Transaction Review & Calculator Practice

Latest Transaction Reviews

  Meeting Notes:
  • 01:05 – Great way to access our Free training resources
  • 04:05 – Dawn’s recommendation on which Financial Calculator to use for note investing
  • 05:00 – Dawn shares that “Knowing the top five buttons has built me a business”.
  • 07:08 – Citizen of the Realm, Kathy share her latest real estate note deal
  • 11:20 – Key indicators for determining borrower’s commitment level to not default in the first 12 months of loan
  • 13:48 – How to determine your yield with the 10Bii financial calculator
  • 17:14 – How to calculate borrower’s Debt to Income Ratio
  • 22:22 – Babysitting your borrowers vs a true passive investment
  • 24:35 – How do you calculate the balance after 6 months?
  • 29:34 – Have a deal that doesn’t eat up all your time with a yield that you can live with.
  • 32:14 – Dawn shares   her latest deal out of Dayton Nevada , which includes her experience negotiating seller carry terms
  • 34:00 – Dawn shows why she fell in love with her Dayton Nevada property and how she would use it.
  • 37:19 – How to determine if the numbers make sense for flipping vs carrying
  • 39:18 – Negotiating Seller Carry Terms
  • 45:34 – Best clause to protect your future profits
  • 50:00 – Leveraging multiple exit strategies for top profits
  • 52:19 – Does anyone know someone out of Chicago looking for a great deal? Ken Bucho has a Chicago 6 plex for sale. Contact Ken at [email protected] for rest of details.

Here are a few important links to bookmark or save:


Meeting Notes:

  • 00:30 – What we cover during our “Calculator Practice” segments?
  • 01:06 – On the Horizon: INTRO-Digital brochure for educating people in our marketplace about owner financing and notes.
  • 02:50 – Sign up for a FREE Note Queen account: includes FREE Resource Guide to useful links and tools Dawn uses for her business.
  • 04:13 – Property & Paper Summit video recordings have been posted.
  • 05:00 – Live Training Opportunities
  • 05:45 – Calculator Practice Session – Reno Property/$30,000+ potential profit
  • 10:27 – Investor priorities for Reno Property
  • 12:06 – How Dawn’s markets her latest renovation property?
  • 16:00 – Live Calculator Practice with Citizen of the Realm member David (How to calculate your YIELD?)
  • 19:15 – When should you offer discount on a note for sell?
  • 24:10 – How to stay DocFrank compliant without a Mortgage Loan Originator?
  • 26:00 – Digital brochure for educating people in our marketplace about owner financing and notes. 

Here are a few important links to bookmark or save:

Meeting Notes:

  • 1:00 – Sign up for a Free Note Queen account (Free vs. Paid Citizen of the Realm benefits)
  • 1:50 – Upcoming Property & Paper Summit 2017 – Join us in Lake Tahoe. Learn more at
  • 2:30 – Local Meet Up – Supporting Our Local Investor Needs!
  • 3:00 – Why I feel really strong about the “Dance Between Property & Paper”
  • 4:30 – Don’t let the wealth vampires on Washington and Wall Street suck your financial blood.
  • 6:30 – Calculator Practice intro: Daisy Chain… Seller Financing to Cash, Step and Repeat
  • 11:00 – How to calculate a ballon within a note?
  • 14:50 – Citizen question – On the ballon, how are you keep the ballon DodFrank compliant?
  • 19:45 – Summary of how Daisy Chain strategy helped seller buy $150,000 property cash
  • 14:50 – Citizen question – Amortization timeline for multiple schedules 
  • 26:00 – Calculator Practice Summary

Here are a few important links to bookmark or save:

I love creating wealth, both for myself and those I work with. I like to say that I ‘triage’ difficult financial situations just as I used to triage patients when I was a nurse. What does that mean, exactly? It means I am always looking for the optimal solution for everyone involved. Today’s example involved a motivated seller for a piece of land in Idaho.

I am also very pleased to welcome Bart Godinez and Ed Bencroft to our community. BJ had some excellent questions and resources to offer everyone during the discussion, it was amazing for me to have such on-the-ball immediate feedback; I learn from these discussions, too.

