How to Avoid Mistakes When Creating Seller-Financed Real Estate Notes | Real Estate Notes Show

Episode: Avoid Mistakes - Seller/Owner Financed Real Estate Notes FULL Dave's Goals and Plans: - Running JKP Holdings as a note buyer focusing on seller-financed deals - Mission for 2023 is bridging the gap between seller finance creators/originators and note buyers - Not handcuffed to buying notes at 3-4-5% returns; looking at higher yield opportunities - Connected with leading people in creative financing space since January to help them originate better notes Nathan's Goals and Plans: - Buying his first hypothecation deal hopefully closing today - Currently reviewing a tape of bridge lending loans in Georgia (short term, 12-month payoff, all to companies) - Looking at seller finance notes in North Carolina from contact met at Directed IRA Summit - Raising capital and buying notes as current focus Key Recommendations: - Structure notes as two notes using 80/20 split to create more value when selling - Get 20-25% down from seller when structuring notes for sale - Verify land ownership before engaging in mobile home or property deals - Use hypothecation as alternative to partials - lend against the note while seller maintains servicing and monthly cash flow - Create notes properly and legally to avoid heavy penalties and regulatory issues - Attend industry events like the conference in Nashville (May 31-June 1) for networking and learning from both sides of note ecosystem Topics Discussed: - Seller-financed real estate notes and how to structure them properly - Hypothecation versus partials for both buyers and note sellers - Bridge lending and short-term note strategies - Creating value through note restructuring (80/20 strategy) - Connecting note originators with capital providers - Common mistakes in seller financing deals - Mobile home deals and due diligence requirements Guest Insights: - Mark Monroe started in creative financing accidentally at age 19 using bandit signs in Vermont - Many people get into creative financing by accident rather than intentional planning - Industry events are valuable for networking between note originators and buyers - People originating seller finance deals often don't realize they can restructure notes to create more value - There's been an upsurge in the last 12 months of people doing seller financing as a business model, not just mom-and-pop operations - Both sides of the note business (originators and buyers) need each other and benefit from collaboration foreign [Music] that we're talking about and then you still get that monthly cash flow and then sell that note off so you can get some cash coming in so that's another way of doing it and you're using your end buyers Capital to put down on the property so you're making money in the front end you're also you can structure the note like we talked about the 80 20.

sell that note off and then you still yourself can still get monthly cash flow coming in [Music] welcome again Dave put some jkp Holdings alongside me Mr Nathan Turner how are you very good very good so I I'm really excited that this week we just did a video last week and we're doing a video this week so if you missed our last week video which was regarding hypothecation versus no partials for both buyers and note sellers yeah definitely tune into that um our podcast how's your week been turning out for you Nathan it's been good it's been good raising some money buying some notes yeah that's what it's all about yeah uh in uh share in our Greek call we actually going on is I'm actually by my first hypothecation hopefully today that's exciting working some stuff out um and we're gonna see how it goes it's been a little bumpy in the beginning but I'm really excited about it and I'll share more about that as we move forward um and uh I'm sure that you guys will learn a lot about that deal as well as I have and if you've done those kind of deals we'd love for you to kind of put in the chat box and whatnot uh yes this recording will be recorded uh it will be on live it will be on Youtube it'll be on LinkedIn everything possible and everything else so so you're buying notes what are you buying right now what are you looking at um so I just got a tape of uh actually I'll share with you later if you're interested but I've got uh some loans a whole bunch of seller finance loans mostly Bridge lending loans so they're short term with payoff after 12 months all in Georgia which is already kind of a scary thing for us however they're all too uh because they're Bridge loans they're all to companies so that circumvents a whole bunch of the things that we're trying to avoid all the time and trying to work around so yeah yeah yeah so I gotta I've got a tape of those that I'm looking at and then um some other solid Finance notes uh in North Carolina that's a guy that I met at uh directed Ira Summit a couple weeks ago that I was at so really interesting stuff there man there's seller financing you know it's been around forever and ever and you and I have been round notes for long enough we've dealt with institutional for the longest time we've been focusing on uh seller finance the last year or so and the more we get into it the more I realize that there's just a ton out there and I think more recently I would say in the last 12 months there's been an upsurge of people that are doing it as a business rather than just the Mom and Pops that have been around for Beyonce and we when we first got because we thought it was the mom and pop so we're focused on and we weren't sure about this stuff but we're finding out rather quickly is that there's a lot of people doing this right and wrong and that we want to take advantage of that as soon as possible Right and I think one of the best ways we can do is to understand that side of it and we've been doing on a mission for 2023 is Bridging the Gap between the seller finance investors and creators and rap no people that are joining our calls right now and us no buyers yeah because this bridge I think will give us plenty Monroe who's been a leader in the space of creative financing for only part of his bit life the other part was doing what we do and and partially what he did so Mark I'm really excited to have you come on today and just share with your group as well as us about creative owner financing you're on mute there Market nope well thank you gentlemen for having me on I appreciate it um you know we actually met what about a month month and a half ago early June up in Nashville and uh I highly recommend uh anybody listening to go to the next event next year it was it was a great networking event you learned so much but the networking is unbelievable at that event so I'm looking forward to the event next year do you guys already have the dates set or not yet yes indeed May 31st June 1st same place I know a