GOODBYE REO! HELLO NOTES Presented By: John Murray

Self-Directed ROTH IRA’s and 401-K’s• Building a retirement

account as your own mini-bank

• Phenomenal leveraging techniques that are possible with notes

• How you can own 100,000 note for a $100 investment in a self-directed Roth IRA or 401K account

SELF-DIRECTED

PropertyNotes

One Path

©NoteSchool 2012

What’s a Note?

1,000

Eddie SpeedP.O. Box 1234South Lake, TX

John Eddie Owes $1,000

Check Cashing Service

John Murray 1,000

Pays John $850

Sells Note at Discount

Buyer

Ownership Deed

Seller

Mortgage NOTE

Mortgage Lender

Two Types of Notes

Non-Performin

g Notes

Performing

Notes

What Determines Note’s Value?

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Good Payment Record

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Bad Payment Record

Re-Performing Note Re-Performing Note Cost 60% - 80%Cost 60% - 80%

Non-Performing Note Non-Performing Note Cost 10% - 40%Cost 10% - 40%

CASH BUYERSState of the Industry

Source: NAR National Address

20132013

Cash Buyers

HOUSING INVENTORY DOWN

State of the Industry

Source: Calculated Risk, Lawler

310,000 Properties

400,000 REOs

Bank Foreclosed Properties

Where’s the Real Opportunity?

10 MillionDiscountedMortgages

Market Conditions

DemandSupply

10 Million Notes

MAJOR SHIFT FROM REO TO SELLING NOTES

REO’s NOTESREO’sNOTES

REAL ESTATE

As-Is Value of Collateral

Esta

blish

As-

IS V

alue

Esta

blish

As-

IS V

alue What % ?What % ?

Investment to Value Ratio = 85%

Investment to Value Ratio = 20%

Performing Notes Performing Notes

Non-Performing Notes Non-Performing Notes

Est

ablis

h A

s-IS

Valu

e

Price NotePrice Note

Cost of Note

What % ?What % ?

Investment to

Value Ratio

Investment to

Value Ratio

Performing Notes

Est

ab

lish

As-

IS V

alu

eEst

ab

lish

As-

IS V

alu

eWhat % ?What % ?

Investment to Value Ratio = 85%

Investment to Value Ratio = 60%

Performing Notes

Performing Notes

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec100% 100% 100% 100

%100% 100% 100% 100% 100% 100

%100% 100%

Re-Performing Note

Re-Performing Note

Cost 60% - 80%

Cost 60% - 80%

Good Payment Record

Buy Future Payments

at a Discount

Buy Future Payments

at a Discount

Case Study

Property:

Memphis, TNCurrent Market Value:

$200,000 “Re-Performing

Note” “Re-Performing

Note”

Non-Performing

Note

Non-Performing

Note

Eddie’s ROTH IRA

Account

Bank Sells loans to Hedge Fund

Non-Perfoming

NoteNon-Perfoming

Note

Profits from Note grow Tax-free inside Roth IRA

Remaining Loan Balance$1

,081

$1,08

1

$1,08

1$1

,081

$1,08

1

$1,08

1

$1,08

1$1

,081

$1,08

1$1

,081

$1,08

1$1

,081

271 pmts

Negotiated Price for Entire Note of $105,000

$160,316 @ 6% Pmt / $1,081 271 Mos Remain

Yield = 12.5% annually

Buys 271 Pmts

Note Amortization Schedule

Fund

$10

5,00

0

Note bought for $55,316 discount

Note Interest Rate = 6%

Yield = 12.15%

$160,316 Balance

$55,316

$Pm

t

$Pm

t

$Pm

t$P

mt

$Pm

t

$Pm

t

$Pm

t$P

mt

$Pm

t$P

mt

$Pm

t$P

mt

271 mos

Loan Servicer Monthly Pmts

Eddie’s IRA

$Pm

t min

us fe

e

$18

Serv

icin

g fe

e =

$18

one

tim

e fe

e =

$150

Remaining Loan Balance$1

,081

$1,08

1

$1,08

1$1

,081

$1,08

1

$1,08

1

$1,08

1$1

,081

$1,08

1$1

,081

$1,08

1$1

,081

271 pmts

Negotiated Price for Entire Note of $105,000

$160,316 @ 6% Pmt / $1,081 271 Mos Remain

Yield = 12.5% annually

Buys 271 Pmts

Note Amortization Schedule

Fund

$10

5,00

0

Note bought for $55,316 discount

Note Interest Rate = 6%

Yield = 12.15%

$160,316 Balance

$55,316

Own Note Without Having to Manage It

Loan Servicer • Collects Pmts • Taxes / Insurance• Borrower Work-out • Foreclosure Mgt

Note Owner

Work done by Who??

Mortgage NOTE

Outsource!!

Hous

e Va

lue

$20

0,00

0Ho

use

Valu

e $

200,

000

Cost of Note IRA Invested$105,000

IRA Invested$105,000

52% ITV52% ITV

Non-Performin

g Notes

Buyer

Defaulted Note?Modify Loan

Deed In Lieu

Foreclose

Buyer Stops

Paying!Non-Performing

Loans

Non-Performing Notes

Modify Deed in Lieu Foreclosure

40% 40% 20%

©NoteSchool 2013

Non-Performing Notes

Modify Deed in Lieu Foreclosure

40% 40% 20%

©NoteSchool 2013

Non-Performing Notes

REO Property

Modify Deed in Lieu

Foreclosure

Re-Performing Note

Owner Finance or Cash or Rental

The Model - Who Sells Non-PerformingLoans?

Banks – Bulk Only Re-Aggregators “Private Firms”

- How To Price For Problems- Making Capital Feel Comfortable

Buyer

Mortgage NOTE

Mortgage Lender

Mortgage NOTE

Mortgage NOTEMortgage

NOTEMortgage

NOTE

REAL ESTATE

Esta

blish

As-

IS V

alue

Esta

blish

As-

IS V

alue

What % ?What % ?

Investment to Value Ratio = 50%

Investment to Value Ratio = 20%

Non-Performing Notes Non-Performing Notes

NoteSchool “Student”

Russ Brucks Fort Worth TXCertified Note

Investor

Purchased 4 NPLs Within Two Months

FTC DISCLAIMER: While these case studies are REAL DEALS that my students have closed recently, These results are NOT typical. As with all courses, you should not expect to make this much money or any money with

“how-to” advice.

Paid $9,500 for Note

• 4/2, 1,800 sf • $150k “Listing”

Comps • Rent $1,250/mo

Stone Mtn , GA

“I didn’t need a calculator to pull the trigger on this one!”

Total Cost approx $30,000

Property worth $100,000

Non-Performing Notes

REO Property

Foreclosure

Note or Cash or Rental

Stone Mtn , GA

Modify Deed in Lieu

Own Note Without Having to Manage It

Loan Servicer • Collects Pmts • Taxes / Insurance• Borrower Work-out • Foreclosure Mgt

Note Owner

Work done by Who??

Mortgage NOTEOutsource!

!

$50,000 Today

Realtor’s BPO says Mid

$60Ks

5yrs X $950/month