Finally, if you like getting out to seminars or in-person events, I am so thrilled to be hosting the Paper and Property Summit at Lake Tahoe October 9th and 10th. Space is limited, but there are still some available slot. We would love to see you there!

Minute Notes:

  • [0:29] Disclaimer – Do Your Due Diligence!
  • [0:40] Paper & Property Summit – Tahoe
  • [1:25] Welcome to new members
  • [2:00] Special Announcement #2: Website Enhancements
  • [3:05] Financial Calculator Practice
  • [10:51] Dawn’s Background – Why do I Invest in Notes?
  • [17:35] Troubled Land Deal Discussion
  • [41:07] Learning Resource –
  • [41:53] Introduction to new member Bart (BJ) Godinez

Here are a few important links to bookmark or save:

Show Notes Below:

[1:28] Overview of Note Deal (Texas House on 19 Acres)
[3:30] Calculator Practice Session – 10bII Financial Calculator
[4:17] Don’t Calculate Yield Before Doing This First!
[6:21] Open Q&A – “Why was it so hard to determine value?”
[9:15] What Is Your Time Worth?

How can we set up the note to be sold for minimum discount if the note investor is looking for a 12% yield? IF YOU HAVEN’T ALREADY… Download my new app, Note Queen Capital, at If you ALLOW PUSH NOTIFICATIONS, you will automatically get timely notifications so you can continue to be a part of our free monthly Virtual Coffee mastermind sessions.

2016 Transaction Reviews

Show Notes Below:

  • [1:27] What is the basis of any deals?
  • [3:27] Zach explains how he doesn’t use any of his own money for deals.
  • [7:02] Leveraging Craigslist for marketing “Owner will Carry” properties.
  • [12:47] General guidelines for selling a note.
  • [23:25] How to avoid the appearance of a predatory lender?
  • [27:24] Pros and Cons of leveraging a a balloon payment.
  • [46:49] Difference between a small mom’n’pop operation and a large operation?
  • [50:07] Benefits of leveraging an application process for filtering out “High Risk” or poor qualified buyers?

Package Deal Consisting of Manufactured house, Barn and Five acres of land

Enjoy the October 2016 “Transaction Review & Calculator Practice” mastermind session.

Thank you for being part of our mastermind community.


Download my new app, Note Queen Capital, at

When you download the app, you also get a free copy of my book, Seller Financing on Steroids and the opportunity to sign up for a ‘hot seat’ for the next Virtual Coffee so you can be sure to get air time on the monthly calls.

Member deal review on a Single-Wide Mobile Home Note Enjoy the September 2016 “Transaction Review & Calculator Practice” mastermind session. Thank you for being part of our mastermind community. IF YOU HAVEN’T ALREADY… Download my new app, Note Queen Capital, at When you download the app, you also get a free copy of my book, Seller Financing on Steroids and the opportunity to sign up for a ‘hot seat’ for the next Virtual Coffee so you can be sure to get air time on the monthly calls.

Quit Trying to Broker – Private Money Partners Can Shoot Your Note Business Through the Roof

Enjoy the August 2016 “Transaction Review & Calculator Practice” mastermind session.

When people are approaching the note business, many think that the best place to start is to be a broker or “finder” and wholesale note deals, very similar to the way wholesalers all across the country assign real estate contracts for a fee.

And then, they say to themselves, “maybe when I’ve built up enough cash, I’ll start investing in notes for my own account.”


It’s not that creating a whole business from scratch and becoming a mad lead generator is a bad thing, but it takes time and money and great persistence to create consistent, effortless deal flow. Frankly, most give up before they get to that point.

There’s a much easier, faster way to blast into the note business. I suggest that you focus your efforts on cultivating private money partners who can fund the deals you can easily find laying around all day long like manna from heaven and START CREATING PASSIVE INCOME OUT OF THIN AIR TODAY!!

Hey, it took 6 years after quitting my nursing job for me to finally figure out how to play this game right. You can do it in far less time if you’ll pay attention and learn from my less-than-speedy journey to the Queendom.