lot of good locations downtown is just a little too distracting we're there to learn first of all we'll have fun at this time yeah it's a quick bus ride that's 20 minutes downtown like uh you know and uh I think you guys had a bus from the hotel that took people right downtown so if they wanted to do that but it's convenient right near the airport too so it works out really well so I highly highly highly recommend yes anybody that's looking to get into the note buying you know especially in the Solar financing game uh it's gonna open the door up for a lot of you guys that are out there originating doing these seller financing and you're holding paper but then you have another whole world where you actually can turn around and sell your notes in the beginning a lot of people when they come into doing seller financing they're just structuring enough because they want to acquire it and that's how that's the first leg of what they're trying to accomplish but then what you can do is you can turn around and sell that note and then learn different ways of structuring it because money and he's to keep going he may pay us off early we hope he doesn't but if it does it does and for us it really kind of helps clarify that this world of buying banknotes at three four five percent we don't need to do that we're not handcuffed to buy these kind of those kind of notes I think it's huge for us yeah it's huge there and there's so many notes out there um we're hoping we're trying to help those that are doing the seller finance to do it properly and correctly yeah and that's that's been a big nation of ours yeah so for those so those who are creating notes um this is for you as well as well as a note buyers but we're we're doing is we're becoming that bridge for you guys so you guys can build and create originate secure and better notes not just get money put a person on property and be in a spot where you can lose everything in a matter of few years so what we've done since January is really connect with the leading people in the space of creative financing and really kind of network with them so that we can actually help them move forward and create notes but also teach their tribe how to do it the best way possible yeah so they can get the most money out of it they can do it legally without having any you know never having to look over the shoulders see who's can be bringing down all kinds of really heavy penalties um yeah we just we want to help everybody who's doing this do it right and we'll man we can do it yeah we've had the underwriting calls we've had rml locals right so if you're curious about if you have an owner occupied in there make sure you hit that so yeah um I'm getting Dave foots from jkp Holdings Nathan from Earnest investing we're two separate companies both no buyers looking to bridge you guys up but today special guest is a guy who we respect a lot we've talked a lot with him has been awesome right we have Mark I'm thinking to myself okay but I started asking questions and said do you own the land he goes no I don't own the land I'm like yeah I'm not interested so he calls me back another month goes give me six thousand dollars for this mobile home it's worth 21 000.

now I'm thinking to myself okay now there's a deal but I'm like I kept going to the same routine I'm like why do you got to sell it goes I don't live in it I have a lot right do I don't have a lot I'm like I'm gonna be frank I'm not interested in a mobile home but I'll give you 3 000 for it because give me four thousand I go no I'll do three thousand dollars so you agree to three thousand so what I did is um I hung up I said I gotta send somebody out do the inspection I gotta go get a contract we didn't have the internet so I had to go to like you know Staples you know the you know the store and we had to get the carbon copy you know the the the contract so I hung up the phone I called the newspaper up I put a uh an ad um mobile home for sale 25 000 with three thousand dollars down lady called me up and she goes hey we want a lot we lived there we like that so I ended up doing a no she gave me three thousand dollars I took that three thousand dollars and ended up giving it to the seller and I created a note at like seven and a half or seven and three quarters at like seven years so I was 19 years old that was my car payment my insurance payment for like seven years while I was going to school that was my first No Deal so anyways so what happened was then at that time um I kind of got out of doing that a little bit I got sucked into the corporate world a little bit and I got into real estate banking at the age of 24 25 I ended up having a mortgage company up in the Washington DC about a 107 loan officers um so I had that for a few years and that's where I a lot of my clients were investors so I became friends with them I started seeing the different strategies and just over the years I just kind of evolved and really I understand the note world and how to structure it and how to make it work a lot of investors you know they're trying selling seller financing to Sellers and the sellers usually said no but if you guys if you use your amortization schedule and show the seller how much you whenever you're talking about APR uh Finance about that's when you kind of opening yourself up to the whole uh regulations of financing now you can sell it off to another investor that's not living as a as a primary residence and then you're exempt from those consumer protection right like the dot Frank act that's just one of them to say that these are federal but then you also have state level um what was happening um besides the whole collapse a lot of mom and pop investors are doing the same thing when everything collab jobs they're putting people into the homes not checking their income and seeing they can qualify and we actually seen a couple cases where people investors were being you know part of my language scam bags were taking people's large 30 40 50 000 down payment knowing they couldn't qualify and then turn around and foreclose on them and get them out of the property he kept doing this over and over and uh actually the the Attorney General stepped in and the guy actually went to jail because um he was just a predatory lender at that point so a couple of important points here so the first thing you said back a minute or so ago is uh there's more to it than just the paperwork so the paperwork like there's there's a way to do that these are the documents to use this is the process you do that's part A Part B is actual qualifying and then we're talking about the Safe Act and all those kind of things and then it's state specific so in Florida you've got Homestead in Texas you've got Homestead in New Jersey you don't you know and there and you so you have to know State specific it's vitally important that you understand