All Forum Posts by: Patrick Roberts

Quote from @Eddie Fernandez:

Quote from @Patrick Roberts:

Quote from @Eddie Fernandez:

Quote from @Patrick Roberts:

Quote from @Eddie Fernandez:

Quote from @Patrick Roberts:

Appreciate you posting this. I've been looking at Paperstac for a minute. This helps a lot. Did you already have a background in notes to base your DD on, on was this your first note, also?

I have about 2 years under my belt investing in notes and this is my third deal. I thought I’d give Paperstac a try versus buying from an individual directly which is what I’ve done the previous times. DD is the same, go through the collateral file thoroughly and make sure everything is in order.  If you don’t feel comfortable doing it yourself pay an attorney or have someone you trust review it with you. I’ve taken note investing courses for both PN and NPN, watched many videos on YouTube, and reviewed many of the posts on BP from the more experienced note investors on here and felt comfortable reviewing it myself.  I’m trying to build my Roth SDIRA with enough these notes that when eligible I can start living off the income from these performing notes without touching my other investments.  Performing notes like many have mentioned before are safe and boring BUT they pay every month.  I only invest in performing notes with a minimum of 70% LTV or lower preferably in case things go south…non-performing notes may be more lucrative but for me I like boring right now.

 Gotcha. I'm playing the same game - Roth SDIRA, although I'll prob start purchasing through an entity as well in the near future. What resources prepared your the most for competent DD? I'm loathe to pay for courses or sign up with guru-esque trainers, but also realize that botched DD can cost even more. 

@Chris Seveney already beat me to it. Totally agree if you don’t want to mess with DD pay an attorney to review and save the money on courses.   Do a search here in the forum and I’m sure you’ll find one mentioned by the top contributors. Another great option is to join a note investing group for a nominal monthly fee. Both @Chris Seveney, Fred and Tracy Rewey, and Dan Deppen have groups you can join on their websites and FB.  The Rewey’s have an extensive library of presentations on every topic imaginable which I found very helpful. There’s lots of free stuff on YouTube as well you just need to do a search. If you really want to become a note investor you need to educate yourself.  Think of taking note courses like courses you took to get your degree.  You need to take the time and pay the fees to learn or like you said you’ll end up paying a lot more for a deal gone wrong.

 Agreed. I've been looking for a reputable attorney to work with but havent found one locally yet to hold my hand through DD on the first few deals. I know the basics of what's involved from originating on the mortgage side, and I've done fair amount of research/reading, but my concern is not recognizing when a small detail is missing or off. DD on the property itself isn't an issue for me - I'm most concerned with not recognizing a problem in the collateral file. I'm gearing up to buy my first note in the next 4-8 weeks, so we'll be putting rubber to the road soon enough. Just trying to use the first deal to learn as much as possible and not get burned. I've been researching on notes specifically for about a year so it's time to jump in. I came across paperstac in the process of my research and was curious about whether it was legit, so real world validation is helpful. 

Give Dickie Baldwin a call at BAG offers collateral view, or he can point you in the right direction. Also any attorney with knowledge of collateral review can look at it. It doesn’t have to be a local attorney.

 Small world - Baldwin Advisory was already at the top of my list. I think Dan Deppen ran a podcast with Dickie a while back. 

Bluffton, Sumter, maybe Spartanburg and Greenville. Dorchester and Berkeley are two of the counties surrounding CHS. I'll be attending quite a few of these this year

Quote from @Eddie Fernandez:

Quote from @Patrick Roberts:

Quote from @Eddie Fernandez:

Quote from @Patrick Roberts:

Appreciate you posting this. I've been looking at Paperstac for a minute. This helps a lot. Did you already have a background in notes to base your DD on, on was this your first note, also?

I have about 2 years under my belt investing in notes and this is my third deal. I thought I’d give Paperstac a try versus buying from an individual directly which is what I’ve done the previous times. DD is the same, go through the collateral file thoroughly and make sure everything is in order.  If you don’t feel comfortable doing it yourself pay an attorney or have someone you trust review it with you. I’ve taken note investing courses for both PN and NPN, watched many videos on YouTube, and reviewed many of the posts on BP from the more experienced note investors on here and felt comfortable reviewing it myself.  I’m trying to build my Roth SDIRA with enough these notes that when eligible I can start living off the income from these performing notes without touching my other investments.  Performing notes like many have mentioned before are safe and boring BUT they pay every month.  I only invest in performing notes with a minimum of 70% LTV or lower preferably in case things go south…non-performing notes may be more lucrative but for me I like boring right now.