If you sign up for our mastermind community (the link is below) you will be able to watch to the end and see how I follow through with this line of thinking. It might give you just the idea you need to radically change your life, and the lives of your financial friends.

Thank you for being part of our mastermind community.


Download my new app, Note Queen Capital, at

If you ALLOW PUSH NOTIFICATIONS, you will automatically get timely notifications so you can continue to be a part of our free monthly Virtual Coffee mastermind sessions.

As a reminder, when you download the app, you also get a free copy of my book, Seller Financing on Steroids and the opportunity to sign up for a ‘hot seat’ for the next Virtual Coffee so you can be sure to get air time on the monthly calls.

Once you understand the world of owner financing and notes, you can make deals and profit handsomely in situations where others might not see the opportunity at all.This episode will cover a project I’m in the middle of, and how I put the puzzle pieces together.

I’ve developed a relationship with a local Mobile Home Park, and I have just dropped several units in to fill up the empty spaces they had. It can be dicey to invest in mobiles in parks, so the key to this whole deal was my relationship with the owner and manager. If they want to play nasty, they can completely squeeze you out of your position.

There is a lot of power that comes from being flexible understanding “the dance between property and paper” 😉

In this session of Transaction Review & Calculator Practice, I talk about a small commercial note that came across my desk. The daughter of the note holder called me to see what her father’s note was really worth because she had been so confused and disconcerted by previous conversations with potential note buyers, most of whom were most likely brokers.

She needed to liquidate her father’s assets so he could qualify for Medical. He had suffered rapid-onset dementia and of a sudden needed intense institutional care that estate simply couldn’t afford. So… she had to sell his assets and give the proceeds to the facility so they could ‘spend it down’ before Medical would kick in.

I connected with her as a human being first, developed trust and offered her a fair price for the note… that’s all it really takes to stand out in this business, folks.

Near the end of the webinar, I take you through a couple of possible scenarios with the financial calculator to show how I could have easily taken a good note and increased my yield by 3-4% by giving the Payor a better deal than he already had… a true win-win for everyone involved.

Hope you enjoy… I truly love this business 🙂

A lot of people and companies buy big portfolios of NPN’s (non-performing notes) at a big discount. The work they do to add value to their portfolio is to get the borrower paying again. Then the non-performing note becomes a ‘re-performer’.

The note holder ,who now has turned an ‘ugly’ non-performing note into a decent ‘re-performing note’, can either sit back and receive the payments for great cash flow, or they can sell the note for a profit to someone who wants to buy a note that is already performing.

In this webinar, I am going over the scenario of where a guy wants to sell me a ‘re-performer’ but wants an option to buy it back any time in the next 18 months.

He needs cash now for other projects, but once the note has paid perfectly for 12 months on a permanent modification, he says he has a bank that will buy his note at 70% of the UPB (unpaid principal balance)… which is MUCH higher than I can pay for it now, based upon ITV (investment-to-value maximums.

I customized a deal that would work well for both of us, which is one of my favorite things to do.

2015 Transaction Reviews

This month we are talking about a guy in Kansas City who buys houses cash (or with hard money) and then sells them to home owners with seller financing, and then…. he needs to sell the notes he creates to get the money he needs to go out and buy the next property. He can sell the whole note, or he can sell a partial and keep the tail end of the payment stream, or… he could create two notes, one for selling, one for holding.

Enjoy 🙂

One of the biggest needs in today’s market, as institutional cash buyers are drying up and 50% of buyers can’t qualify for bank financing, is for property sellers to know how to structure a carry back transaction in such a way that they have the option of the selling the note(s) for the highest possible price on the secondary market.

One such lady provided us with the example for this session of TR&CP. I could have done more for this person if they would have seen the value in hiring me to create a completely custom transaction, but she wasn’t in alignment with that program, even though she could have passed the fee along to the buyers, and though I would have refunded the fee upon purchasing the note(s).

This is a transaction-in-progress… I have no idea if this deal will come back around, or she will decide that a cash offer, even though it’s less than her ideal sales price, is a better way to go.

