Dawn Rickabaugh - Note Queen

A month ago, I was at Robert Hall & Associates teaching a class on PAPER… well, next Tuesday, May 10th is the other half of the story… PROPERTY.

It’s that “Dance Between Property and Paper” that I seem to perseverate about (yes… it really is a word that I just barely learned)… it basically means to obsess over in a redundant, slightly OCD sort of way.

per·sev·er·ate

–verb (used without object), -at·ed, -at·ing.

to repeat something insistently or redundantly: to perseverate in reminding children of their responsibilities.

If you’re interested in learning how to (and want to hear stories about) buying property without qualifying for a bank loan or looking for hard money, and you’re in the LA area, please RSVP to Jennifer Nelson to reserve your space, as there is limited seating. Real estate professionals could really help some of their clients out by knowing a little about owner financing. There are more options than most people are accustomed to thinking about.

Tuesday, May 10th, 2011
Check-in/Networking: 6:30 pm
Seminar: 7:00 - 8:30 pm
300 West Glenoaks Blvd., 3rd floor
Glendale, CA

There is no charge to attend.

FYI, here is a little clip from my chat with Henry Dvorken at our first meeting of Owner Financing Club this week. Would love to have you join us for the next call. If you sign up before June 1st, you’ll get the recording to the last meeting as a bonus :) Henry was absolutely amazing.

To your success,

Dawn

This is super last minute, but just letting you know I’ll be speaking at Southland Regional tomorrow:

Thursday, October 21, 2010 at 11:30am:

7232 Balboa Blvd. Van Nuys, California 91406

If you’re around, come say hello!

Dawn

***

[watch video] Help protect your personal property rights: the ability to use owner financing to sell your property, the ability to buy a property without needing to qualify for new bank financing, your ability to defer capital gains and enjoy cash flow for retirement by carrying paper.

If HR 4173 goes through unamended, it will greatly harm the real estate industry and the private note business. Thank you, Eddie Speed, for sending around this email:

Dear Friend and Colleague:

With HR 4173 moving forward in conference, we need to contact the Representatives and Senators listed below, as they are Conferees and will have final decision as to the inclusion of Section 1073 and 1074. Please review the draft letter (ready to be cut and pasted to your letterhead) and the attached fact sheet. Both items should be e-mailed or faxed to your Congressman. (Sending to Congressmen outside your area will have little to no impact.) The 5th paragraph has a bolded sentence where you MUST personalize or remove the sentence.

Who is your Congressman?

Contact a Senator from your state, or in state where you do business. Contact a Representative if you have property or do business in their
district. If you are not sure check this site:

• http://www.congress.org/congressorg/dbq/officials or here:
• http://www.house.gov/zip/ZIP2Rep.html”

Please contact your Senator or Representative if they are on this list.

List of Conferees on HR 4173:

House Democrats:

• Financial Services Chairman Barney Frank of Massachusetts
• Howard L. Berman of California
• Leonard L. Boswell of Iowa
• John Conyers Jr. of Michigan
• Elijah E. Cummings of Maryland
• Luis V. Gutierrez of Illinois
• Paul E. Kanjorski of Pennsylvania
• Mary Jo Kilroy of Ohio
• Carolyn B. Maloney of New York
• Gregory W. Meeks of New York
• Dennis Moore of Kansas
• Gary Peters of Michigan
• Collin C. Peterson of Minnesota
• Bobby L. Rush of Illinois
• Heath Shuler of North Carolina
• Edolphus Towns of New York
• Nydia M. Velázquez of New York
• Maxine Waters of California
• Melvin Watt of North Carolina
• Henry A. Waxman of California

House Republicans:

• Financial Services ranking member Spencer Bachus of Alabama
• Joe L. Barton of Texas
• Judy Biggert of Illinois
• Shelley Moore Capito of West Virginia
• Scott Garrett of New Jersey
• Sam Graves of Missouri
• Jeb Hensarling of Texas
• Darrell Issa of California
• Frank D. Lucas of Oklahoma
• Ed Royce of California
• Lamar Smith of Texas

Senate Democrats:

