purchase agreement as the paperwork.  It is essentially a promissory note/personal loan using the note as collateral.  I know there are some people out there who do this and put an assignment in place to be recorded if the loan defaults.

As with so many things in REI, there are multiple ways to skin the cat, and it has a lot to do with your level of risk and your partial investor's level of risk.

I do teach a 4 hour live class on this.  DM if interested and I'll send you the website link.

Are you trying to buy the property from the owner and pay off the property taxes, or is it going to tax foreclosure?

If it's going to tax foreclosure, and you win, you can wait 120 days for the IRS to come after you to collect...they usually don't unless it's a very juicy property.  There's also a form you can fill out.

If you're trying to buy it from the owner, that might be different.  I would think that at the closing table, the owner would have to clear the IRS lien with the sale of the property and then come out of pocket.  The following link might have good info, but it's from the standpoint of the person who owes the IRS.

https://www.irs.gov/payments/offer-in-compromise

You sell the property and owner finance it.

1) sell property 

2) create note/mortgage/deed of trust (depending on state); I would still accept a certain amount down, and take care to notice usury laws of your state.  This is the most complicated piece because you are essentially the mortgage originator (which might run into licensing concerns depending on how many times you do this and your state), and you need to make sure the person who is buying is a good borrower.

3) close with a title company or lawyer (state dependent) who knows how to deal with this type of transaction

4) set up an account with a servicer to collect the money from the borrower (not required, but highly recommended from note buyers)

5) collect payments

Maybe it's a non-profit who wants to turn it into a community garden and somehow got a grant and greased some wheels in the planning office?

I would think that a lot of folks who were in it 2-3 years ago were in it for the non-performers, and we know how that market is currently.

I'm not currently buying because my capital is currently deployed.  That's the downside of performing notes.  I'm a big fan of the upside though.

Topics on my mind:  

what market conditions would have to occur for the NPN space to make sense for smaller investors? And depending on the conditions, would we want them to happen (from a larger societal perspective)?

Does note investing still make sense for small investors?

Chris' question on the alphabet is intriguing as well.  And how hungry did someone have to be to say 'mm, that 8 legged sea creature with the snappy legs looks delicious'.

Overages were one of the things I tried during my experimental phase.  I had some success, but I was one person working against other people who had whole teams and systems in place already.  To Ned's point, a lot of state's either don't allow a 3rd party to collect, or place a limit on how much the 3rd party can collect of the overage.  Weirdly, California wasn't one of those states, and that's where I focused.  I did create a spreadsheet of all the states and their rules, that I'm happy to share, but I haven't updated it in about 6 years.  

 @Steve Schmidt 

The FB groups I'm in pay attention to are:

JKP Real Estate Note Investing - run by the great folks at JKP Holdings.  I know there are partial buyers in this group.

Note & Mortgage Investing Made Simple - Matt Kelley is the admin, he's a lawyer out of CA

Creating Wealth Simplified through Note Investing - This is Chris Seveney's group

Note Investing Tools Members - This is run by Tracey Z and Fred Rewey...you might need to be in their network to join. 

There are others, but these ones are definitely info/networking first.

My honest advice is if you haven't sold a note, let alone a partial, selling the entire thing here are on something like Paperstac might be your best option.  Notes are nuanced, and partials more so, and you can really mess things up if you don't know what you're doing.  Several folks on this thread and in those FB groups would be happy to give you advice.