Either way, it provided a real life example for us to work over. As always, I appreciate your involvement and participation, and welcome you to submit your own questions and/or transactions for our group to review at these monthly sessions. 😉

I spoke to a group of real estate professionals last week, and they gasped when I showed them how heavily a 30-year note was discounted.

“Time value of money” is such an important concept, and one that few people grasp. The best way to preserve the value of a note, or at least to be sure you are creating the strongest note possible, is to talk with someone who buys notes in the “secondary market” to see what they will pay BEFORE you agree on terms with the buyer. Find out what the buyers want, and THEN create your note.

There are SO many ways to put a deal together, so if you are smart about the way you engineer it, you can maximize amount you net from your real estate AND your paper.

Basically, remember that “more money sooner is better”. In this session, we see that adding in a 3-year balloon would have been just as good at maximizing the value of the note as cutting the term in half (from a 20-year amortization to a 10-year amortization) along with greatly increasing the face rate on the note (from 6% to 9%).

If you or a client of yours needs help with structuring a deal, remember that as a member you have access to DISCOUNTS when you need 1-on-1 help.

I don’t know about you, but sometimes I subscribe to the “fire, ready, aim” philosophy. I made several mistakes in buying my first NPN (non-performing note), but I’m still glad I did it, it felt like the right thing to do, and… so far it’s paying like clockwork. And… you should definitely take the time to learn the volumes of information it takes to really master the NPN space, and hopefully you will learn from some of my mistakes!

Not too long ago, I moved from the Los Angeles area to Carson City, Nevada (Reno/Tahoe area). I was surprised to love the house we are renting, so I wanted to take you on the mental journey about how I am thinking of presenting a seller financing offer to the owner, and how I went about finding out the back story on the property so I can know as much as possible about the owner’s possibly situation before I get to the negotiating table.

When you know about discounted notes, you automatically know about owner financing, because that is where the private note business comes from. The things we talk about in this community are SO empowering in SO many areas of your life… gotta love it!!! 🙂

How do I make money once I have a note under contract? I can broker it for a fee, sell off a front-end partial, or joint venture for passive income, or any combination of the above.

The first half reviews a current note deal and the story of two note brokers that brought it to me over a 2-year period.

More and more I like to invest small amounts of my own money and participate in almost every note and loan transaction that I do. These two strategies not only allow me to leverage my investor’s money to make good returns on relatively small amounts of my own money, but it has a way of providing more safety for my investors.

One of the things I do in this session is to show you my very first note purchase through my new Self-Directed Roth IRA. I invested a whopping $100 to make a 600% return. Step and repeat, and I will turn a measly $500 account into thousands within a few short years, and all of the distributions will be tax free!!

When a note has different payments each year, or several small balloon payments, it can be difficult to understand how to calculate what you would pay for it. In this example, I demonstrate the long-hand way, and the short-cut way to figure out how to price a complicated note.

This month I decided to bring up a situation I encountered for trouble shooting that hasn’t been resolved yet. A woman with a pending divorce needs to find a way to pay off her ex without losing control of the property. She had a nice bank 1st, a private 2nd, and about $100,000 of equity. We discuss ways she could use private money and land trusts (and other strategies) to solve her problem.

I thought it provided an interesting case study to get our juices flowing for creative problem solving. Also, at the end, Ken Bucho, one of our members, was gracious enough to bring up some situations where we demonstrated how to offer a loan modification on a note you already own in such a way that it increases the yield and safety of the note while helping the Payor decrease their overall financing charges… true win-win. Thanks, Ken, really appreciate your participation!

This month you can see how I worked with a buyer client who was making an offer on a $3mil property and asking the seller to carry paper, offer seller financing. You can see the deal structure we contemplated to minimize property taxes, ask for below-market terms, and reduce risk for the seller.

2013 Transaction Reviews

If buyers understand the discounted note business, then they can close on properties without needing to have all the cash, qualifying for a bank loan, or borrowing expensive hard money.

In this session, I talk about a recent client who needed to give the seller $140,000 cash, but only had $105,000 and couldn’t qualify for bank financing, or private financing (because of the onerous regulations around consumer finance).

