All Forum Posts by: Tim Fitzgerald

@scott 

@Scott Carson Yes, thanks for the info on Noteworthy .

There is actually a ton of opportunity today in purchasing (or brokering, for that matter) seller-financed notes. And at high yields, no less. There is such a wide range of opportunity out there but I tend to gravitate towards the smaller-tier (in terms of price) single-family homes-- in large part because that is where the bulk of my experience lies but also because of the sheer numbers of these potential deals out there (at the moment, don't have current real figures in terms of percentages of owner financing to bank financing in this area but it is significant).

Let me give you an example of the kinds of opportunities that are out there. A fellow investor that I know recently purchased a seller-financed note secured by a small ($60,000) manufactured home in one of the southern states (BTW there are tremendous opportunities in notes secured by manufactured homes). The owner took back financing with a $5,000 down payment. The buyer had already made 60 monthly payments of $657.29 with 84 payments remaining. That's a solid payment history-- very well-seasoned. Very little chance of the buyer defaulting, as he was already almost halfway through the term of the loan. Any way you look at it, that's a very safe investment. (BTW this home was in a gated community with a golf course. There are some really nice manufactured home communities out there today and I believe this area tends to be overlooked by note investors... may be because there seems to be a perpetuating image or stigma attached to this type of property which tends to cast it in a [for lack of a better word, 'junky' or 'lowlife'] negative light.... kind of like mobile homes which also present huge opportunities as well.

Anyway, the note (after performing all due diligence, running buyer credit check, etc) was purchased for $29,407.72, reflecting an ITV of less than 50% (fantastic) with quite a high yield... 20.24% in this case. I love deals like this. Anything above 20%, I tend to vibrate. Although I can do much better in many cases but I digress..

I could run a couple of other recent examples but I wanted to make this a short post. I just wanted the above example to be reflective of the type (or genre) of deals that I like to be on the pulse of and tend to go after. (I can bump my yields even higher by using more advanced techniques like partials, for example but that is subject matter for another day.

And I like my note investing activities to be passive as I tend not to have a lot of free time (I think many of you are probably in the same boat).

With this in mind, it's been my experience that passive direct mail to a purchased leads list is the most cost effective, time-efficient way to find and nail down these deals.

Just try to find deals like this on FCI exchange. (You probably won't)

Direct mail is really a science (and I many cases relatively predictable in terms of projected to actual results) once you've been doing it long enough to get a solid program going.

One more thing-- I find that beginning direct mailers fail to follow up. And, that's a huge mistake because most of the deals are unearthed on the follow-up.

@Bob Malecki Thanks for the info. I was getting Jack Sterberg's (Noteworthy) emails up until about that time and, from what I could see, his latest conferences seemed hastily put together and the informational page on his site that they would link to was a summary of the PREVIOUS year's lineup-- I found that strange. I appreciate the insight.

@Don Konipol So, show me how you got your numbers on the "success rate"? Your statement "One would probably..." has no bearing on anything without any stats to support it.

As far as "a scenario that was first disclosed in 1974..." I never said this was a NEW strategy. In fact, note investing is as old as the hills. The principles don't change; only the interest rates do.

Sure, this particular strategy was more attractive to borowers back then when interest rates were through the roof. doesn't mean it does not work now in certain situations. I am using "double the payment halve the interest rate" as an illustrative example. But also, in certain cases if you can get the borrower to up his payment somewhat, you can create a higher return for yourself as an investor. "Win-win" .

Suggested threads (You can use "other people's money" to get started as opposed to risking your own $ while you learn the ropes:

https://www.biggerpockets.com/forums/70/topics/518...

https://www.biggerpockets.com/forums/70/topics/510...

https://www.biggerpockets.com/forums/70/topics/504...

@Jay Hinrichs Yes, I agree-- there is always a way to up your yield through restructuring if your buyer can up his payments.

And, yes, I do remember those days of the 1980s with the 18% interest rates. That really ignited the seller financing sector.

