All Forum Posts by: Bryan Hartlen

Hi @Christopher Lynch.  We’re in AZ and we invest in Birmingham. We typically focus on C/D class neighborhoods for Section 8 rentals and B class neighborhoods for flips. 

Often the water company won’t let you turn the water on without clearing up any past due balances. Forces the issue assuming that you want your buyers to see all the utilities working. 

You should be making offers at prices that drive cashflow and an overall return that you're comfortable with.  That said, if your return expectations are out of sync with the current market you wouldn't expect many deals to be accepted.

If you don't think your offer price isn't going to work, look for other ways to improve the deal (alternate financing, new income streams, etc) to see if you can bridge the gap between his asking price and your needed returns. 

@Jared Sandler in general, as a buying investor, if I wasn’t sure about the properties condition, I would avoid appraisals and jump to an inspection (full blown or investors/systems).  If you’re selling a property and the buyer is financing, then you won’t have a choice and the bank will order it’s own appraisal.  

@Rick Pozos thanks for the input.  I’ll check but I think these notes we’re all in the mid west somewhere. 

@Chris Seveney thanks for chiming in. The trailer park segment has been getting a lot of investor attention over the last year so this has been an interesting thought exercise.  I don’t know that I’d value them that high - one of my concerns would be how to perform due diligence.  Without recorded titles what do you do?  It would also seem that exiting the investment would be more difficult as there doesn’t appear to be a secondary market. It would require finding the right investor (maybe the park owner?).  On the positive side, from what I’ve heard, the eviction/repossession process is much faster and cheaper than an ejectment or foreclosure. 

Assuming you could buy it right, I could see investing the a portion of one’s high risk / high reward portfolio in this type of note, but couldn’t see it being the primary staple / strategy.

This is an academic question for me but it was prompted by a discussion with another investor. That investor was trying to value a portfolio of 30 notes on mobile homes. Trailers only - land belongs to the park. Assume they are performing. All notes are seller financed by the seller (no underwriting), low value ($10 - 20k UPB), $200 - 300/mo P&I, 5 - 20 years left.

Is there a secondary market for this kind of paper? Have you met other investors that buy in this space?

As a buyer of ‘traditional' notes, what kind of discount from UPB (or market value) would you expect this kind of note to require in a secondary market?

You may have found an anomaly. Payments (P&I) should be pretty accurate.  Late fees, arrearages, escrows etc can be a mess. It could also depend on the source of the data for the note you are looking at... a serviced note from a servicing company that Paperstac links to should be accurate, a serviced note should be relatively accurate (it has an opportunity for data entry errors) and a note without professional servicing will have a high probability of being inaccurate. Build your tool to account for the key parameters - when they don’t jive that’s an area for greater due diligence. 

Here's another https://realestatefinancialpla...

@Michael Jones this strategy can work quite well depending on the demographics of your area and your ability to carry the cost of the flipped house.

Creating a seller financed note is relatively easy and you can do it properly by outsourcing the underwriting process to a 3rd party that specializes in compliance. 

The harder part (IMO) is how to target buyers. In general you're going to be targeting buyers that can't get a traditional mortgage (or you'd have to offer notes @ < 3%). When you sell the note you'll most likely be discounting the remaining principal such that the buyer's yield would be in the 8 - 14% range depending on seasoning, equity, market, etc, etc.  So if you write a note in low single digits,  the discount required to offer the buyer an 8 - 14% yield is most likely going to wipe out any forced equity. So the trick is how to identify and market buyers are willing to pay higher interest (in the 10% range), with ability to invest a substantial down payment (equity lowers risk for your note buyer) and with sound enough work history that you believe they'll continue to make payments.

Once you've found a seller financed buyer, you should be prepared to carry the note for at least 12 months.  You can find buyers that will buy with shorter seasoning but they'll be looking for higher yields (more discounts). You can lessen the discounts if you have access to your own pool of investors (not note investors) that are looking for asset backed investments in with a yield in the 6 - 8% range