I show how these buyers can get what they want, and totally customize their own financing, by using owner financing with the subsequent sale of the note.

At the end, I give the exact language I used to present the deal structure to the seller and the agents involved. Enjoy!

Except for members of this community, I rarely work with other note brokers, or note ‘finders,’ because sadly, they are usually a waste of time. This is true either because they do not have an adequate grasp of the business, or they do not have control of the seller, i.e. there is a long daisy chain of people in the middle. Not fun.

By contrast, I LOVE working with one broker in particular, because he not only sources deals for me, but he is pleasant to work with, we’ve spent enough time on the phone to get to know each other on a personal basis, he knows the business and makes my life easy because he basically puts the file together for me… almost like he’s my transaction coordinator.

Because he used to be a loan officer, he knows how to put a complete file together, and tee up the documents and find answers for the things he knows I’ll need to make a decision and pull the trigger. He is a good salesman, good at creating rapport with note sellers, and great at negotiating with them and following up… he is much better and more aggressive than I am in those areas.

But he doesn’t have the money to close on the notes himself, and has no desire to build his own investor base, but prefers to have about 3 people like me… brokers that underwrite and fund at our own discretion, often having our own private list of investors come to the table after the deal is closed, or simultaneously.

Hard money brokers function the same way… they either originate with their own money, assigning to another investor a few days later, or they have the private investor fund the deal in escrow, putting them directly on the Note and Deed of Trust (or Mortgage).

He does what he is good at, I do what I am good at, and we all get a piece of the pie.

I wish I had 3 of him… he’s a rare gem in the industry. And we trust each other. We do not have non-competes (NCAs or NDAs) or formal payout agreements… he knows that I will never go around him, and that if I end up closing something down the road that I’ll cut him in on the deal, and that after I close on a note, I’ll be down to Wells Fargo the next day to drop his broker fee directly into his account… whatever we have agreed upon.

I always do what I say, when I say, and he is wonderfully thorough and trustworthy. There is no BS going back and forth… just nice straight up business. That’s the way I like it.

This month’s session covers a little note he brought me recently. I take you through how I analyzed it, and the various options I have once I have it under contract. You can do these same things when you learn to source your own deals and pull the trigger with the knowledge you have acquired. Hope you enjoy.

This was a tricky deal to put together. To solve a financial problem for the seller (and buyer) I had to ask for additional collateral to be able to buy the note. Thinking outside the box allowed me to create a positive outcome for all parties.

  1. Ask for additional security for the note. If he is a real estate investor, then he should have real property, or a real estate note, that he can pledge as additional collateral. You can cross-collateralize the note with something else he owns. Make sure there is at least $200,000 in equity left in any property that is pledged as additional collateral. That way if he defaults, then you will not only get your property back, but you will also be able to foreclose on another property he owns so you can be made whole financially. It is also his way of having some ‘skin in the game’ since he doesn’t want to put down any cash. If he has no cash to put down, and no additional collateral (with lots of equity) to pledge, then he shouldn’t be investing in a $800K vacation rental.
  2. If he signs the note and deed in the name of an entity, such as a corp or LLC, then make sure he also provides a personal guaranty with his personal name and social security number. That way you can get a judgement against him personally, and it will affect his personal credit report. An LLC can be stripped of assets easily, and you will have no way to collect.
  3. Get and keep a copy of the note to the first lien holder. You may be inheriting that note in the case of default, so you want to make sure it’s something you can live with. The interest rate should not exceed 12%, the late fee should not be more than 5-6% with a 10 day grace period, there should be no prepayment penalty, and you should have no shorter than a 6-month balloon… preferably 12 months. If you get the property back, you want to have time to re-sell the property in the regular market, and not be forced to sell quickly at a discount because the first lien holder has started foreclosure.
  4. Have the first four months’ worth of payments to the first lien holder withheld and pre-paid at closing, so there is no way that the first note will go delinquent while you are waiting for your second loan to mature in 120 days. If it were to go delinquent, then it would cost you no less than $15,000 (above and beyond the $420,000 principal) to cure it for 4 months’ worth of payments that were left unpaid, including late fees, etc.
  5. Make sure you are listed as an additional loss payee/mortgagee on a hazard insurance policy that is pre-paid for an entire year. The first lien holder will be on it, you should be, too.
  6. Make sure you are issued a lender’s title policy, just like the private lender will be.