what the rules are federally and Statewide and which state has which rules and how do you abide by those so it's the process is one thing and that's the easy part the paperwork that's there's nothing to that and understanding general attorney is not going to be the person you need to speak to you need to speak to a specialist exactly that understands creative financing writing a mortgage note or a land contract and a note right of inventory moving forward for the near future yeah we we can do a ton of business together um I I love the seller finance people and I've done that in the past I really appreciate the hustle and I'm more than happy to let them do the hustling yeah I'm more than happy to cash them out so they can turn around and do it again absolutely I think for most people they they don't realize why each side needs each other um and benefits from each other right you go out there as a seller finance Creator go find the house subject to wrap it whatever you're gonna do and now we're going to cash you out right and we talked about last week with hypothecations we're actually giving a loan right we're actually gonna loan against your your note and give you money where you're going to handle the whole situation we're not take anything of it you're just going to keep working with our money and pay us on a monthly basis and move forward from there which is similar to partials yeah but you know in your conference we had the DME again I'm gonna plug it we have the videos on our website DME 2023 take a look at those videos because we had some really good speakers on both sides of this panel giving some ideas and some understanding of what this note world is about on both edges because it's key for everyone yeah yeah one of the goals was to to bring together all the different facets of notes so I mean there are so many different ways that you can approach notes seller finance residential commercial first seconds I mean there there are dozens of different ways to to approach it yeah uh so that we're trying to do that and bring everyone together and I think we did a pretty good job of that and uh it's great to see all the different areas coming together and you know talking together together and learning from each other just this week we're right we're the note we're trying to close today hopefully we'll get everything situated but it's really a guy who bought a loan got a br has a hard money lender for a short term and needs to cash them out so we're solving his problem by giving him longer term a lot of times you guys are out there structuring it it's just this one note but in fact if you want to sell it you structure it as two notes you do like the 80 20 and then you try to get 20 25 down from the seller so when you see that you're creating more value for yourself we'll have more of a more maybe an in-depth talk about that next year we'll make a note yeah all right so I put the in the comments section the video recording for those people who are curious to see what's about you can definitely order the recordings from this last web uh this last event uh Mark spoke he was one of the guest speakers which was awesome um this is all notes right all real estate notes we've had some people in our trailers land notes all that kind of field is amazing so we want to make sure that people understand that we're both sides of the coin here and I want to stress that as much as I can um mark it's funny most people get into creative financing typically came about it by accident right um how did you get started in creative financing but in real estate in general you've your background is some impressive stuff well I don't know if I ever told you guys what my real what um what uh how I got into this my note my first one I was like 19 years old and I was in a small little town up in Vermont and what happened was I did the Carlton sheets book you know and I went and got these bandit signs and like we buy homes I put them up on the telephone pole meanwhile I got in trouble because I didn't know the Mr coyote I was 19 years old I didn't know any better and I put I put up about 20 throughout that through the area so this guy called me up goes hey I've got this mobile home for sale it's worth 21 000 I want 18 for it and I'm like I'm that interest in a mobile home calls me back another week he goes hey you know I got this mobile home so we're 21.

I'll let it go for 15 000. I'm like ah I'm really not interested calls me back like a week or two later goes hey give me 12 000 for this mobile home and I don't the questions are like how do you do it like and that's where everybody's learning like hey I got a deal the seller's open cell financing I don't know how to do it and most people are just saying hey this is how you do it with a contract and this is how you do the transaction however and even people giving advice out there are not even aware of if you're putting a buyer into the property that's going to be Homestead living it as a primary residence there's a ton of consumer protection regulations on a federal and state level and that's where a lot of people go wrong and they don't even understand it and they don't even realize it it said we've been for the last few months us we've been out there promoting at non-started people are starting to kind of see because I am starting to see people asking questions about it um so just make sure like if you're doing a seller financing and if you're going to your extra strategy is you're going to put an environment property and you're trying to wrap it make sure if it's a homestead buyer that you totally truly understand the regulations because um I've actually I remember a few years actually several years back somebody was doing this and actually went to jail but he was doing a predatory he was doing it on purpose so the biggest thing is the definitions let's get some definitions what's homestead mean for those people who may not know what homestead means you're living it that's your home property you're going to be living at your home property and you can get some like in Florida we get a tax Discount Advantage if you're Homestead I don't know is it the same way up in New Jersey uh we don't have that Advantage Jersey likes getting their tax money so you know the hopes that we have that so in Florida we're protected if you're Homestead um you get a lower tax break and in Florida also if you ever get sued or you accidentally get they can't come after your property in Florida other states they could possibly do that the homestead is main if you're selling a property they're going to be living in a property as a primary residence and that's where there's a lot of consumer protection regulations to protect that consumer because technically if you're doing this a full-time you are considered a originator you're originating loans and that's recruiting