You give an interesting example re '30 months 0% is the same as 15% for 7 years'-- any way you can elaborate on that a bit? Just curious--- BTW I heard your podcast on BP, really liked it

You can up your returns by working with the payor after you acquire the loan. Let's say you find a $60,000, 20 year note paying 8% with a monthly payment of $501.86. You offer to buy it at an 11% yield, so your purchase price is $48,620.97.

You then make this offer to the borrower: You will cut his interest rate IN HALF to 4% and get him paid off in 66.78 months instead of 240 if he can double his paymentsto $1,003.72 per month.AND in return they are all paid off in just over 5 1/2 years (as opposed to the original 20 years) at just HALF the original interest rate (a reduction to 4% from 8).

While not every buyer will have the ability to increase his payments, those who do will jump at this offer (you can play with the numbers accordingly depending on the situation and the borrower's ability to pay). It's quite simply the best financial deal anyone has ever offered him. Think about this. Has your mortgage lender ever made you an offer like the above? Don't think so. And, the buyer saves a total of $53,417.98 with the new, more favorable terms.

Now-- let's look at how YOU made out after the restructuring. Your investment was $48,620.97 and you receive 66.78 payments of $1,003.72.... bumping your yield up to 12.08% in this case.

You can work all of this on the financial calculator in order to formulate creatively restructured offers, and you should do well to make this sort of offer to every payor for every loan you acquire. Depending on whether or how much $ the payor is able to increase his payments, you can play with the numbers with an eye to upping your yield while giving your buyer a great financial deal at the same time. This is truly a win-win.

This is how you achieve 12-15 % or even much higher return rates.

One thing that I lament is the absence of the Noteworthy conference from this list. That one was always one of my favorites, and i know that Jack Sternberg took over there a # of years ago and had a Vegas event scheduled as recently as 2016-- however, I'm not sure how successful it was at all or even whether they are a serious player at all anymore. (The last convention of theirs I attended was in 2007 and it was a good one-- we all know what happened to the economy shortly thereafter and from that point on, I believe Noteworthy has been but a blip on the radar screen.) Just curious as to whether anyone knows anything.

I would say, to Dave's point, most successful referral agents are indeed relationship-based professionals. They source note holders who then become note sellers by working with and obtaining leads from financial professionals who have clients who are holding notes or may create notes in the future. By referring these leads to institutional investors, you can make money by earning a fee which the investor pays you, while putting up all of the cash necessary to close the transaction.

I think this is a great, risk-free way to learn. Walk before you run. Take no risks with your own money while you are still in the learning stages. The worst that can happen is that you make $0 when a potential note transaction doesn't go through for whatever reason or you get a "no quote" from an investor or what have you, and the best thing that can happen is that you earn a fee for the transactions that close.

Money aside, though, the most valuable thing you're gaining is the FREE EDUCATION you're getting by watching the pros either reject or quote on and close a transaction. You're learning what's good, what's bad, etc. simply by watching.

So, after you do a # of these referrals, you will be much better prepared to put up your own money for certain deals after you've learned the ropes a little bit.

I personally think that anyone who 'jumps in' to the note business, never having done a note before, by buying a NPN with his own money to learn by the seat of his pants is crazy. Even if it turns out OK the first time.

Let me add this. To Dave's point of seller financing coming back-- and, as he also alluded to 'networking'- as in taking a banker to lunch---a serious long-term player in the note space should never overlook attorneys, accountants and financial planners as viable referral sources for this type of product. Reaching them requires a good long-term marketing plan which, when done correctly, can potentially result in multiple note referrals per year from each source. That can add up to a lot of money year after year.

Seeing that these types of financial professionals tend to have note holders amongst their clientele who, in many cases, have taken back seller financing (in many cases, the only time they've done this in their life)but are just not very educated as to how to manage the note, much less how to go about liquidating all or part of it to fill a financial need.

Most of my leads come from referral sources such as these who are looking to help their client out who is in need of cash for one reason or another. And I find these people relatively easy to work with... especially when they see how well I can guide them through the entire process in a very low-stress manner.