You should retain walk-away power. Know that you are in the driver’s seat and that you have options. This deal structure puts ALL of the risk on you. The buyer has none. The private lender has none. You are taking all the risk. That really doesn’t make sense to me.If he knows he can close with all the cash in 4 months, then hive him a lease option.  That way the existing bank loan doesn’t need to be paid off, you can leave it there. His lease payments will cover the mortgage. You will stay on title to the house so there is no foreclosure to deal with, no deed-in-lieu, and your property tax basis will not be higher upon default. His option payment should be more than what it would cost you to re-furnish the home, or $50,000, whichever is greater.If he is not upstanding, he can get your property with no money down, rent it out to vacationers for 3-5 months, collecting rent money while NOT paying you or the first lien holder and then remove all the furniture, while you are figuring out how to get possession again, including paying someone to re-key the property, pay back property taxes and insurance, make any repairs, etc.. The only loser would be you.Your existing loan does not need to paid off right now. It can stay in your name if the guy only needs 4 months to put it together.  If you are hanging out with your daughter anyway, why add the extra risk and cost of a private loan?

OK, just wanted to get my thoughts out there. I want you to have the best chances of getting the results you are looking for.

Best wishes, and keep in touch, I want to know how it all goes down.

For this months’ Transaction Review & Calculator Practice, I did a case study based upon a consulting client that I have right now. They were shocked when we ran the initial numbers on what the note would sell for as they had originally conceived it. We are now in the midst of exploring the various options that they have, to see which one will maximize the financial outcomes for all concerned, as well as minimize the risks.  

This should be instructive whether you’re buying or selling property on terms, or buying or selling paper, or a real estate or note professional wondering how to make a living in the middle of it all!! Thanks for tuning in…

In this session of Transaction Review & Calculator Practice, one of our members shows us two note deals he recently closed, how he found them, the kind of due diligence he performed, and what he expects out of them in terms of yield and performance, especially if he offers a loan modification.  Thank you, Ken… great job.

Not too long ago, I moved from the Los Angeles area to Carson City, Nevada (Reno/Tahoe area). I was surprised to love the house we are renting, so I wanted to take you on the mental journey about how I am thinking of presenting a seller financing offer to the owner, and how I went about finding out the back story on the property so I can know as much as possible about the owner’s possibly situation before I get to the negotiating table.

When you know about discounted notes, you automatically know about owner financing, because that is where the private note business comes from. The things we talk about in this community are SO empowering in SO many areas of your life… gotta love it!!! 🙂

Besides a great wrap-up from the Cash Flow Profits event (with amazing direct marketing tips from Jeff Armstrong) this month’s Transaction Review & Calculator Practice takes an in-depth look at the various ways we can structure an owner-financed transaction to get the outcome we’re looking for.  What’s most important?  The total amount that will be collected over the life of the loan?  To preserve the highest Present Value so the note can be sold for top dollar at any given time?  

Going through these types of exercises can help you whether you’re trying to sell property on terms or buy property on terms.

If you know what the objectives are up front, then you can customize a seller-financed transaction to maximize both the real and paper assets of all parties. Enjoy!

In this month’s session of Transaction Review & Calculator Practice, we go over the numbers of exactly how I am putting a Land Contract deal together, including how it works with my co-investor.  Coincidentally, another member is also buying a Land Contract in the same state, so it’s pretty interesting to compare notes!  [(not notes that can be discounted :)]


Dawn, here is your answer on my land contract when you brought up whether or not to have your seller quit claim his interest. I hope this helps.Ken

Begin forwarded message:

Ken –

 You will end up with the same ownership whether you get a warranty deed at the closing or a quit claim deed.  All a warranty deed does is require the seller to defend your title if there is a problem (which is why I recommend title insurance in 99.99% of transactions that I am involved in).  A quit claim deed merely says that the seller is giving you whatever he owns – if he owns nothing you get nothing and have no right to go back on the seller.  With a warranty deed the seller is promising that he actually owns the property interest that he is selling.

