Secured Income For Life with Note Investing

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Secured Income For Life with Note Investing. www.TheNoteGuys.com. Ellis San Jose Ellis@thenoteguys.com Gerald Lemoine GL@thenoteguys.com Office: (310) 414-9757. Agenda. Who we are & What to expect tonight Why notes? Goals & Strategies What are notes? How we buy & evaluate notes - PowerPoint PPT Presentation

Text of Secured Income For Life with Note Investing

  • Secured Income For Life with Note Investing

    Ellis San Jose Ellis@thenoteguys.comGerald Lemoine GL@thenoteguys.com

    Office: (310) 414-9757www.TheNoteGuys.com

  • AgendaWho we are & What to expect tonightWhy notes? Goals & StrategiesWhat are notes? How we buy & evaluate notes Typical yieldsManaging notesPitfallsExit strategies & Case Studies

  • Ellis San Jose Investing & Work Experience Influences: Father & Mother: Retired Navy and Housekeeper to Real Estate InvestorsCourthouse Steps: Managing rental propertyMy First Solo InvestmentBud Fox vs. My Dad Wall St. is callingBruce Norris wake up callFull-time leap of faithNotes: The Beginning

  • Gerald Lemoine Influences - my father - entrepreneurWork Experience Project Manager General ContractorSteamboat Springs, CO - land development California ForeclosuresHow I got started in Notes Ward Hanigan reunionBuying REOs from lenders

  • What We Specialize In.

    1st Position and JuniorsDeeply Discounted NotesNon- PerformingRe-performingBK 13We Fix Damaged Goods and Improve ValueThink of Us as Note Rehabbers

  • How We Do Business?

    Happy Happy Notes- Happy if they pay - Happy if they dontHappy Happy Borrowers & InvestorsWe have flexibility to modify payments, loan balancesWe are the lending committee

  • What Are Notes? Note: a contract for a payment or series of payments.

    Categories: Unsecured- no collateral attachedSecured (cars, land, equipment, house)

  • What is a Trust Deed/Mortgage?Backed by collateral (Real Property) Secured InvestmentRecorded document on the public recordWhen you buy a Trust Deed: YOU ARE THE BANKThe security for the note (contract)

  • Amortization:Portion of the principal paid with each paymentTerm: How many paymentsFace value: Original loan amountRate: Contracted interest rateBPO: Brokers price opinion of valueITV%: Investment to valueUPB:Unpaid balance

    Terminology

  • TerminologyDiscount: Percentage under face amountYield %: Annual rate of return of investment expressed in %Performing: Paying as agreedNon-performing: Not paying at allRe-performing: Re-establishing paymentsPriority:Determines order of payment in liquidation (1st, 2nd, 3rd)

  • Two Common QuestionsWhy would banks sell?Clear portfolio of poor or non-performing notesRaise capitalWhy would Note Funds sell?Buy pools of $100 million or morePrimary model is to liquidate propertyNot interested in long term holdSell to investor is last choice

  • How to evaluate notes?

    Purpose for buyingBuy and Hold for YieldRehab and FlipBroker to other investors

  • How to evaluate notes?Types of notesPrice range - inexpensive to expensivePenny Stocks to Blue Chip - qualityNationwide vs. Local - locationBorrowers ability to pay?Performing or Non-performingVacant or occupiedChapter 13 BK

  • Lafayette, LA

  • Redding, CA

  • How to evaluate notes?

    Primary modelOwner occupied, source of income, desire to stayThis results in a lower risk investmentBuy multiple notes in low to medium price rangeBK 13 payment deducted from paycheckPerforming or non-performingLoan modification to help borrower make payments

  • How to purchase notes?

    Due DiligenceValue Zillow, Dataquick, Epraisal, GoogleBest indication of value Local RealtorTitle searchTaxes could be $10,000 plusBuilding Dept Code violationsAssessor web site additions, remodels

  • How to purchase notes?Calculating offer price

    Offer calc

    Low EquityHigh Equity

    Property value45000105000

    Monthly payment850850

    % Fair Market Value62%46%

    Yearly payment1020010200

    Note offer2800048000

    Yield - cash on cash36%21%

    Limiting factorInvestment to value (ITV)Yield

    Notes

    Monthly Payment

    BorrowerCityStatePurch dateOrig loan2nd MtgTotal debtLoan orig dateUPBPayoffFair Mkt ValueNote purchase amountOther exp - tax, legal, rehabTotal investmentScheduledCurrentFutureComments

    1CarrDaytonOH8/20/0923,90012,50036,4009/8/9218,45420,75028,000200200200Performing

    2FisherWest NewtonPA8/25/0961,8502,40064,2501/31/0056,55670,40943,000550450450Sold with owner financing Aug 2010

    3DupreeHoustonTX2/25/1067,20067,20010/7/0563,81368,00035,00018,1277770.0500FC set for Sept 2010

    4EverttsLakelandFL3/5/1087,40087,4004/6/0787,26489,58025,000926600600Performing

    5PenningtonDetroitMI5/20/100.043,5518,0005,000370200Non-performing

    6CrutcherDaytonOH6/21/100.050,04350,000516200516Performing

    7JonesLumbertonNC6/30/100.025,58075,000500841841841Reinstatement amount of $7,000 scheduled for Sept 1, 2010

