Dawn Rickabaugh - Note Queen

According to a poll released recently by LoopNet, an online commercial real estate marketplace, 46% of commercial real estate professionals say the commercial RE market will not rebound until 2011.

Fifty-three percent (53%) expect further price declines of 11% or more. “Lack of access to debt financing” was the No. 1 cited barrier to recovery. No one can get loans these days.

That’s why my whole conversation is about putting buyers and sellers together without the need for new bank financing. Intelligent, legal, ethical non-traditional ways of putting real estate transactions together is all I talk about.

We just need to choose the right strategy and engineer the transaction in such a way that it addresses the short and long term interests of both buyers and sellers.

Sometimes price is the most important thing to a seller, sometimes monthly income, sometimes capital gains. But one way or another, it’s about quality of life and creating desired outcomes.

What does the seller want to be doing with their time and energy?

• Do they have health problems?
• Are they tired of managing property?
• Are they moving out of town?
• Would they like the freedom to relax and travel and enjoy their retirement?
• Would a little more cash each month make all the difference?

A few days ago, I was talking to an agent that was trying to put a commercial real estate transaction together. His client owned a desirable 9,000 sqft property free and clear on historic El Camino Real in Northern CA.

A couple years ago, the property would have fetched close to $3 mil. Now it was listed at $1.6 mil, and there was one lone buyer who wanted it, only he couldn’t get traditional financing.

He would pay the $1.6 mil if the seller would take $400,000 down and carry the rest at 6.5% over 30 years.

Well, because the seller didn’t want to pay ANY capital gains, his agent was exploring the possibility of selling the note so all the proceeds could go towards a 1031 exchange.

Good idea, except for this…

The discount on a green 75% LTV (loan-to-value) commercial note, even with good down payment and credit, would be so high that it just wouldn’t make sense, especially with that low interest rate!

Here’s what I might say to the seller:

1. Just carry the dang note and be happy that you get to defer MOST of your capital gains through the installment sale . . . you’re getting your price, for heaven’s sake! And after some seasoning, you can sell the note for a smaller discount!
2. Drop the price 20% and hope for a cash buyer (or one that can actually get a loan) so you can do a 1031 Exchange or set up a Deferred Sales Trust.
3. Lease the property out and be prepared to wait AT LEAST 10-15 years before you find someone willing to offer $1.6 mil again.

I think this particular seller ended up leasing the property to the prospective buyer instead of selling it to him . . . which is fine, if he’s truly happy owning the property.

Just because the financial markets are in a mess doesn’t mean we can’t put savvy, potent real estate transactions together. And the economy needs us to do just that.

Be sure to sign up for: Seller Financing on Steroids: Pumping Paper for Power, Peace and Profits. Defer capital gains & sell fast for top dollar, regardless of market conditions (and have a note that's worth something!)

[Also included below as a random tangent and not related to business at all (except I did make it here to write this post): Bare to Bear - a True Tale of Grim Survival and Wobbly Knees] . . .

A title holding (land) trust is a great way to hold title to property, and personally, I will never again hold title to any piece of property in my own name, or even in an LLC or Corporation.

First, it'll go into a land trust, and my entity of choice (LLC vs. S Corp) will be the beneficiary.

When the trustee is deeded the property, the trustee is said to hold bare legal title.  The trustee holds legal and equitable title, but does NOT have the power of direction . . . that resides only with the beneficiaries.

The trustee does not have the ability to take any action with regards to the property or related paperwork without the express written consent of all beneficiaries.  This is why, in most states, there is unparalleled asset protection:

• not only do you have killer anonymity and privacy in ownership,
• but your ownership is consider personal property, not real property (which means it's usually protected from partition, judgments, probates, divorce proceedings, IRS tax liens, etc)

Judges, police officers, politicians . . . these people never want to show up on public record, right?  They don't want anyone to know what they own or where they live, and no one should in a society where lawyers are looking for a reason to snatch away your net worth.  Hey, wait a minute . . . are they working for the government???

Contrastingly, BEAR legal title refers to that right that a large mammal, known for its prodigious strength, has when it wants your property . . . or at least to get in for a snack . . .

It usually doesn't ask for written or even verbal permission . . .

Be sure to sign up for:  Seller Financing on Steroids:  Pumping Paper for Power, Peace and Profits.  Defer capital gains & sell fast for top dollar, regardless of market conditions (and have a note that's worth something!)

I had an especially exciting conversation with a Realtor recently . . . one of the few that totally gets how a little knowledge of the discounted note business helps put more real estate transactions together.