wholesalers assigning seller financing deals you're the one technically originating that note because you're the one who's structuring it so they're looking at it closely and they're they're also looking at assignment fees possibly being rolled into the APR because all upfront fees are considered rolled in APR and then you have usury laws so just kind of be careful that and again I'm not trying to scare you just want to inform yourself that's all I'm saying you know that type of thing so usually for those who don't know usually laws what the max APR or interest rate you can give to a borrower right business to consumer that the the state allows each state has different usury laws look your local state for knowledge about that and that comes to play with us right and I'm gonna flip the switch for a second cover a few note buyers probably going when are you gonna get to us and understand what we want so for you guys who are creating these notes and you're doing it and learning correctly from people like Mark what we recommend is make sure you write a note that's not only legal right that we can buy that's foreclosable mean legal that I can go to a foreclosure a judge won't kick it back and I won't have a problem on the flip side we want to make sure that you do that but the paperwork and the note numbers the five numbers that come into play right is your original balance your interest rate your monthly payment which is your principal interest tax returns are excluded from that right your term and your balloon right obviously five years you can't have a balloon but then a turn right are you running 360 months are you wearing 240 now even if you're doing an 80 20 loan the way we have a chart that shows you the best way to do it is the lowest term you can do and the highest interest rate by law is the best way to get the best price from us so if your originating notes at six percent I encourage you not to do that because you're not going to be able to resell it right and the borrower you want to understand the borrower can't literally go get to a loan from A bank typically so don't undermine the bank where they're giving out seven you're giving out six Mark money they're going to make five seven ten years down the road um I had one just recently with one of my students the guy goes in North Carolina they tried selling it they couldn't sell it and they were okay they're like all right we want three years and I just didn't feel comfortable because the the market is at the peak you know and there's and if the market pulls back a little bit there's no room there three years just not enough time to get equity in that property to be able to refinance it so we did an amortization schedule we sent it over to them we pulled it up I jumped on the phone hey do me a favor hope the amortization schedule in the beginning it breaks everything down the finance amount of the payment the terms you know the rate I said go down to line 120.

that's 10 years yeah how much money in this scenario would you have collected she said it was like 86 000 so and then there's a balloon over to the right of that image position how much money is that left she said that dollar I said add those numbers together because she added the two numbers together and it was a really and I said how much is that and it's a large amount much more than she's selling it I said how much are you selling the house for she said whatever I said subtracted so you're making an extra 129 000 becoming the bank over 10 years yeah amazing it's powerful it's really powerful and if you can hang on to it yeah yeah and and not only do you make more money in the end but then you've got regular cash flow in the meantime yeah that's pretty and you don't have new tenants and you have no no tenants no toilets no turnovers no any of that problem I mean that's the being the bank is so powerful and if you lit sat there and you're able to raise the money and do that with borrowed money at six seven percent look what happens then your return is astronomical it's ridiculous so you know more this creative financing world is really interesting but there's ways to do it wrong what are some of the most common pitfalls your tribe sees that you see from those who are getting started or the most common questions you're seeing with those people well um Mark when you're doing a lot of these order financing are you creating land contracts obviously in Texas you don't do land contracts but are you creating land contracts most time are you creating mortgages um well I want to go back one second so all the stuff that we're just talking about about learning don't let that scare you guys um because we threw a lot of stuff at you and I might like whoa wait a minute yeah there's a lot of groups and even these guys you can reach out to the people that are like no buyers and experts that will give you some advice and point you in the right direction so don't let that freak you out so if you're doing one like that and you're like oh my God it's too you know I don't want to go to jail don't worry about it because it's very very profitable just get some proper guidance and there's a lot of people here that would help you out so um one more thing to add to that is if you've already done some seller finance deals and they're not done correctly almost always like it's pretty much everything is fixable so even if you you're hearing this and you're going oh shoot I didn't do that I didn't do this I I did it wrong it's fixable almost everything is fixable so so don't sweat too much about it but just realize there is a right way to do it right and it's going to be costly when you do the owner financing and there's a person living in the home dot Frank say fat come to play you have to make sure that borrow has the ability to repay not just a checkbook that rate you a ten thousand dollar check and you walk away right the idea is to make sure they have the billiard repay and it has to be if you've done more than three originated by someone who is an rmlo license in that state specific most of the time so Texas we had Sarah on from Texas there's people Nationwide uh that we can recommend to you guys to get that set up so we can buy it if we don't we have to spend time money and energy to get that loan corrected so yeah I mean that's the first part I mean also yeah also if you're doing assignments and you and you think you don't you're not responsible be very very careful the North Carolina is actually looking at people the um because um I also shortened down the amortization schedule a little bit to kind of make sure my numbers work so there's a lot of like playing around with numbers but if I'm selling a note yeah if I'm selling a note there's no way I'm going to make sure what the premium is and that's why you know we talked in the beginning of this you know when you're doing the 80 20.

