Archive for July, 2013

Is Buying a Note a Good Deal?

Which is better for real estate investors – buying a note in pre-foreclosure, buying the house through a short sale, or waiting until the house comes on the market as an REO? That depends on the difference in the discounts expected, the condition of the house, and the likelihood of reaching an agreement with the current homeowner to either move or purchase the note at a discount and remain in the house.

The discount on the note may well be less than the amount of discount the lender will be willing to take for the house as an REO. Having the note gives the note holder considerable flexibility—and some additional risks. The note buyer can decide to set up a new mortgage with the current homeowner, negotiate a “cash for keys” or deed-in-lieu of foreclosure with the homeowner, or may be stuck taking the homeowner through a long, drawn-out foreclosure process. If the latter happens, then the note buyer may well be better off waiting until the home comes on the REO market rather than tying up funds unproductively waiting for the foreclosure process to complete. However, if you have a cooperative homeowner, buying the note presents you with some incredible opportunities.

Let’s say that you have done your due diligence and know that the homeowner is interested in a discounted mortgage and has the income to cover housing expenses if the loan is at 80% of fair market value. Let’s say current FMV for this home is $200,000 and you bought the note at $100,000. Your homeowner then purchases the note from you at $160,000 immediately after you bought the note from the bank. That’s an instant profit of $60,000.

Maybe your homeowner doesn’t have the money to stay in the home is willing to walk away from the property. Once you own the note, you can release them from the note and report it as satisfied. Then you are free to sell the note to a new buyer at the full market value of $200,000 for a profit of $100,000.

Maybe the house is in excellent condition, in a great neighborhood, and all of your monthly cash flow needs are already met through other deals. If that’s the case, and you are able to buy the note at 50% of current market value, you might want to hold onto the property and rent it out. This is a great way to build up a stable of income-producing properties at safe loan to value ratios. After a few years, you will own the properties free and clear and your monthly cash flow will skyrocket.

These examples illustrate that buying the note can be very profitable, provided the note holder does not land in a protracted foreclosure battle with the current homeowner. Since settling for a new mortgage or getting out of a troubled loan with a deed-in-lieu of foreclosure is a much better deal for the homeowner, most should eagerly jump at the opportunity to work with the note buyer.

With all of the fraud the banks committed being discovered and exposed; investors now have a way to get the banks to negotiate on our terms. By investigating the specific circumstances behind underwater homeowners’ loans, we are discovering unbelievable and blatant fraud that can be used as leverage against the banks in order to negotiate huge discounts on note purchases. This allows investors to free homeowners from the burden of dumping money into an underwater home while also doing some incredibly profitable deals with multiple possible exit strategies.

If you would like more information on this awesome strategy, give my office a call at 706-485-0162!

Bob MasseyBob Massey is a recovering corporate executive who is now living the dream running his own successful real estate investing business and teaching others how to do the same. In the process he has become the nation’s leading educator on the foreclosure investing process.

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Putting It All together – Bento 4

“To say that I am organized is an understatement, but my car tells a different story.”
~ Emily Procter

I love summertime, don’t you? So many memories in the making! Barbecues with the family. Long, lazy evenings by the pool. Ball games and beer.  Mowing the lawn. Mowing the lawn again. And mowing the lawn again…. And when, oh when, are those kids ever going to sleep? Man, it’s hot! I’m going inside.

I love air conditioning, don’t you?

When you’ve had enough of the summer heat, maybe it’s time to pay some attention to your office. You do have an office, right? And no, a pile of paper on the kitchen table doesn’t count as an office. You need some dedicated space.  It could be just a corner of a room but it needs to be set aside just for business. It needs to be pleasant, quiet, and comfortable.

You may not want to spend the time, but it really is important for you to organize all the files and “stuff” you’ll have around you.  If you’re not organized, things fall through the cracks. Deadlines get missed. Money evaporates. I’m speaking from experience here.  There was a time when my home office looked like the aftermath of a hurricane.  Stuff was everywhere.  That’s when I knew I had to get organized!

Now, it’s your turn. Your home office doesn’t have to be expensive. It does need to be reasonably efficient, though, so setting it up deserves some quality time and attention.

Just a few years ago, “organization” meant filing cabinets and bookshelves. You still need at least some of these, even with all the technology you have at your fingertips. Of course, you’ll also need a desk and a chair.  And by that, I mean your own desk and chair, not that rickety junk from the yard sale that your kids rejected.

I used to recommend that my students buy a good mortgage calculator, a cellphone, a camera, a computer, and maps. Now, you have all of those in one tiny package: the smart phone.

There are still a few die-hards that want a phone that’s just a phone. Even though I understand the desire to keep things simple, I guarantee you that your toughest competitors have smartphones. Why give them that advantage?

But it’s not enough to just have a smartphone. It’s not even enough to have lots of great apps on your smartphone. You need one more thing: Time.

You’ve got to invest time to learn the software and customize it for your own individual needs.  I know so many people who have the latest smartphone with all the latest apps – but they don’t’ have a clue how to use them. They just want to turn it on and go, and when they can’t figure it out right away, they give up. They might as well have one of those clunky car phones from the 1980s.

In the system I’ve developed, I’ve gathered all the best software and customized it for real estate investors. That’s half the battle right there. But even the best collection of customized apps won’t do you much good if you don’t take the time to educate yourself; and of course you may still want to customize it for your own unique situation. So think of time as an investment – in yourself!

Take Bento 4 for example. Bento is a wonderful organizational app for iOS systems (that is, Apple products). Lots of you have separate programs for contacts, schedules, budgeting, and projects. Bento integrates all those functions – and many more – into one handy app. It’s highly customizable so you can fit it exactly to the way you do business. Better yet, there are loads of templates already created for you. A couple dozen are included in the program, but you can go online and choose from hundreds more. (A word of caution: anybody can submit a template, so there are some clinkers in with the gems). Once you’ve downloaded a template, you can change the content and the look until it’s just right for you. You can even encrypt information and program it to do simple calculations. It’s really versatile.

The first few times I opened Bento, though, I was completely mystified. It looked really great but it sure seemed complicated, so I avoided using it for a long time. I thought if Bento was any good, I would have been able to figure it out right away.

Finally, I decided to invest a little bit of time. I went on Youtube and found an hour-long video about the basics of Bento. I looked at some other tutorials. I explored all the templates and played with them. Then, I worked on customizing the templates and entering data. Now I see how practical it is. (By the way, make sure you get Bento version 4 or later). But it took several hours of learning and practicing and tweaking templates before it was of much help to me.

My efficient little virtual office took some time to set up and learn. But these days I take apps like Bento almost for granted. With one little box smaller than a deck of cards, I can check the time, make a phone call, take pictures of a house, download it into a database, link the record to a contact, encrypt the phone number, track my expenses, and find a coffee house.

And that leaves me more time to enjoy those long summer evenings. From now on, though, I’m paying the neighborhood kid to mow the lawn.

Don DeRosaDon DeRosa is recognized as one of the nation’s top 21 real estate investors in the New York Times bestseller “The Millionaire Real Estate Investor”. Don, who is a full-time investor, trainer, and mentor, is the first to offer his complete investing system on a mobile platform. Don teaches investors how to Make More and Work Less by being more efficient, productive and competitive, leveraging mobile technology and apps on the iPad, iPhone, Android and other mobile devices.

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