Instead of going broke with many of her colleagues, she's a real estate broker, turning note broker as well.

So here's what she's doing . . .

She's taking all these good buyers who can't qualify for bank financing, and hooking them up with FSBOs who are willing to carry paper (of course, she does a lot of educating in the process).

She collects a consultation fee from her buyers after she qualifies them, and knows they have a decent down payment.

Then, she goes out and finds FSBO sellers who are having a hard time competing with all the short sales and REOs. She shows these sellers how they can carry paper (offer owner financing) and still walk away with cash when they let their note season for 1-12 months, and then sell it.

And guess who will most likely be brokering that note?

So, she may not make a big commission selling the property, but she'll make a commission when she helps those sellers/note holders get cash for their note. And because she understands the note business, she knows how to help those sellers create a note that will sell for a decent price on the secondary market.

Fun, huh? She's a visionary and a leader, and she's passionate about helping the economy, and preserving the dream of home ownership for her clients.

Real estate brokers should be note brokers, as well. These markets dovetail nicely, and the specialized knowledge can make the difference between a broker going broke . . . or not.

Be sure to sign up for: Seller Financing on Steroids: Pumping Paper for Power, Peace and Profits. Defer capital gains & sell fast for top dollar, regardless of market conditions (and have a note that's worth something!)

I’ve never witnessed a tsunami first hand, but I’ve been told that before the devastating wall of water devours everything in it’s path, like a hungry sea beast coming in for a glorious feast, there are a few moments in time that seem quite magical to the innocent and unsuspecting.

The water line temporarily recedes, making it excruciatingly tempting to prance delightedly along the shoreline collecting shells, fish and other treasures that have suddenly become accessible.

And apparently, it can be such a fascinating and engaging activity that you might fail to notice the darkness forming on the horizon as you fill your goodie bag to overflowing. By the time you do . . . well, it’s usually too late.

I recently read the following from John Mulkey:

“If the economy is improving, do we really have millions more foreclosures coming? According to the U.S. Treasury, the answer is yes. In written testimony to Congress, Assistant Secretary for Financial Institutions, Michael Barr said that, regardless of the success of mortgage modification efforts, we should still expect millions more foreclosures.

Mr. Barr’s testimony is certainly not welcome news for those anticipating a significant recovery in the housing market. In fact, it is an indication that significant recovery is still years away.

And there are other factors that confirm the fragile state of both the economy and the housing market. Recent reports have indicated that there are almost 3 million active, interest-only loans with a total value of almost $1 trillion, with loans of about $500 billion set to reset within the next 30 months. Then we have a large group of Option Arm mortgages set to recast during the next 2 years. These loans have a combined value of more than $125 billion.

The rising number of bankruptcies, up 36% in the second quarter over last year, with wealthy families filing at double that rate, creates a ‘perfect storm’ of disastrous consequences for the housing market. With the likely prospect of millions more foreclosures coming, home prices and home sales will remain depressed until the market can achieve stabilization. And achieving stabilization will be a slow and painful process.”

Of course, certain areas of the country will be hit harder than others. Even here in California, (one of the hardest hit together with Florida and Arizona) there are pockets that are devastated, and pockets that seem almost immune.

And I don’t especially care for being a Prophetess of Doom . . . my brand is ‘Note Queen,’ which is rather harmless and mostly silly, really.

It’s just that I feel strongly about helping people triage (can you tell I used to be an RN?) their financial lives carefully. The real estate market may be fine where you are, and it may get even tougher. And if it does, how will your quality of life be affected?

If you’re holding on for ‘just a couple more years’ until the market ‘recovers,’ then stop it. Sell now, especially if you’ve got negative cash flow and your net worth is less than $5 million.

If you’re happy owning your property for the next 12-20 years no matter what happens, then fine. Hold out for your price and terms. But if your emotional and financial well-being depends upon the successful sale of a piece of property in the next 10 years, then quit dawdling.

And if deferring capital gains is important to you, download your free copy of a report I created entitled “How to Avoid Paying One Red Cent to Uncle Sam When You Sell Your Property” at www.AvoidCapitalGains.net.

There are a lot of investors out there picking up pre-foreclosures and REOs like sea shells before a tsunami. Prices seem good now, but they could get even better, despite all the government’s shenanigans in the ‘free’ market.

Be sure to sign up! (you’ll get the inside scoop)

When you opt in to ‘Seller Financing on Steroids,’ you get a Decision-Making Guide for FREE!

Perhaps our souls are burning along with the forest as we experience the shock, sadness, anger, fear and confusion of watching the mountains, once rich with life, turn desolate moonscape.

