All Forum Posts by: Michael Dorgan

It's hard to find anything un-biased in MLM type organizations where every member has a vested interest in the group.

As an aside, I believe yet another way to make million is to sell 100 people a class or two for 10k. :)

Still probably not a good deal. You didn't mention note terms, rate, time, etc. An amazingly good 2nd at 0% interest or something may get it close to buy and hold territory, but no where near wholesale land.

Assuming no notes and a sale at 165k with comps at 186k, you are at 89% LTV. That is risky and won't work unless you are getting good appreciation (not in today's market). Also, your cashflow is not positive, it is very negative. If you intend to manage the place yourself, you can only count roughly 60% of the income as yours. Why? Mortgage is 1225 (assuming fixed), what about taxes and insurance? Those may be mostly included in that mortgage figure, but your will be higher. How about a maintainance fund for when the roof goes bad? Vacancy allowance? How about paying yourself a little for dealing with tenants? That adds up quickly.

Also, are you assuming the mortgage? If not, you are probably going to end up paying a lot more in interest than the owner. My back of the envelope calcs show the owner currently paying in the 6s for his mortgage. You will pay in the 7s or 8s depending on your credit.

Add that all up and I get at least 400 a month negative cashflow or so.

This is not an investor grade deal, this is a retail, give it to a Realtor for a small cash kcikback deal.

Honestly, my first question: Are you sure that every one of these properties are investor grade deals? Deals with at least 25% equity after repairs or a little less equity, but cashflow well positive?

Depending on what state this is in, foreclosure can take forever. Some states have a redemption period which further draws out the process and all the while, the property withers further taking more deglect damage. People generally buy notes as income instruments, not as back-door purchases. Though if the price was right, it can work. Especially if some idiot overpays you at auction.

Then there's the other half of the problem - how many other senior liens are above your note? Those directly compete against your bottom line. There's a reason that 2nd above 80% LTV are called throw-aways.

Let's pretend you buy the note for 5k, then spend whatever it costs to foreclose (not sure on this as I've never had to go thorugh with one.) If it indeed only costs 3k, then there might be some value if the foreclosure process isn't too long. If it is, then it could take 3-4 months to foreclose and another year to take possesion. Then a few months and a few k to fix, then and only then can it start making you money. That is a long time to wait for your return with many potential pitfalls in the way (payor BKs for delay, gets offers on the property that fall through, but delay the process, etc.) Oh, and in a falling value market, that's 18 months of value depreciation to factor in as well.

This is probably why the note seller is just happy to make a buck and run. Why in gods name would someone have given it to him otherwise?

If it is a quick foreclosure state, then you might be able to turn and burn the place in under 6 months if the stars align perfectly. That would, of course, increase the resell value of the note.

I'm sure there are other note buyers on here that can give you a much firmer value of the note than me and can go further into the nitty-gritty of foreclosure. I try to specialize in Mobile Home where note no-pays are repos and go much quicker. :)

Ok, I'll bite.

There is quite a bit of antaganism between realtors and investors. Many times, they are in direct competition with each other. Preforeclosure investors don't want a realtor involved because another middleman just eats the profits. Further, a well advertised property will generally get a higher asking price. Whether that asking price is higher than the commisions charged is debatable.

Realtors also do not like dealing with investors because many just don't understand us or don't want to. The Realtor I worked with the last few years got looks of shock and awe when he told his collegues he went to a foreclosure auction with me. Not one other agent in the office had ever been to one and many thought it very strange of him to do so (even though, if I had bought, he would have got the listing within a month on the flip.) Also, at least personally, most realtors I run into just are not knowledgable about the field they represent. I cannot tell you how many times I've run into agents where I know their job better than they do. I had one agent actually tell me it was illegal for me to put an unrepresented offer in on the house he was representing. Ignorance of this level won't last through the current downturn though.

Also, many, many of the Realtors I've run into are not exactly, well, how to put it, honest. I watched one house go into foreclosure because a Realtor came in at the last second, disrupting an investor deal with a promise of a well above market sales price. Yep, he bought the lisiting. Amazingly enough the house, in its rough condition, didn't sell in time and the house was lost. Then there's the enternal, "We already have another offer, make a better one..." line. And amazingly enough when I decline to make said improved offer, the house is reoffered to me soon after at my price, or stays on the market because said offer didn't actually exist (or the other offer fell though, but then the listing status should have changed.)
And then there's the do anything to get a sale attitude. Offer a 4% buyer's commision on a nice house and watch the feeding frenzy begin as every represented buyer within 50 miles shows up to see the house. I understand that agents need to eat, but a system where the higher the price, the more I get paid isn't too fair to the buyers.

Anyways, this turned into a bit of a rant and that wasn't my intention. I am not anti-realtor. I've sold everyone of my houses through a realtor (eventually). A great realtor is an asset. Someone who knows what I do and is a better negotiator than I. Also, first and second time home buyers do need someone to help them through the steps and to help them make sure they aren't buying a ticking timebomb of a house. It takes a lot of time to pick up the skills needed to do this. Anyone can learn the paperwork in a month or so, but real value added takes time and experience.

Not nearly enough information. Notes are a little different than real estate. The Payor is a large factor in the note's value.

Anyways, we also need to know:
* What's the interest rate on the note
* How many payments have been made and if they have been on time.
* How many payments remain (seasoning)
* Is it currently deliquent and how much.
* Are there any other senior encumberences against the property (is this a 1st or 2nd position note and are there taxes due.)
* How much value is in the collateral which you've stated is around 40-50k after repairs.
* What is the general credit worthiness of the payor?

All of the above can make the note worth anywhere from 0 to above par (37k).

For instance, if the payor has good credit, has paid for a year on time and currently is up to date, and if the note yield were in the 10-12% range or so with a loan to value of under say 65%, then you'd probably get close to par if not more for the note.

If, on the other hand, the note is delinquent, has almost no equity to back it (which it sounds like this note has), and has any other senior liens ahead of it, then it is worth just about 0.

Anyways, without the rest of the info, we can only guess. And yes, you can reassign notes to other people. Banks due it all the time when they sell mortgages.

I keep my rents just under 'market' for the houses I have. I make sure I have a quality product and therefore I have a large pool of renters ready to go. I'd rather be under market rent a little and not have vacancies. That said, I've been able to raise the rent on my nice house 8-10% for the last 3 years which has been nice indeed.

Forbes, Fortune huh. Haven't seen that before. My biz has more than enough credit at the lower-end credit givers like Lowes,Home Dopey, Staples, etc, and was able to get a couple of nice 30-50k locs from the big box banks. This is without the 2 companies reporting idea. While not big enough to outright buy homes, it's plenty big to do massive amounts of Lonnie's and the occasional Land Bank deal. I'm courting a small bank now to see if they'll give me a larger line. We'll see, as they are very careful about cashflow and equity - unlike the big banks for under 50k.

BTW, does DnB charge you for reporting and if so how much?

I would gladly allow an assigner to make a decent payday at my expense if there was still plenty of equity in the deal for me. That's my fault, as a buyer, for not finding the deal first.

DnB lies. They lie constantly. You can easily get a PAYDEX without buying their silly package. My business got a number for free a few years back and has since gotten a paydex without me spending a dime. Once you have the dnb number and open a number of business lines, paydex will come in time.