um you can do that and make sure if you plan on selling that note in the secondary Market going into it you kind of know where your rate needs to be to be able to sell that into the secondary Market perfect so it so we've we've kind of talked about it a little bit um there's education involved here so make sure you learn the rules and again it's not rocket science it's not you know we're pretty regular people believe it or not I know we sound like we're pretty smart but the reality is you know we're not yeah we've just learned through experience and and through doing a whole bunch of these deals over time and we're more than happy to share how to do that because there's room for everybody we did a question uh Lincoln's not feeding in through our our system here but uh Rakesh asks a question any thoughts about I-10 lending and investing in these notes uh i t n i n you know what's your thoughts about this idea of having I-10 borrowers um and lending on this kind of money that way any thoughts or Curiosities or individual conversation for that well let me ask you guys that would you guys buy something like that the challenge again for me is at some point I'm going to want to resell this and well maybe if I'm buying for myself and I'm gonna hang on to it I have zero problem with that none uh if it's a note that I know like if I'm buying it for myself no problem if I'm buying it in my fund that's a problem because I'm going to have to resell that at some point uh and that's gonna that's gonna mess things up yep um because um for whatever reason usually they don't do that unless the payment is um not being made now or if it's a credit union sometimes Credit Unions may do it um but very the big boys they don't care they just want um especially nowadays the banks and stuff um they don't care as long as that payments do because with the new regulations every time there's an um a delinquent they have to put what is it like two or three dollars for every dollar aside um on that so so they they just want those payments coming in because let's say it's a two hundred thousand dollar delinquent no then they have to put an extra up to six hundred thousand dollars aside on on that I don't know if that's exactly the numbers but it's a roughly about that um so anyways so we have some questions coming in uh and I'm gonna read them since they're on LinkedIn what are some of your thoughts on giving seller mortgage well purchasing power of a dollar is declining are you getting paid in future dollars at today's rate and value is reducing we're not better uh we're not better of borrowing as opposed to lending I'm not sure exactly if we understand that question Rakesh if you can kind of clarify a little bit more uh would the lender not start the Foreclosure as they're prohibited in a second so I guess the question is can when you say lender are you talking about the underlying subject two original lender or are you saying as the rap note the wrap note can foreclose they can still foreclose it that borrower is stop paying um you can do that right it's still look through the lien in the property you're secured by that situation so we're talking recently about the yeah we're talking recently about the the partials and the uh hypothecation is you could go ahead and buy their wrap note from you right especially if you've got it with Equity if you're into that deal for 200 but you're into the property for maybe a hundred grand you could sell me that meal for 150 and you wrote a 10 interest rate we could get a really nice discount and make sense for both of us to get what do you typically your industry and your loans when you create them what are they typically at let's see for me I have to I take it a little bit step further because when I'm writing when I'm structuring a deal I'm also looking at what's the market rent is so I need to make sure that the market rent is in line to what my monthly payment is so I'm trying to get the max as much as possible like nine percent ten whatever it may be um however if the payment is going to be out of whack I'm not going to move that property so you have to modify and play with your numbers a little bit maybe lower the monthly maybe lower the amount so that's kind of how I look at it so it's very very tricky um if that makes sense does that kind of make sense would you ever write a note at six percent um I hate to say it but I have because it was the only way the deal was gonna but I knew I wasn't gonna sell that note you know that's the key if I'm gonna sell it if I'm gonna sell it yes however I had to do it at that rate because the monthly payments didn't match so like for example like Jacksonville is in a market where if you're doing seller financing the house prices went up so much in the market runs didn't go up enough to cover that and that's the problem so it's a market my market so because the market rents didn't go up and the new prices of the new homes you're almost as an investor there's not enough cash flow to be able to cover that if that kind of makes sense so because of that I had to go a little bit lower actually I had to go down to like five and a half to make that deal work you know so that that particular um buyer I mean you can't get a rate at five and a half nowadays you know it's impossible so that's the only reason why I did that it's just to kind of make that numbers the numbers were but I'm still cash flowing because the underlying debt that I have on that one because I we did a wrap was that uh three and a quarter rate so I had I had enough cash flow spread there and on that deal yeah so they had to put um I actually sold that I'm just using that one yeah so the subject what was the online number the online number was 150 you said well yeah for the first mortgage so let's say Bank of America yep and then you brought to a 200 000 rap no so the total we haven't competition yesterday what is that total debt is it 200 plus the 150 or is it 200 total so was that 50 Grand seeing like a secondary or a second note on the property it's it yes so it would be second but the wrapping both into one so it's creating that one note yeah yeah Mark and I talked earlier this weekend so it's it's not your if I'm gonna buy that note I'm not necessarily in first but I'm not really in second either so like I'm I'm like one and a half but you would be you would be the one because what happens is in this scenario you would because you have that note you keep paying the first mortgage the hundred and the mortgage right but you're for closing on with these the buyer the borrower you're for closing but your first got 150 000 or the mortgage and you're gonna keep paying that so that and then you can turn around and resell the property again so you're taking a property back because you're rocking off but meanwhile that rapid 150 000 of Bank of America you're still paying that so they're still getting money and the reason why you want to do that is like you may have a two and a half three percent underlying debt so you're going out there no buyers you're borrowing money what eight ten percent when you have a debt already in place at three percent or whatever and it can be paid off sooner so that's the advantage of that's how that would work now you do have the underlying risk of like What's called the do on sales Clause um however that's very rare that that has happened but you should be aware of that um where the lender could actually uh call the note due way yeah mailers definitely could work um I don't personally but I have some of my students they do some mailers um what they're doing is they're pulling um some data um you know people that have been owning there's so many different ways like I like to buy seller financing for um people that are originally been investors that own the home for like 15 plus years um Mom and Pops where um they're they like that passive income