 Gotcha. I'm playing the same game - Roth SDIRA, although I'll prob start purchasing through an entity as well in the near future. What resources prepared your the most for competent DD? I'm loathe to pay for courses or sign up with guru-esque trainers, but also realize that botched DD can cost even more. 

@Chris Seveney already beat me to it. Totally agree if you don’t want to mess with DD pay an attorney to review and save the money on courses.   Do a search here in the forum and I’m sure you’ll find one mentioned by the top contributors. Another great option is to join a note investing group for a nominal monthly fee. Both @Chris Seveney, Fred and Tracy Rewey, and Dan Deppen have groups you can join on their websites and FB.  The Rewey’s have an extensive library of presentations on every topic imaginable which I found very helpful. There’s lots of free stuff on YouTube as well you just need to do a search. If you really want to become a note investor you need to educate yourself.  Think of taking note courses like courses you took to get your degree.  You need to take the time and pay the fees to learn or like you said you’ll end up paying a lot more for a deal gone wrong.

 Agreed. I've been looking for a reputable attorney to work with but havent found one locally yet to hold my hand through DD on the first few deals. I know the basics of what's involved from originating on the mortgage side, and I've done fair amount of research/reading, but my concern is not recognizing when a small detail is missing or off. DD on the property itself isn't an issue for me - I'm most concerned with not recognizing a problem in the collateral file. I'm gearing up to buy my first note in the next 4-8 weeks, so we'll be putting rubber to the road soon enough. Just trying to use the first deal to learn as much as possible and not get burned. I've been researching on notes specifically for about a year so it's time to jump in. I came across paperstac in the process of my research and was curious about whether it was legit, so real world validation is helpful. 

Quote from @Eddie Fernandez:

Quote from @Patrick Roberts:

Appreciate you posting this. I've been looking at Paperstac for a minute. This helps a lot. Did you already have a background in notes to base your DD on, on was this your first note, also?

I have about 2 years under my belt investing in notes and this is my third deal. I thought I’d give Paperstac a try versus buying from an individual directly which is what I’ve done the previous times. DD is the same, go through the collateral file thoroughly and make sure everything is in order.  If you don’t feel comfortable doing it yourself pay an attorney or have someone you trust review it with you. I’ve taken note investing courses for both PN and NPN, watched many videos on YouTube, and reviewed many of the posts on BP from the more experienced note investors on here and felt comfortable reviewing it myself.  I’m trying to build my Roth SDIRA with enough these notes that when eligible I can start living off the income from these performing notes without touching my other investments.  Performing notes like many have mentioned before are safe and boring BUT they pay every month.  I only invest in performing notes with a minimum of 70% LTV or lower preferably in case things go south…non-performing notes may be more lucrative but for me I like boring right now.

 Gotcha. I'm playing the same game - Roth SDIRA, although I'll prob start purchasing through an entity as well in the near future. What resources prepared your the most for competent DD? I'm loathe to pay for courses or sign up with guru-esque trainers, but also realize that botched DD can cost even more. 

Quote from @Jack Miller:

Quote from @Patrick Roberts:

DSCR is your best bet. It will be extremely challenging to get a conventional/govt/portfolio loan for residential RE on your own without current income, and less than 25% down worsens this outlook. There are some crazy, super complex strategies that could theoretically work, but it's a long shot. For a DSCR, at 85% LTV (15% down), your rate is going to be 9%+ for the most part. Ideally, you'd want to be no more than 75% LTV, and 70% is better.

If you don't want a DSCR loan, your next best option will be to partner with someone with good credit and enough income to qual. Even with private/seller financing, if you're househacking, the lender will still be subject to the ATR rule and ignoring this will cause problems for everyone. Income is a basic requirement for any kind of Conventional/traditional loan.

As far as rates, pretty much any 30yr residential investment property mortgage anywhere near par at 85% LTV is going to be north of 7%. With a househack, you could possibly get low 6's with a buydown or a sweetheart deal, but I wouldn't plan on it. If househacking with less than 20% down, you'll also have MI stacked on top of your rate. Long story short, 7%+ is just where the market is at right now.

In your shoes, it might be simpler to stay focused on grad school and use your cash to lend to other investors or take an LP role. 

Yea I hear you and that is the consensus I have arrived at. I was hoping there maybe some special portfolio loan that may work but I may get a cosigner if all else fails. Do you think at 7% DSCR it is even worth it, considering the fourplex will essentially just pay off its own mortgage + taxes and not have any leftover? 