    8BrooksMilwaukeeWI6/30/100.082,88850,000718718600Performing

    9MartinLafayetteLA6/22/100.08,78030,0005,0002800.0400FC scheduled for December 2010

    10WilsonDetroitMI6/15/100.0145,38050,00013,0001,3040.01,000FC scheduled for September 2010

    Totals563,855366,000111,95041,627153,5776,2812,8095,107

    Months in year121212

    Yearly income$75,377$33,70861,284

    Expected yield49.1%21.9%39.9%

    Appreciation

    MonthsAppreciation MonthlyNote Purchase PriceNote UPBMonthsAppreciation TearlyNote Purchase PriceNote UPB

    1125,00075,000300,0001200,00075,000300,000

    2125,37575,000300,0002206,00075,000300,000

    3125,75175,000300,0003212,18075,000300,000

    4126,12875,000300,0004218,54575,000300,000

    5126,50775,000300,0005225,10275,000300,000

    6126,88675,000300,0006231,85575,000300,000

    7127,26775,000300,0007238,81075,000300,000

    8127,64975,000300,0008245,97575,000300,000

    9128,03275,000300,0009253,35475,000300,000

    10128,41675,000300,00010260,95575,000300,000

    11128,80175,000300,00011268,78375,000300,000

    12129,18775,000300,00012276,84775,000300,000

    13129,57575,000300,00013285,15275,000300,000

    14129,96475,000300,00014293,70775,000300,000

    15130,35475,000300,00015302,51875,000300,000

    16130,74575,000300,00016311,59375,000300,000

    17131,13775,000300,00017320,94175,000300,000

    18131,53075,000300,00018330,57075,000300,000

    19131,92575,000300,00019340,48775,000300,000

    20132,32175,000300,00020350,70175,000300,000

    21132,71875,000300,000

    22133,11675,000300,000

    23133,51575,000300,000

    24133,91675,000300,000

    25134,31775,000300,000

    26134,72075,000300,000

    27135,12575,000300,000

    28135,53075,000300,000

    29135,93775,000300,000

    30136,34475,000300,000

    31136,75375,000300,000

    32137,16475,000300,000

    33137,57575,000300,000

    34137,98875,000300,000

    35138,40275,000300,000

    36138,81775,000300,000

    37139,23375,000300,000

    38139,65175,000300,000

    39140,07075,000300,000

    40140,49075,000300,000

    41140,91275,000300,000

    42141,33575,000300,000

    43141,75975,000300,000

    44142,18475,000300,000

    45142,61075,000300,000

    46143,03875,000300,000

    47143,46775,000300,000

    48143,89875,000300,000

    49144,32975,000300,000

    50144,76275,000300,000

    51145,19775,000300,000

    52145,63275,000300,000

    53146,06975,000300,000

    54146,50775,000300,000

    55146,94775,000300,000

    56147,38875,000300,000

    57147,83075,000300,000

    58148,27375,000300,000

    59148,71875,000300,000

    60149,16475,000300,000

    61149,61275,000300,000

    62150,06175,000300,000

    63150,51175,000300,000

    64150,96275,000300,000

    65151,41575,000300,000

    66151,87075,000300,000

    67152,32575,000300,000

    68152,78275,000300,000

    69153,24075,000300,000

    70153,70075,000300,000

    71154,16175,000300,000

    72154,62475,000300,000

    73155,08875,000300,000

    74155,55375,000300,000

    75156,02075,000300,000

    76156,48875,000300,000

    77156,95775,000300,000

    78157,42875,000300,000

    79157,90075,000300,000

    80158,37475,000300,000

    81158,84975,000300,000

    82159,32675,000300,000

    83159,80475,000300,000

    84160,28375,000300,000

    85160,76475,000300,000

    86161,24675,000300,000

    87161,73075,000300,000

    88162,21575,000300,000

    89162,70275,000300,000

    90163,19075,000300,000

    91163,67975,000300,000

    92164,17075,000300,000

    93164,66375,000300,000

    94165,15775,000300,000

    95165,65275,000300,000

  • Provide Cash Flow & Increase Net Worth

    Note PortfolioCase StudyLong term InvestmentRiskInvesting in IRA/HSA

  • Managing Re-performing Notes: An Example Portfolio

  • Provide Cash Flow & Increase Net Worth

    Case StudiesFix & Flip - Ontario, CASeller Financing - West Newton, PA Cash Flow Crutcher /Dayton, OH

  • Ontario, CA Sold July 2009

    Note Purchase $155,000Repairs $ 25,000Sold $218,000Net profit $ 24,000Total time 77 days

  • West Newton, PASold Aug. 2010

    Purchased in August 2009 $19,000Cost of rehab, etc.$ 8,000Total invested$27,000Received Payments ($ 4,000)Net Investment$23,000Sold with Seller financing $43,000Down payment$5,000Total financed$38,000Payments are $450/mo for 125 months @ 8% interest rateResulting Yield 24.93%

  • Dayton, OH

    Note Purchase $ 16,500UPB $ 50,043Monthly pmnt $ 516Maturity date 10/2036Yield 37%Performing by Nov. 10

  • How to provide CF & increase NW?Long-term InvestmentAs underlying asset appreciates value of note increases.Note balance is decreasing due to amortization.Investor capital returned in 50 months with payment at $1,500/mo.See following chart showing appreciation, reduction of note balance (UPB) and return of capital.

  • Offer calc

    Low EquityHigh