they don't want to get hit with capital gains so they're willing to carry that note um that's kind of what I like to do and then I also when I'm talking to those people I said you know down the road you can actually sell your no as well so that is another angle where you can kind of go in there like you know if you're buying a property yourself and you want to do solar financing you can have them do seller financing for you and then they could turn around and sell that note if they want some cash out of it so that is another approach um but for me I have a lot of uh referrals um I have about got over 600 dogs that feed me deals I work a lot with Realtors as well I work with a lot of other investors I just built up a big referral network over but also right now like I'm teaching my students to go into systems like prop stream or any of those and look for people that just did an FHA or VA loan like within the last year or two and they're selling it there's not going to be any Equity there because those are 100 financing so we can buy those uh subject to the existing mortgage or an agreement for data contractor needs so that's kind of where I'm finding a lot of our people over there so there's a lot of different ways a lot of times people come in like where do I go if you take a step back and you start networking with people and start listening you'll start to understand what paths to kind of kind of go through try to find these particular sellers do you have do you have specific areas that you like to concentrate in different states that you like or ones you avoid um I will look at every state my extra strategy will determine on what that monthly fee that's awesome we've never seen that buying banknotes that's really great yeah so keep going with that then they do all the reports yeah yeah and they handle all the reporting the taxes I mean they handle all that stuff so and it's just so much use and then if the people are not paying they're the ones calling it their collection department you don't have to worry about it yeah yeah so we had a question from Kendrick was uh looking to create notes with burned out landlords great method what's a good message to craft for marketing to burn off and burn out landlords is that what you're saying yeah burn down landlords what is a good marketing to say Hey listen aren't you tired of Land Learning do you wanna sell it the asset and sell a finance it I presume that's what they're meaning yep so you wanna um yeah you can just say hey you're looking to sell your property um you know just a nice little marketing piece um a mailer um reach out to yellowletter.com um yellow letter they have a lot of great templates already set up up for the seller financing so you can reach out to them they have a lot of examples but uh if you're looking to do it yourself just saying hey um you know you know make sure they're 15 years if you're looking to sell your property um you know sell it you know you like that cash flow so you don't get hit capital gains you know um you know just craft something on that lines to kind of make it intriguing so because the most landlords and that's why I love working with landlords or other investors because they understand the game and the other reason why I like people that owner for 15 plus years they're not so greedy they're living some meat on the bone because um they've already built up their empire with their Capital they just want to sit back and relax now what I've noticed here if it's like less than 10 years or especially five years those investors already took in all the meat off the bone so they there's nothing there it's very challenging to do though so um and then they're gonna they're willing to do solar financing but there's no monthly cash flow so if something goes bad and you need to do all right so so let's talk about the fact that wrap notes you mentioned that for those people who don't know what that is what is a wrap note and where does it come from okay it's actually I'm doing one right now um so I'm actually uh I wish I had the numbers let's say um just trying to remember if I remember the numbers so what what you're doing is let's just take some rumble just run numbers let's say it's it I'm selling it for two hundred thousand dollars my to my end buyer 200 000 no okay but they have an underlying lien with like say Bank of America uh whoever Chase or whatever it may be and say it's like at uh 150 000 okay then what I want to do is there's 50 000 of equity there me as the investor that's where my profit is so then what I'm doing is I'm taking the hundred thousand dollar note or 150 000 note with Bank of America and then I'm creating my fifty thousand dollar difference putting it in there and then wrapping both notes on the one so my end buyers know it's two hundred thousand dollars so what happens is um once that's done they send the payment directly to the servicer and then the server server distributes the funds to the proper parties like the mortgage in the first position and then any profit to me and any tax Insurance that's also included in the monthly payments so that's kind of how I the wraps of the notes I'm actually doing one right now where I'm buying the property um and I'm turning on I'm talking on uh seventy nine thousand dollars on that particular one because we had to go and do a little bit of work and then we're wrapping it to our Environ and usually you can sell um you know whatever the ARP is after repair value you can usually sell that above the market value a little bit so you can get a premium on it because you're structuring it where they can't go through your traditional uh bank to get the financing a little let's back up a little yeah go ahead go ahead I said What's the total debt on that deal What's the total County Line lien dead your money out another way of doing is buying a partial where you can buy 60 months of payments right and then I take ownership of a note um last week we talked about hypothecation which I think is probably the best way of doing it where we literally loan you money on that first or second and we just charge an interest rate and we're protected by the security of that note so that if you go bad as my borrower I get your new and if I bought that note that's worth two hundred thousand and I give you a hundred grand right and I'm making game payments and you default guess what I get in my hands a 200 000 note right so the hypothecation I'm not responsible for handling the note you as the seller as the lender original lender gets it can maintain it if it goes bad you can transfer it to a different node so hypothecation is actually a great way for rap no people who own wrap notes just to literally give gets money off their books as well as continue to buy more as long as you keep making payments to us we're becoming your bank and if you have good equity and you wrote numbers well your interest rate's high enough and your term is good you can make a killing and we can do this over and over and over again again remember me and Ethan are two different companies we will buy as much as you have if the numbers work out well and one of the key things for you guys is LTV it's not a killer for us we're more interested in our yield so those who are curious about were interested in our yield numbers yeah yeah so if you have a question about that please put in the chat and we'll do our best to answer um because I know we have different people on right now people in the seller finance create owner finance world uh part of Mark's group listening our group as well as a LinkedIn and I think Twitter's on as well so um this will be recorded put on YouTube so Mark when you do these kind of things um for those are curious where do you find your borrowers where you find your properties are you doing mailers yeah already sourcing Miller's is a good and then the other 20 would be 40 000.