 Whether or not 7% make or breaks the deal depends on the cap rate and the specifics of the deal. The combo of the current rate environment, the current prices of most properties, and the current rental market makes cashflow much more difficult these days that it was a couple years ago. This especially true at high leverage (85% in your case). 

My questions here would be around the anticipated appreciation and any potential for improvements - either forcing appreciation or increasing rents. If the property basically breaks even and you can't force improvement in NOI or value, then the bulk of your return will come from market appreciation (and potentially any tax advantages). In other words, if you invest your cash in the property today and receive virtually no cashflow from it, will there be a sufficient return from just the expected appreciation over whatever investment horizon you have for this property? Equally important - would this return be greater than your other alternatives, such as the equities market, private lending, investing in a private fund, etc, once you account for the work and risk? Lots of unknowns here, but this is the thought the process I use when analyzing opportunities.

One thing I would not do, however, is buy solely because you're counting on being able to refinance into a lower rate in order to become profitable. Contrary to popular opinion, I don't see us going back to yesterday's rate environment, and I'm not anticipating being able to obtain investment property financing at sub 6% at any time in the near future without heavy buydowns. 5-7% is the historical norm for mortgage rates - it's not like 7% for an investment property is outrageous or shocking, and this is the ballpark I use to underwrite my deals. 

Appreciate you posting this. I've been looking at Paperstac for a minute. This helps a lot. Did you already have a background in notes to base your DD on, on was this your first note, also?

Quote from @Will Sifert:

Quote from @Patrick Roberts:

Quote from @Will Sifert:

Quote from @Patrick Roberts:

I like the SC process as well. I've attended the CHS county auction for the last 3 years and bid on several liens last year but did not obtain any. I believe you still have go through a quiet title process in SC and I know this has caused problems for other investors in obtaining clear title and title insurance in future sales. Even though the CHS county auction is in person, it was still saturated. In 2022, the auctioneer made a comment about seeing a lot of new faces and asked how many people were bidding for the first time - about 2/3 of the room put their hands up. Last year, I had a person sitting next to me tell that liens were 100% safe and there was no way to lose money. That being said, there were some very professional crews (funds) there. I plan on attending some other county auctions this year and branching out from just Charleston.

Overall, though, I don't think its an efficient way to obtain properties. If I remember correctly, the redemption rate in CHS county is something like 80-90% and the interest that can be earned is capped. With the way people were bidding the last two years, the yields if the properties were redeemed were like 2-3%. Maybe I'm missing something, but to me, it seemed oversaturated and this crushed the potential returns. Again, this was specific to CHS county. 

Have you tried Civic Source in LA? We bought a property in the BR area in 2020 and it was pretty straightforward. Just hard to find good properties on it. I haven't messed around with Nola much, just BR. 

 I’m very familiar with civic source they started about 10 years ago to fix a problem. In LA the tax liens that didn’t sell were adjudicated to the parish. The laws dealing with adjudicated auctions were cumbersome, each parish had to deal with it and very very few adjudicated auctions ever happened.  Civic source was created to take decades worth of properties that had been sitting idle on the parish’s books and make it easy for them to auction them off and put it back in commerce.  The problem was no one wanted to buy or pay much for property that was not insured with title ins so civic source purchased a title insurance company and insured the properties they auctioned of. That is what gave us USNational which has been a big help in my area as I can use them to insure tax sale properties I acquire when in most cases other title ins companies will not.  The negative is that the title ins can cost 3-4x or more than what traditional title ins will cost. It also means the buyer has to be explained all of this and they have to use USNational when they go to sell, and explain it to their future buyers.

With all that being said when the market is soft or there is lots of inventory I’ve noticed tax sale properties (including the adjudicated you buy off of civic source) will typically sell for about 10-20% less than market value.   Every time I go to bid on property on civic source people are bidding it up to or over market value. It’s crazy.   Just about anything online is going to be so competitive that you rarely if ever will find a deal. If I am going to pay market value I will browse the mls to see what is for sale, not overbid for a tax sale property.

In SC I was hopeful, since they are all in person that there would be some smaller to medium counties that wouldn’t be too competitive to where you could still get a decent deal, if it doesn’t redeem.
What % of value do you think most property was being bid up to? I would be looking for mostly abandoned or run down houses that need repairs. They typically have a better chance of not redeeming. Or even vacant land. 