• Banking, Housing and Urban Affairs Chairman Christopher J. Dodd of Connecticut
• Tom Harkin of Iowa
• Tim Johnson of South Dakota
• Patrick J. Leahy of Vermont
• Blanche Lincoln of Arkansas
• Jack Reed of Rhode Island
• Charles E. Schumer of New York

Senate Republicans:

• Banking, Housing and Urban Affairs ranking member Richard C. Shelby of Alabama
• Saxby Chambliss of Georgia
• Bob Corker of Tennessee
• Michael D. Crapo of Idaho
• Judd Gregg of New Hampshire

Donations to support this effort of a $100 or more would be appreciated, and may be sent to:

National Association to Protect Private Property Rights
1725 east South Lake Blvd. Ste. #102
South Lake, TX 76092

Don’t forget, here is the customizable letter to email or fax to your representative, and the fact sheet to attach to it:

1. Sample letter
2. Fact sheet

When banks say NO, I say YES!

Investors are looking for ways to squeak profits out of fixing and flipping by using owner financing (with subsequent note sales) if they can. My answer to this recent email may help to shed some light on what’s out there right now . . .

“I was wondering what terms to use in structuring an owner finance note for our rehabbed home in Scottsdale, AZ. Here are the specifics on the property and what our goals are:

Home very recently comped at $205k

We need to recoup at least $175-180k as soon as possible so that we can continue our investment activities.

Questions:

1. What rate of return (IRR) do most note buyers look for?
2. What down payment should we seek from a buyer?
3. What interest rate should we charge?
4. What price should we seek for the home?
5. At what point in time should we set the balloon payment?
6. What other information do you need from us?
   

Thanks for the help!” - Paul

Hi Paul,

Sounds like you have recently purchased and fixed up the property, or have you owned it for longer?

If the property is worth $205,000, then most note investors would probably not be willing to invest more than $135K in the property, keeping to an ITV (investment to value) of 65% or lower, if they’d buy it at all. So, unless you have someone coming in with a large down payment, I don’t think that your objective of getting $175K out of it is likely using owner financing.

Perhaps you should lower the price to get someone who can qualify for FHA.

Tidbits to think about . . .

There are more buyers for your note when either you have owned the property for at least 12 months before selling it, OR, that you have seasoned the note (received at least 12 payments) before trying to sell it.

It can be possible to sell green (simo) rehab paper, but you need to have it underwritten and structured by the person that is going to buy your note… and it might look something like this:

• 15-20% hard cash down payment
• credit score at least 630
• property value reasonable (it has to appraise) and the markup after rehab sensible (don’t try to buy at $50K and sell for $100K with $10K of rehab . . . doesn’t make sense)
• 9% or better interest rate
• fully amortized over 10-20 years (don’t make any balloon sooner than 7 years out)
• need to fully document the buyer (1003, financial statement, credit score, etc.)

Even if you meet all of the above, your note will probably not sell for more than .60 to .80 cents on the dollar right out of the starting gate. If these numbers don’t work, then consider seasoning the note for a while before trying to sell it, or sell a partial and get a little of your equity out at a time.

Hope this helps! If you’d like a private consultation regarding the specifics of this or other scenarios currently on your plate, I’m available for hire on a case by case basis.

When banks say NO, I say YES!

Diana Olick over at CNBC puts out a lot of relevant data. Jumbos are really making the news these days. (You saw my last related post, right?)

“It seems that while the middle and lower end of the market was seeing real price recovery this Spring, the high end, which was pretty flat all fall, started to really tank from March through May.

Not surprisingly, the inventory of high end homes surged in January, just before that price drop and is continuing to climb.”

One real estate broker I’m working with in the Calabasas area is tweaking her business to increasingly implement alternative strategies for her high end clients. One of her listings isn’t moving because the sellers are insisting on $1,100,000, when the market only wants to pay $900K - $950K. (If they wait too much longer, the market might only want to pay $800K!)

If she can get this listing sold, then they’ll buy this other $2mil home they’ve got their eye on, so getting the listing sold for asking price is worth $3mil in business. We’re working on it . . . if we can get them to offer terms, then there’s a good chance they can get their price.

There’s not much help for many high end homeowners who are already far under water and have unattractive short term financing in place, but there are a few we can help who still have equity and happen to have great long term financing . . . but they’d better not sit around! Those trends above don’t look especially promising.

When banks say NO, I say YES!