yep exactly so let's so what we would do is take the 160 put that in first position set that up the right way structure it so in a way if you want to sell that note and this is a uh you can sell that no and then meanwhile the remaining forty thousand dollars you hold on to that and then that's what you get your passive income coming in so that's another way of structuring that so it's a win for everybody um and then what happens is the servicer collects the month and monthly for both of them combined and then they go ahead and disperse it all out uh they just follow you understand let's take a second on that right me Nathan got this learning more and more about this from you guys and we were shocked to find out that some people out there who creating these notes rap or self-originated are using different ways to service notes why do you use a servicer and what's for those who are not doing it what's your kind of a sales pitch to start doing it with a servicer well some people use apartments.com yeah because you supposed to do reports you know it's just it's a huge mess um well first of all yes there's like a 30 to 40 fee depending on who you use but what you do is you if you're sending a node up the correct way you just roll that into your note and have your buyer pay for that so you're not paying for it do you hear that buyers no buyers did you just hear that you guys get that did you get that let's repeat that again what can you do with the servicing fee in creative financing you put it into the note the servicing fee so then they will be responsible for paying it not you the borrower pay servicing fee so those are buying notes and you've been discounting the note because the servicing Fair every month if you're buying creative financing notes and it's written the way Mark does it you're not paying it you're actually getting able to buy a fraction more money because you're not subtracting um I had one yeah yeah we all have horror story so I'm gonna tell you a line a little trick those people who are looking to talk to landlords either for note buying raising capital or assets go to local Rios you're going to file a landlord talk to them like you've been a landlord tell them all the problems and kind of relate to them get on the you know just share more horror stories if you have to make up one or two that's fine just get on their same page and what they're going to do is say well what'd you do well you say listen I used to do it I'm done doing it and they'll say well you've done what'd you do do you are you out of real estate no no much easier now I'm actually in the notes game and you're gonna find a lot of these landlords turning their heads going what and you're going to get a lot of attention this Rios this is how I started doing raising Capital talking to Riaz and just mentioning that I'm a you know ex-landlord and tired of it and I moved on I moved past it I lost the weight of being a landlord and I think that really kind of energized them to understand hey I want to know more about this and hey I got capital I can sell my properties if I need to and get more into this stuff raise Capital um so we want to make sure you stress the fact that you can get copper from these people but also the property you can do both because a person's interested in learning about what you do well and how you got out of this game right so mark one of the other things we want to make sure is that for those who are looking to buy these notes they need to buy the first the second by apothecation rentals you know you guys love cash because sometimes you run out of it are you guys open to selling to these note buyers who are our tribes to say listen we want to sell a note and we're in a good position where we wrote a 10 11 percent interest no not a three or four like the banks did and I'm able to sell this 11 percent interest rate at a discount and anyone who knows the math on that says holy goodness that's amazing because I can buy a 11 note at a discount where we're trying to fight state it is okay um like we have one right now in New York where one of my students you know he wants to exit all this option I'm like this comes back you know because the landlord tenant laws versus I told him the best that might have been an agreement for deed or a land contract um but because of the person doesn't because you have to do a double closing on that you're buying it from the seller then you turn it on routing it so there's not a lot of capital they have to come out of capital put it that so that's kind of why they're doing at least option route because it's less money to get from your end buyer so but usually in those type of states where they're not landlord friendly I'm definitely looking at an ex having a seller financing strategy because at that time you're you're just structuring it putting it together and then and they actually like it because they're they're homeowners you know they take here it's a different different type of person they take it the property a lot more if they know it's their home yeah so I wanted to get into the 80 20 thing you talked about briefly is it this 80 20 what is the 80 20 know and what does it mean for us note buyers and note sellers why create a20 what's the benefit of it and what's it look like okay well let's use that scenario of the 200 000 note that we talked about let's kind of go down that path let's just use that one for example so I am the investor I'm actually going to sell that property for two hundred and twenty thousand dollars okay I'm gonna get twenty thousand dollars down from my buyer you know up front so they have some meet and again if not more um it actually could be more than that that's only ten percent so 15 20 you can get up to Thirty forty thousand dollars down so you wanna get a large down payment and then the remaining balance say the finance amount is two hundred thousand well what they could do is they can structure that where 80 of that is what is that the numbers um eighty percent will be the first position and that's where you can set it up in a word yeah oh I'm sorry 160.