Robert W. Thomas 


Ok, so if I understand your position as my lawyer, I will get a warranty deed at the close of escrow in my name and this will give me title of ownership as compared to getting him to quit claim his interest to me.

Thanks Ken

On Apr 4, 2013, at 8:59 PM, RW Thomas wrote:

Ken –

It is my position in general, and certainly when I represent the buyer, that you should receive a warranty deed from the land contract vendor for its interest in the property.  Of course, the warranty deed will be subject to the land contract vendee’s interest in the property.  The primary drawback to a warranty deed, at least under Michigan practice, is that all ad valorem real estate taxes have to be paid before the warranty deed can be recorded.  This can be a potential problem because the seller generally does not pay the taxes – the land contract vendee does.  However, in your case, with the vendee escrowing the taxes, there is a certainty that the taxes are paid so this should not be a problem.

That having been said, if I were representing the seller I would push for a quit claim deed so as to eliminate the warranties of title, but I would expect to give a warranty deed.  This opinion is based upon Michigan law and custom, other states may have different laws and/or customs concerning real estate transactions.

Robert W. Thomas

When you’re in ‘the note business’, you get lots of calls from people who need all kinds of financial help.  

For this month’s Transaction Review & Calculator Practice, I reveal a recent conversation.  Ultimately, all of my ideas were futile, because the partner who wanted out was NOT willing to have the existing bank financing left in place… she wanted off title and off the loan.  

That left the partner who wanted to keep the property few options as far as keeping the condo, but I did show her that if she agreed to sell the property, and invested her proceeds into a note-plus-equity opportunity, she would make a lot more money, and have a lot less risk, than if she was successful at keeping the condo herself.

For this month’s Transaction Review & Calculator Practice, I am going over a deal that one of our community members brought to me.  

He was interested in buying a home with owner financing, and thought that perhaps if I could simultaneously buy the note, the seller might be able to walk away with the cash he was hoping for.  

There are several iterations we walk through, from a whole note purchase, to partial purchase, to lease option, to sale lease back with option and finally decide that the only way to act on the opportunity is to try and buy it for cash and flip it with a JV partner.

In this episode of Transaction Review & Calculator Practice, we go over a member deal.  

Joe’s trying to buy a property with owner financing, but the seller needs $20,000, and he only wants to put down $7,500.  

We go over owner financing with note sale, partial note sale, and ultimately, it looks like Joe should do a lease option, and that for the extra $12,500, I might take assignment of the rent for 30 months… see what you think…

2011-2012 Transaction Reviews

I probably get 2-3 inquiries per week from investors who want to know how they can use owner financing (with a simo note sale) to create an effortless exit strategy for their real estate flips.

It’s not impossible, but for the most part, the numbers disappoint them unless they’re willing to leave their profit in the deal (and sometimes part of their seed capital) until some time into the future, when realizing the gain is a financially viable option.

In this session of TR&CP, we are working through two scenarios that I frequently get approached with. As you can see, many times it’s better for a real estate investor to drop the price of their property to sell for cash, or CTNL (cash-to-new-loan), than to carry paper and sell the entire note immediately.

Actual documents start to finish, revealing a BIG mistake I made and how I fixed it. This is an actual example of a deal I did back in 2007, where I bought with 5% down, and sold for 20% down, pocketing $14,000 in two weeks and creating a $200/month passive cash flow stream.

A retired couple who needed to do a 1031 exchange were short $24,000 to make their desired purchase, so we created a seller carry back note for $30,000 that I bought for $24,000.  The challenge was to customize the cash flow to net $1,000/month to the buyers who needed it to supplement their retirement income.  We kept the debt payments low in the first two years as the duplex was being updated, then increased the payment for the remaining 6 years when the property would ostensibly be throwing off a lot more money as rents were brought up to market. Because of the uneven cash flow, it was a little tricky to calculate, but hopefully you will be able to follow the 3 different steps:

  • First, calculate the discount needed for the first 2 years
  • Then, calculate the discount needed for the last 6 years
  • Then, discount that number to present value (the payments on the last 6 years don’t start for 2 years)

Many people are curious and/or confused about the differences in investing in interest-only notes vs. amortizing notes.