I agree - the handful of worthwhile properties on Civic source in BR were bid up like crazy on the few that I watched. Last year in CHS, liens for any house worth owning seemed to be selling for 30-50% of market value. Good properties were typically higher than that. Marginal properties were hit and miss. About 4-6 buyers got the lion's share of the SFH 200k-400k homes. If I remember correctly, East Coast Tax Auction LLC and Red Rock Capital were two of the high volume bidders. A couple of local individuals as well. I recorded a list of what most of the liens sold for and tracked the wins of the clearly professional bidders for research and learning purposes. A little bit of vacant land, but most of it seemed worthless from what I remember researching. I was primarily targeting properties that were likely to redeem and would yield me at least 12%, so my bidding and research were structured around that. I had no illusions about acquiring properties this way.

Between the tax auctions, the FB groups I'm a part of, and what I see in my day to day as a lender, my general opinion is that there's still too much money chasing too few deals as a whole. The marker is still frothy and most of the "deals" I see are dogshit. The higher rates have somewhat slowed down the "get rich quick with no money down" crowd as financing is more difficult, but I still see a lot of new investors with serious cash or purchasing power. There's still a ton of liquidity out there.

Bidding up 30-50% would work for me. I wouldn't want to go much over 50% and my "value" might not be as high as the next guy as I assume the condition of the home is worst case, full gut, electrical plumbing needed etc etc.   I would target the properties in their current condition that would be worth less 100K. Sounds like this is a sector that would not have fierce competition. I am not an investor who does it for the interest. I target the sweet spot, property that has a better chance of not redeeming (vacant or abandoned or in need or lots of repairs) but it has to still be worth it. Not a tear down. If it is a tear down and the value of the land is less than the cost of the demo work I don't want it if you give it to me for free lol.  If the property is too nice it has a much higher chance of redeeming and it gets a lot more competition from the investors looking for the interest. I like vacant land, more likely to not redeem and less speculation on my part worried about it's condition. But it has to be decent vacant land, not something land locked, can't be built on or some obscure piece. Its much easier to calculate it's value, if similar lots are selling for 50K and I can get it for 10-20K  it doesn't redeem, i can clear title, etc list it and make some money.    Thanks for the info. 

You may have to look at the surrounding counties with your strategy. Charleston is still crazy hot and any decent detached SFH is selling for $250k distressed or $400k+ on market. Even in the rough areas of N Charleston, homes that would sell for $50K in BR are selling for more than $200k. Most of the liens for these properties were going for $80k+ going off of memory. I had no illusions about acquiring properties via the tax sale in CHS - too many funds with deep pockets involved and too many wholesalers calling the property owners after the auction. I was talking with a realtor who had one of these properties listed - the owner had received more than 100 wholesale calls/texts/etc in the months after the auction. The CHS market is still red hot. 

I will say this, though - SC just passed a de facto ban on wholesaling, which may slow down the market for these kinds of distressed properties. Wholesalers now have to close on their deals before re-marketing the property, so the high volume teams will likely face capital constraints. Supposedly, sub-to is also in the crosshairs of both the state and the CFPB. I expect this will crimp the current pace and volume for distressed sellers. This year's auction may be different. 

DSCR is your best bet. It will be extremely challenging to get a conventional/govt/portfolio loan for residential RE on your own without current income, and less than 25% down worsens this outlook. There are some crazy, super complex strategies that could theoretically work, but it's a long shot. For a DSCR, at 85% LTV (15% down), your rate is going to be 9%+ for the most part. Ideally, you'd want to be no more than 75% LTV, and 70% is better.

If you don't want a DSCR loan, your next best option will be to partner with someone with good credit and enough income to qual. Even with private/seller financing, if you're househacking, the lender will still be subject to the ATR rule and ignoring this will cause problems for everyone. Income is a basic requirement for any kind of Conventional/traditional loan.

As far as rates, pretty much any 30yr residential investment property mortgage anywhere near par at 85% LTV is going to be north of 7%. With a househack, you could possibly get low 6's with a buydown or a sweetheart deal, but I wouldn't plan on it. If househacking with less than 20% down, you'll also have MI stacked on top of your rate. Long story short, 7%+ is just where the market is at right now.

In your shoes, it might be simpler to stay focused on grad school and use your cash to lend to other investors or take an LP role. 

Quote from @Will Sifert:

Quote from @Patrick Roberts:

I like the SC process as well. I've attended the CHS county auction for the last 3 years and bid on several liens last year but did not obtain any. I believe you still have go through a quiet title process in SC and I know this has caused problems for other investors in obtaining clear title and title insurance in future sales. Even though the CHS county auction is in person, it was still saturated. In 2022, the auctioneer made a comment about seeing a lot of new faces and asked how many people were bidding for the first time - about 2/3 of the room put their hands up. Last year, I had a person sitting next to me tell that liens were 100% safe and there was no way to lose money. That being said, there were some very professional crews (funds) there. I plan on attending some other county auctions this year and branching out from just Charleston.