In a stupor of smoke, we watch homes evaporate, and wonder if ours might be next. With ravaged hearts, we mourn brave heroes, and imagine the innocents . . . thousands of creatures with nowhere to go, but up in flames.

When I was young, I used to take my Golden Retriever up Santa Anita to Chantry Flats. From there we’d wind our way down to First Water, then Hermit Falls to spend lazy afternoons jumping into the frigid pool and thawing on granite by turns.

Other times I’d hike up to Sturtevant Falls and let the mist moisten my face as well as my sandwich.

In 1994, we formally joined the historic canyon community above Sierra Madre known as the Big Santa Anita Canyon. We bought a cabin when the oldest of our four children was barely out of diapers.

We spent hours upon hours in front of the fireplace, mesmerized by the flames, roasting marshmallows, happy to be warm in the middle of winter. By candle and lamp oil, the children played with wooden blocks and formed clay wonders as we read “The Lorax” and “The Pokey Little Puppy” for the 89th time.

Over the years, it’s been one of those places where we can step out of time. Without TV, XBOX, cell phones or internet, we’re free to experience the pure joy of being together, and the simple pleasures of slow and thoughtful food preparation, chopping wood, talking, laughing and telling stories.

And we can travel from our city life to our ‘real’ life in under an hour. Door to door is usually about 45 minutes, which has been an unparalleled gift to us over the years. Rural, peaceful, turn-of-the-century living within minutes of the madness.

Our small little space is a regenerative refuge by itself, but we’ve also grown to love, adore and belong to the crazy, eccentric, generous and loving community of cabin owners. The canyon has a life of its own, but it’s definitely become increasingly rich and colorful as we’ve built relationships and shared experiences with our friends up there.

If you’ve lived in this area for any length of time, it’s likely you’ve taken the opportunity to experience the beauty of the canyon first hand.

Perhaps you’ve noticed how your cares unwind with each step you take down the road from Chantry to Roberts Camp, where you’ll decide whether to explore Winter Creek, or continue on to the Falls and beyond.

A walk through Nature’s playground is one of the most powerful ways to ground, clear and balance ourselves.

Perhaps you’ve had the good fortune to stumble upon Sturtevant Camp where you can pick up the Mt. Wilson Trail, or head over across Newcombs Pass. If you haven’t, and if by some miracle you ever get the chance to again, you must make a trek there.

Historic Sturtevant Camp was established in 1893, and is the only camp from the Great Hiking Era which is still in operation in the San Gabriel Mountains. Surrounded by the largest virgin stand of Big Cone Spruce trees in the United States, Sturtevant’s setting provides the perfect opportunity to experience the local wilderness.

You’ll be absolutely enchanted by Chris and Joan Kasten, the gentle on-site caretakers. Sturtevant (www.sturtevantcamp.org) is an oasis of generosity where thirst is quenched, the lost are found, and the curious are met with polite helpfulness. Chris . . . he’s the most egoless man I’ve ever met. He’s a unique, Woodstocky blend of Stephen Hawkings, Mr. Rogers and Jesus.

And perhaps you’ve refreshed yourself with an ice cold beer at Adam’s Pack Station after a long, hot assent up the hill, while your kids squeal with delight at the goats, chickens and mules (that are still used as pack animals serving cabin owners up and down the canyon).

By the time this is published, we’ll know if the part of our Collective Soul known as the Big Santa Anita Canyon will remain a haven for local residents and cabin owners . . . . or not.

As of this writing, we are forced to prepare to surrender to forces beyond our control . . . to surrender our way of life for a very, very long time. It’s humbling. We’ll pray and give thanks for assistance both earthly and otherwise.

But perhaps while dead brush accumulated over decades goes up in walls of furious flame, we can invite a fire of renewal to burn away the tired baggage we’ve been dragging along in our souls over the years.

What is it time to let go of? Are we ready to forgive ourselves and each other? Are we ready to receive a renewed sense of gratitude for life and each day that we’re given to live it?

Paul Bowles, near the end of his life said,

“We get to think of life as an inexhaustible well, yet everything happens only a certain number of times, and a very small number, really. How many more times will you remember a certain afternoon of your childhood, some afternoon that’s so deeply a part of your being that you can’t even conceive of your life without it? Perhaps four or five times more, perhaps not even that. How many more times will you watch the full moon rise? Perhaps twenty.”

When we get older, or when we experience events like the Station fire, life takes on a special poignancy precisely because we realize that time is limited. We realize just how fragile life can be.

It becomes more important than ever to spend time with the people we love . . . to create and savor simple, precious moments.