AN REAL ESTATE INVESTORS GUIDE TO TRANSITIONING TO NOTE INVESTING

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Real Estate vs. Note Investing

About the Presenter

Martin Goodman California Broker Bought and Sold > 500 properties Originated more than 3,500 loans | $80M Fund Purchased of 3rd Party Loans Attended over 10,000 foreclosure auctions Active Personal Note and Real Estate Investor Founder of www.LoanMLS.com Founder of www.PrivateMoneyLendingGuide.com

The Big PictureInvesting in Notes vs. Real Estate

Similarities Collateral Valuation Inspections Appraisals Title Escrow Due Diligence Insurance Closing

Differences Lien vs. Ownership Borrowers vs. Tenants Credit Underwriting Documents Leverage Foreclosure

Collateral, Collateral, Collateral

Evaluate the Collateral As If Buying ItArrange InspectionDrive By if PossibleRun Your Own CompsOrder an independent BPO / Appraisal

Important Note: Ability to Evaluate depends on Originating New

vs.Buying Existing Note

Tile, Escrow & Insurance

Lender’s Policy for New OriginationTitle Endorsement for Existing NotesUse an Escrow to CloseInsurance –additional insured vs. policy

holder

Due Diligence

Review Note and Loan DocumentsUnderwrite Borrower’s CreditInspect and Value PropertyReview Title Preliminary Reports

Differences in Note Investing

Lien vs. OwnershipBorrower vs. TenantsCredit UnderwritingDocumentsLeverageForeclosure

Lien vs. Ownership

Less risk, but not “no risk”No maintenance (generally, unless borrower

bails)Multiple choices of liens

1st – safest 2nd – risky and more difficult to service 3rd + uber-risky, but high yields

Borrowers vs. Tenants

No “TNT” (Tenants and Toilets)Service a Borrower (outsource this)Monitor other LiensWatch Property for “waste”Monitor Insurance

Credit Underwriting

Care as much about Borrower as CollateralThe 3 Cs to Underwriting

Credit Capacity Collateral

Documentation & Leverage

Similar to Real Estate Investing, But… Mortgage (or Deed of Trust) vs. Deed Disclosures to Borrower Loan Servicing

Leverage Cannot easily obtain against a note investment There are not “mortgages” against “notes”

Foreclosure

Foreclosure is like an Eviction of a non-paying tenant, but typically expect a foreclosure to be: More Expensive Take More Time Requires More Knowledge and Diligence Rules vary by State Potential Liability from Municipalities

Resources

LoanMLS –Loan Exchange 6,000 Members Buy Notes by Geographic area Sell Notes without paying a commission Demo Site

Private Money Lending Guide Find hard money lending brokers & articles Borrowers use the site to find hard money lenders Demo Site

Thank You

Thank you for attending.

Visit LoanMLS at www.LoanMLS.com

Visit the Private Money Lending Guide at www.PrivateMoneyLendingGuide.com