Private loans are generally interest-only, while discounted notes are usually amortizing, meaning you get a little bit of your principal back with each monthly payment.  

I’ve also demonstrated that discounted notes can sometimes have nice surprise upsides if/when they pay off early, increasing your yield.

Tune into this month’s Transaction Review & Calculator practice.  See how this buyer will get a $10,000 discount on the price of the owner carry back property she’s buying.

I’ve rarely considered a second position lien to be desirable, so it surprised me when I gladly bought an 180-month partial. 1) I kept my CLTV below 50%, 2) I really like this property, 3) the payor’s credit and financial strength are excellent. See exactly how I calculate the partial amortization schedule using T-Value!

In this session of Transaction Review & Calculator Practice, I go over what I’m doing with two of my consulting clients who are looking to buy property with owner financing.  

One has signed a Buyer Broker agreement, and the other has simply hired me as a consultant.  

We also go over the potential sale of an RV park with owner financing, with subsequent note sale, as well as my thinking process when someone brings me a performing note that is “under water” (when the balance of the note is substantially higher than the current value of the property). 

Sometimes you learn more from the notes you wouldn’t (shouldn’t) buy, than the ones you end up pulling the trigger on. Granted, not everyone shares my underwriting values for private loans and discounted note purchases.

Until you’ve been through the ringer a few times, you may not really know what you’re getting yourself into, and you can be tempted to think an investment is much sexier than it actually is.

I wouldn’t buy a note at a price that represents 75% of the value of the collateral. I see people do this all the time, and not performing notes… even non-performing, or recently re-performing. This is crazy to me. And I wouldn’t buy a property at 80% of it’s fair market value all cash, which I also see people doing.

All prices have to do is drop 10% – 20%, and if you have to sit on a non-performing note (where the payments aren’t coming in) for 9-18 months or longer, plus put out money for foreclosure, and then on top of that, invest cash to rehab the property after the last occupants trashed it, then you have to market it and pay commissions, well… you would be hard-pressed not to show a negative ROI (return on investment). Most likely, you’ll have to offer terms, seller financing, to get it sold, so where is your liquidity supposed to come from? Better be happy leaving your money at work for a very long time.

Many people are unclear about the differences in buying notes from private, professional lenders, versus buying notes from sellers who carried back paper. Lenders can not usually afford a discount… sellers with profit built in probably can.

In this month’s “Transaction Review & Calculator Practice” meeting, we went over the details of a recent partial purchase transaction I closed last month.  We also discussed an Owner Will Carry listing that one of our real estate professional members is currently working on, and went over possible ways that he could get his transaction closed.  Additionally, we covered a simple example of private money investing that even beginner’s would be thrilled to get involved with.

If you would like one of your transactions discussed in our meeting, (we meet on the first Thursday of every month), please email me in advance at [email protected], or bring your deal to the table live with us.

Discover how simple it is to understand owner financing and notes when you get familiar with five little buttons.  Practice on your financial calculator while we go over scenarios that will teach you how I run my note business, and how I consult with sellers and buyers involved in owner financing.

Here’s what you’ll need to buy a note for your own portfolio.  It also includes commentary on how the SAFE Act, Dodd-Frank, TILA and HUD affects my note buying.

I am a little disoriented when I realize that most investors hanging out at real estate investment clubs seem to know nothing about how they can leverage owner financing and note sales into phenomenal returns. Here is a case study of a real deal I was evaluating recently…

Why not diversify and hedge your position in the market?

Brief ROI recap…

  • Buy and hold for rental income: 19%
  • Flip w/ 3 yr owner financing: 18%
  • Hold w/ hard money: 43%
  • Flip w/ 7 yr owner financing: 38%
  • Flip to FHA buyer (2 x a year): 89%
  • Flip and sell note (3 x a year): 73%