All Forum Posts by: Tracy Z. Rewey

Hello @Larry Walters Like @Chris Seveney I've used their trading platform but not the fund.  I've also been to their physical offices in downtown Orlando.  They are a professional and experienced operation.  I'm sure you know this but for anyone new to the world of notes, investing in a fund and investing in notes directly are very different things.

Originally posted by @Chris Seveney:

@Charles Robbins

I would say the ability to get a note and mortgage to acquire a home has helped a lot more people than it has hurt. My wife is from a country that does not allow lending or loans to acquire housing.

Last time I checked only people who have lost a home are those who do not pay.

I remember going to a mortgage closing on a personal home decades ago and the closing agent pushed the 3 inch stack of papers over for signing and said:

"This all says... You Pay, You Stay.  You Don't, You Won't."

Still cracks me up.

My prediction is a federal extension to June 30th 2021. Who knows at the state level. I'm interested in seeing how the $25 billion in rent relief fund gets administered to be certain it goes to pay the landlords that have had to keep making their mortgage payments while not being able to collect rents.

@Wesley I.  Yes to all!  It depends on the note, the payor's situation, and how much of a discount the note was purchased at.  Many of the notes we buy have a face rate over 6% so it is easy to show them the kind of savings they would get over a 15 or 30 year term in the current under 3% mortgage refinance rate. 

If that is not enough motivation we have offered the incentive of a discounted payoff.  For example on a $100,000 note we might offer a 5% discount of $5,000 if they payoff in full in the next 90 days. The numbers have to work and it depends on how much discount we have from the initial purchase of the note. We did that on note in Oregon last year that worked out well.

If you work with a servicer that reports to the credit bureaus then you can help the buyer/payor either establish credit or improve their credit with timely payments.  This will help them qualify for a refinance at better rates. A good relationship with a loan officer can help as well.

Yes, we do work with the servicer.  They have to be part of knowing there is a discounted payoff.  Depending on the servicer they may or may not want to be part of the initial discussion.  You definitely want to involve them and play by their rules.  Their job is to help keep you safe and compliant in the servicing and debt collection arena.

Originally posted by @Chris Seveney:

Performing notes I typically like to sell a partial / hypothecate the note.

Non Performing getting them to reinstate is first. Foreclosures typically suck. I had a house burn down over the weekend, is that an exit strategy?

Agreed on the foreclosure.  It's my least favorite and last resort option.  Yikes on the burn down.  Hopefully everyone is ok and insurance pays it off.

Originally posted by @Nick Taylor:

Great Thread! Thank you

Glad you enjoyed.  I'm doing an article on the topic and it made me write them all down.  If I had to pick a "favorite child" it would probably be partials but they all have a time to shine.

If that note hit my desk I would ask what is the value of the property, what is the first lien amount, is the first lien current, how much does the payor have invested, what is their credit score, what is the rate and payment schedule on the second, why was that second note written with no payments in 5 years, and is their any opportunity for the note be cross-collateralized or the terms modified to be more marketable?  Most investors (including myself) would pass on that one at first glance but I would hear it out to see if there was any chance of of a buyable deal.

We have so many exit strategies for real estate notes. Often the best outcome depends on the note itself. Here are some of the strategies we use broken down into Performing and Non-Performing Notes.

Performing Notes

• Pays To Term
  
• Pays Off Early
• Sell The Full Note
• 
Sell A Partial

• Combine With Other Notes for a Mini Pool/Portfolio
• 
Help Borrower Refinance
• 
Restructure For Early Payoff

• Incentivize For Early Payoff

• Trade the Note

• Hypothecate The Note


Non-Performing Notes

• Payer Reinstates

• Work With Payer To Catch Up
• 
Restructure Forbearance or Modification
• 
Accept a Short Sale/Short Payoff
• 
Cash For Keys & Deed in Lieu of Foreclosure

• Sell as Non-Performing
• 
Pursue Foreclosure

• Homeowner Sells House and Pays Off
• 
Sells At Foreclosure

• Get Property At Foreclosure

• Sell Property As-Is To Investor After Foreclosure
• 
Fix and Flip After Foreclosure

• Rent Property Out

• Lease Property With Option To Buy

• Sell With Owner Financing

Would love to hear what are your favorites?

Originally posted by @Chris Seveney:

@Tracy Z. Rewey - I love seeing stuff like this. There are so many creative ways you can deal with performing loans that can lead to better returns than a NPL (with less risk). I have done something similar with some investors where I do interest only 30 year balloon in 10 and sell off the partial for what I had into it. I defer profit now and will get some decent income bump. 

What I also did is plan my partials around my kids college time. So I would start getting paid right around when they are in college so its a way to pay for it (well a portion of it anyways)

Agreed Chris! Love the concept of timing to your kids college entry. The power of compounding interest is amazing.  (Maybe even powerful enough to pay for college tuition!)  If you can do that deal in an SD ESA then even better.

@Alecia Bolton You know I love notes in SD IRAS! Also love the Self Directed HSA if you have a high deductible health insurance plan. At one of the Self Directed IRA events a colleague suggested I read this book:

The Power of Zero, Revised and Updated: How to Get to the 0% Tax Bracket and Transform Your Retirement by David McKnight. 

It is a very powerful concept.

We also do notes through our S corp and take a modest salary that meets the requirements and write off all allowable expenses.  If I am earning fee income rather than long term interest income I prefer to do those deals through the S corp.

These can be concepts to get the conversation going with your tax advisor.

P.S. Save me a beach chair and a drink with a tiny umbrella.  With Wifi and a laptop we can do notes from there!