All Forum Posts by: Steve Chaisson

East Nashville is really hot and appreciating rapidly. You can find quality tenants there and strong rental rates. If I were holding properties right now I'd focus there.

Wow. Call me crazy - but they have a disclaimer saying they don't offer investment advice on their website? Are these guys registered with the SEC? That website looks like a massive securities offering that should be registered. I'm not a financial planner, but I've done deals that require filing with the SEC to pool funds aggregating investors. If they have "clients", they are either a real estate brokerage or an investment firm, and I have no clue exactly what they are from that website. I would stay far, far, away from that without extensive legal scrutiny into the operation. I'm not going to slam them because I don't know them, but I have serious reservations about my initial impressions. I'm open to someone enlightening me if they know something I don't and can explain how selling houses that way is legal.

@Bradford Arner and @Bill Gulley

I only do this under the direction and supervision of not one, but two attorneys who specialize in foreclosures. I didn't learn this from anyone. There are no systems out there that substitute for experience and good legal counsel. I simply evaluated the values of the properties, the costs of the notes, and the costs of foreclosure along with the potential risks of having to hold the paper for a while. It's not difficult learning how to evaluate the elements of a collateral file to determine that the liens are valid and will hold up to a legal challenge. The biggest challenge for most mom and pop type investors is just finding the deals. I bought several notes from local banks who were previously on the FDIC watch list and needed to clean up their balance sheets. I've also got some decent connections from my experience in the industry. Bankers don't like to play games with wanna be investors that don't make deals happen. I've picked up some occasional one off deals from various portfolios who bought DebtX stuff in bulk and just keeping my eyes and ears peeled for opportunities. I'm sure there are a lot of people trading here that are much more experienced than I am so I'd just keep plugging away through the forums and picking up as much advice as possible.

Personally, I think notes are just plain fun. I'm not the biggest expert out there, but I've done about 30 note deals, and they have been very profitable. I've never lost money.

I got two attorneys who specialize in foreclosures here in the Nashville area to review each of my collateral files to insure we had valid liens. This cost me $300. I only paid if we closed a deal.

Exit strategy is a very big consideration. I'm in the Nashville area, and for one deal I brought in a very well-heeled partner, and we were very simply able to use the notes as collateral with a local bank to finance 100% of our deal. We purchased 8 notes all over the state of Tennessee in this deal. If someone declares bankruptcy, there are a host of implications you could deal with. I found that mitigating this risk was easy for the most part - if someone is really upside down, they generally would not include a home in a bankruptcy anyway - your biggest risk comes from more affluent neighborhoods where the owners are struggling but not entirely underwater. They will fight to keep their homes. We got caught with one note like this, but it didn't matter, because we bought a 465k first mortgage on a 650k house for 281k. The deal is 100% leveraged and cash flows $1200 per month. You have to understand that purchasing notes can tie up your capital for a while, though, if problems arise.

To me, it was very important to understand the actual value of the physical collateral. That is my strong point. Since my mindset was primarily of the real estate wholesaler, I looked for non-performing notes to basically treat like "flips". I personally inspected every property on which we purchased a note.

I flipped a 95k note on a condo in Memphis to a friend of mine for 4k profit. He bought it for 44k. In a month, my mortgage broker got an FHA streamline done on the condo for the owner. My buddy made 50k. I should have stayed in that one lol.

Even a sophisticated investor shouldn't play this game with money they can't afford to lose. I never lose because I bring on partners for the risk by being a value-added component to any deal.

If anyone has notes in Tennessee please send them my way!!!

Within various areas of Nashville I would have different recommendations for managers - along with consideration of he actual building types and number of units per building. I would not recommend a "one stop shop" for management.

Attornery - Carlton Drumwright, very investor friendly.

Management Company - Depends on location and property type, I would have multiple recommendations along with a few to avoid.

CPA - Clyde Bright is a fabulous CPA, but he isn't cheap. I have a very affordable tax guy who is amazing with numbers. His name is Jack Young, and he's out of Columiba.

They are the rich dads when they sell that crap to you, and you will be the poor dad if you buy into that crap. Did I mention that it's crap???

Welcome to BP Randull.

I am happy to answer any questions you may have. I bought my first 4-plex and lived in one of the units when I was 23 so I love the idea of starting that way if that is one of your goals.

I'm happy to lend advice at any time.

My financial planner invests with me at 15% with no points. Hard money lenders will often add points to this. You can usually get 3 points and increase your yield if you are actively churning your funds.

We do a demand note in Tennessee so that he can avoid a tax on interest and dividends here called the Hall tax.

With real estate you can achieve a leverage yield that is much greater. Part of your return will be based on your skill in speculation. You can also purchase property at a discount and add value through renovation. There are many factors that will determine your ROI, and you will have a more management intensive investment.

So if you have the capacity to create leverage and the tolerance for risk along with a skill for evaluating property you can generally create a much better return owning property. You will also be doing more work.

Another avenue you may consider in the hard money game is transactional funding. Some people need funds to close deals and will close immediately once other funds are in place. "Good Funds" legislation may require that any simultaneous closing in your state be funded by the original party prior to transferring the property to another party. This can be a very lucrative business but will take time to build.

I think it's important to find an investor-friendly attorney. I always close with an attorney, not a title agent. My attorney draws up all types of side agreements and other relevant documents. He modifies boilerplate note documents to make them specific to private money investors and sets up pretty much anything we need.

I keep him on retainer for $500 per month, and all of my closings have no costs on his side. If I wholesale a deal, I'll push the cost back through to the purchaser. Basically, he makes me a profit.

Additionally, he creates a comfort level for non-traditional real estate transactions that often occur when one is wholesaling property.

With enough digging I think most people can find attorneys like this in their local areas, particularly if they are in a larger metropolitan area. Networking with other wholesalers and investors would probably help. I think it's vital to find an attorney who isn't just looking for perfect residential sale transactions to sell title insurance and fit the transaction in a little box. I've chewed through plenty of those attorneys.