All Forum Posts by: Bill McCafferty

The rule of thumb with creating an S Corp or at least having your LLC taxed as an S Corp, is the company should make over $50k three years in a row. The income should be generated through a product or service. I've been doing this for 5 years now.

I'm a Note Investor. I have two Companies. My own Note Portfolio (PDRS) is an LLC. PDRS owns a bunch of mortgages and also has private investors. The income is generated from my Assets.

My Asset Management Company (PMR II) is an LLC but it's is taxed as an S Corp (my accountant had to file some paperwork with the state to do that). PMR II doesn't own any Assets and it doesn't have any debt. PMR II manages other Note Investor's Non-Performing Notes. The income is generated through the service that I provide. The income that it makes is based on a percentage of what I collect from Homeowners and service fees that I charge my Clients (Note Investors).

It allows me to create a payroll for my Company and it creates a W2 Income for myself. I do pay Social Security and Medicare on both sides. It also allows me to pay taxes monthly. I also pay taxes quarterly. I run my whole world through my S Corp, it allows me to really lower my yearly tax burden.

Mark J Kohler is an accountant, attorney and investor who has a lot of free information on the S Corp. There's all kinds of strategies and techniques that can be utilized between you S Corp, LLCs and personal stuff to really lower your Tax burden.

I quit my 9 to 5 job after 15 years, taking care of Athletic Fields and running a shop at a school for Court Committed kids between the ages of 13 to 18 in 2011. I was able to have my wife retire from 17 years of teaching at an Elementary School in 2015.

I dove into Real Estate in 2005 looking for more out of life. I did pretty much everything between 2005 through 2012: Rentals, Rehabs, Beach Rentals, New Construction and Subdivisions. I had 14 units and was over leveraged when the marketed crashed in 2008 / 2009. I also owned property on the Gulf Coast of Texas that got hit by Hurricane Ike. I also got involved with another Investor and did some deals with him. I thought he was seasoned and found out the hard way.

Somethings worked out and Somethings were a disaster, but I learned so much from those 14 units. I let most of them go: short saled some units, some where foreclosed on, some where wiped out from the Hurricane and I kept a few. I learned how to deal with Insurance Companies and Lenders.

I also met some seasoned Investors that were buying Non-performing 2nd Mortgages in 2007. I invested in their Note Fund from 2007 to 2009, making a 18% yield on my $25k and saw what they were doing. . I bought my first Non-performing and Re-Performing 2nd Mortgage Note in 2008 and began learning the Note Business. They became my Mentors, Partners for Payment Relief, Dave VanHorn and his Partners. My Mentors and the Note Business changed my life.

I began building my own Note Portfolio and I created an Asset Management Company that manages Non-performing 2nd Mortgage Notes (some 1st, but my skill is with 2nds). I've managed over 1,000 Non-performing 2nds for about 150 Note Investors. I've also bought over 150 Non-performing and Re-Performing 2nds in my own Portfolio. I have 2 Note Companies. I put my 10,000 plus hours in.

My wife and I rolled our 401ks and Pensions into SDIRAs. My SDIRAs and my HSA also invest in 2nd Mortgages. I now control my whole financial dashboard.

I'm glad I took the leap and created a better future for my family. We now have our time to spend with our 17 and 15 year old. We have time to travel and do what we want, when we want and with who we want. Real Estate is very powerful and life changing.

Go for it. If you want it bad enough it will work out for you. Learn from Investors that are truly making money. Learn how to add value to others. Learn how to solve the Banks problems. Believe in yourself. Treat it like a Business. Continue your Education and continue Networking with others. Build it slow and steady. Don't compete with others just get creative and worry about your Business.

Most of all and the key to success is LFDA. Laser Focused Daily Activity, that's the magic ingredient.

Good luck.

FCI Lender Services hands down has the best portal.

Always purchase Non-Performing 2nds based off of the loan's Unpaid Principal Balance (UPB), NEVER off of the Payoff. The Arrears are always a bonus. Purchase price is based off of:

1. Status of the 1st Mortgage. 

2. Equity covering the 2nd.

3. The state (Non-Judicial or Judicial).

I see NP 2nds selling between 5% up to 70% of UPB. Always remember what you purchased it for and what you're in the deal at. With 2nds it's always a numbers game, some work out and some don't. It's always about the portfolio and what's best for the portfolio, rather than the deal itself. I definitely need to see a credit report. It's more about the information on the credit report rather than the credit score, because majority of the Borrowers have messy credit in this business.

I love no equity deals, but I understand they all don't work out great.  You would be surprised what Borrowers can do when their house is going to Sheriff Sale.  We as investors get caught up with equity, equity is definitely nice, but you also pay top dollar for equity notes.  Majority of your exits with 2nds are through the Borrower, not the equity in the property.  Borrowers aren't going to give up their equity easy.  Investors also associate no equity in the property with the Borrower having no money, which is absolutely not true.  Plenty of Borrowers have money and no equity in their property. 

it's the art of the deal with 2nds, nothing easy about it.  Hope that helps.

Absolutely. I've done it close to 100 times over the last 10 years. When you take it sale from the 2nd mortgage position, you place your bid on your 2nd mortgage subject to the 1st mortgage. You can bid $1 all the way up to the full payoff on the 2nd mortgage or any number in between. Subject to the 1st mortgage, it means just that. You don't have to pay the 1st mortgage off at the sale, but it will need to be addressed. If the 1st mortgage is not addressed, the 1st mortgage lender can exercise their rights and foreclose.

I will be at IMN in February. Still figuring out the rest.

@Andy Mirza

I agree.

@Martin Saenz

Thanks. I know that I got a little off topic, but it all intertwines and it's what I use daily to stay on top of things and to stay on track.

@Martin Saenz

I work out of Dropbox, Folders and off of Excel Spreadsheets. My Dropbox Folders are shared with my Clients, my Accountant and my Quickbooks Assistant.

I put all bank statements, servicing statements and bank tracking sheets in Dropbox Folders shared with my Accountant and Quickbooks Assistant, so they can access it in real time.

Every Client has their own Folder System. Each Asset has it's own Folder and Excel Spreadsheet, that tracks everything with that Asset.

Once a month I backup my Dropbox Account onto a portable drive.

I have about 10 main Excel Spreadsheets that track my whole world. Everything becomes a PDF, I can access anything in my world, in about 10 to 15 seconds. Everything is labeled real clear.

I work out of my Gmail Email Account and Gmail Calender. I utilize my Email Inbox and Email Labels (which are Folders). I use a whiteboard and good old fashion yellow sticky notes.

I've managed over 1,000 Assets in my System.

My World is in a Folder. I can access my Dropbox Folder on my Computer and Phone. It works real well for what I do.

It's always about adding Value upstream and / or downstream. You definitely get it Martin. The more Value you add in the marketplace, the more access you have to deal flow.