Overall, though, I don't think its an efficient way to obtain properties. If I remember correctly, the redemption rate in CHS county is something like 80-90% and the interest that can be earned is capped. With the way people were bidding the last two years, the yields if the properties were redeemed were like 2-3%. Maybe I'm missing something, but to me, it seemed oversaturated and this crushed the potential returns. Again, this was specific to CHS county. 

Have you tried Civic Source in LA? We bought a property in the BR area in 2020 and it was pretty straightforward. Just hard to find good properties on it. I haven't messed around with Nola much, just BR. 

 I’m very familiar with civic source they started about 10 years ago to fix a problem. In LA the tax liens that didn’t sell were adjudicated to the parish. The laws dealing with adjudicated auctions were cumbersome, each parish had to deal with it and very very few adjudicated auctions ever happened.  Civic source was created to take decades worth of properties that had been sitting idle on the parish’s books and make it easy for them to auction them off and put it back in commerce.  The problem was no one wanted to buy or pay much for property that was not insured with title ins so civic source purchased a title insurance company and insured the properties they auctioned of. That is what gave us USNational which has been a big help in my area as I can use them to insure tax sale properties I acquire when in most cases other title ins companies will not.  The negative is that the title ins can cost 3-4x or more than what traditional title ins will cost. It also means the buyer has to be explained all of this and they have to use USNational when they go to sell, and explain it to their future buyers.

With all that being said when the market is soft or there is lots of inventory I’ve noticed tax sale properties (including the adjudicated you buy off of civic source) will typically sell for about 10-20% less than market value.   Every time I go to bid on property on civic source people are bidding it up to or over market value. It’s crazy.   Just about anything online is going to be so competitive that you rarely if ever will find a deal. If I am going to pay market value I will browse the mls to see what is for sale, not overbid for a tax sale property.

In SC I was hopeful, since they are all in person that there would be some smaller to medium counties that wouldn’t be too competitive to where you could still get a decent deal, if it doesn’t redeem.
What % of value do you think most property was being bid up to? I would be looking for mostly abandoned or run down houses that need repairs. They typically have a better chance of not redeeming. Or even vacant land. 

I agree - the handful of worthwhile properties on Civic source in BR were bid up like crazy on the few that I watched. Last year in CHS, liens for any house worth owning seemed to be selling for 30-50% of market value. Good properties were typically higher than that. Marginal properties were hit and miss. About 4-6 buyers got the lion's share of the SFH 200k-400k homes. If I remember correctly, East Coast Tax Auction LLC and Red Rock Capital were two of the high volume bidders. A couple of local individuals as well. I recorded a list of what most of the liens sold for and tracked the wins of the clearly professional bidders for research and learning purposes. A little bit of vacant land, but most of it seemed worthless from what I remember researching. I was primarily targeting properties that were likely to redeem and would yield me at least 12%, so my bidding and research were structured around that. I had no illusions about acquiring properties this way.

Between the tax auctions, the FB groups I'm a part of, and what I see in my day to day as a lender, my general opinion is that there's still too much money chasing too few deals as a whole. The marker is still frothy and most of the "deals" I see are dogshit. The higher rates have somewhat slowed down the "get rich quick with no money down" crowd as financing is more difficult, but I still see a lot of new investors with serious cash or purchasing power. There's still a ton of liquidity out there.

I like the SC process as well. I've attended the CHS county auction for the last 3 years and bid on several liens last year but did not obtain any. I believe you still have go through a quiet title process in SC and I know this has caused problems for other investors in obtaining clear title and title insurance in future sales. Even though the CHS county auction is in person, it was still saturated. In 2022, the auctioneer made a comment about seeing a lot of new faces and asked how many people were bidding for the first time - about 2/3 of the room put their hands up. Last year, I had a person sitting next to me tell that liens were 100% safe and there was no way to lose money. That being said, there were some very professional crews (funds) there. I plan on attending some other county auctions this year and branching out from just Charleston.

Overall, though, I don't think its an efficient way to obtain properties. If I remember correctly, the redemption rate in CHS county is something like 80-90% and the interest that can be earned is capped. With the way people were bidding the last two years, the yields if the properties were redeemed were like 2-3%. Maybe I'm missing something, but to me, it seemed oversaturated and this crushed the potential returns. Again, this was specific to CHS county. 

Have you tried Civic Source in LA? We bought a property in the BR area in 2020 and it was pretty straightforward. Just hard to find good properties on it. I haven't messed around with Nola much, just BR.