so 80 of 200 160 repairs you're you're in a little bit of a buying there so that's what I've seen that's why I like 15 plus years they've owned it for a long time they like that monthly cash flow but they're tired they don't want to do any property so and then the other thing is you know have them save your information because they may not be open right now but two years three years guess who they're gonna call if you're staying in touch and follow up with them every so often so just to clarify real quick and I'll go continue with the questions here is waste is 5 or 10 or 15 that's how many years into the mortgage that person is obviously the more years you're into it the more you're paid down right um so you said Kick the Can down Kick the Can of taxes down the road yeah so from a rental property to annuity I like the I want a little pitch line for a rental portfolio to annuity and a lot of people who've been landlords tired of being landlords right we I've been a landlord I'm sure all of us been landlords and I I unless I'm really really really good return it's not fun right that's what we got from rentals to buy news um so we buy notes all the time because I don't want to be a landlord again if I'm defaulted because I'm in a great position okay I was a landlord on one property for three two three years something like that and uh it would I came to realize very very quickly what I liked is the cash flow what I didn't like was everything else there was not any other piece of that that I enjoyed it was just the cash flow so then when I figured out notes it's like okay so it's the cash flow the part that I liked with none of the other stuff I'm in yeah I made 100 the same thing yep that's what exactly that's the same thing like I'll buy it through cell financing and I like to sell it through seller financing and create the Arbitrage and stay in the middle and get that cash flow yeah yeah but as much as possible I don't want to own the house uh if I can ever help it I never want to be a homeowner except for my own home that's fine uh first rental is head of all the window shot out huh that's not a good uh first rental that's for sure over eight percent notes at par yeah yeah so Mark are you you and your tribe you know people who follow you are interested in probably selling part of it the whole thing or your hypothecation because cash is probably your biggest funnel biggest struggle point yeah so what I see out there because the people that are in like my group or whatever the people I really kind of talk to are people that are kind of somewhat new so what they're doing and it makes sense they should take it down because what they're saying they can sell the note and make money that way but what a lot of these are doing is they're locking them up and then they're just doing assignments and getting that cash because you are correct as an investor you're always you know you're always putting your Capital to work and then your capital is tied up into an asset so you always need that balancing act so what you're saying what Dave is saying is instead of always doing assignment there David so just to summarize some of the stuff right we want to make sure that you guys are doing it right make sure your paper put together right um You can Echo I'm not sure why but um make sure your paperwork's right make sure you're if you're doing owner finance notes make sure your collateral is written up correctly um if you're doing land contracts make sure it's state specific make sure that the federal law is there make sure you make the ability to repay is there um you know and all that good stuff uh quick question was sorry coming in late 80 20 selling the first and keeping the back end meaning if you're gonna you can keep the first or you can keep the second sell both or either one but most of the time you sell the first lien hold the second lean at 10 12 and you need a cash flow while also being able to get some money up front so that's what you mean by 80 20 cash flow so what you want to do is make sure you break this correctly make sure the borrower has the ability to repay and then make sure you write with an arm Alone um we had it turning on a couple weeks ago uh who talked about they're trying to increase the number from three to 24.

we'll see if that passes um and then make sure you have all that in place make sure you write these loans at a good number no longer six seven percent get as high as you can understand the borrower can only afford what they can afford so make sure you keep that in mind um make sure the entry is high enough the term is low enough get that created that you can either sell a partial the whole thing hypothecation and then go do it again like Nathan started off saying do what you do best find the assets get them created and then you can sell them off and re-cash out re-cash out re-cash out and we're here for that uh I guess the burn method in creative financing yeah yeah we are we're the refinancers yes so we can either buy out and take a note off of you we can give you a loan we can do both these things they're fascinating to you guys uh as rap notes or originating just make sure you're originating correctly talk to a local attorney um and make sure you're doing it right Mark when you got first got started in this what were some of the first stumbling blocks you had lack of capital is one of the first things when you first start out and then probably like the contracts like you know how do I do it you know that's probably was one of the first type of things when you first start out um in real estate so that's why you know nowadays especially with the Internet it's so much easier we had to go to rias back when we were first getting into it we didn't have all we couldn't jump a network like this here when when you guys in Canada and Jersey I'm in here in Boca Raton Florida so it's so much easier back then we actually had to Drive 45 minutes go in there and just kind of network with a small well some of the groups are good um and just kind of learn that way which I did it worked you know but um that's probably one of the things so if that is you're running into whatever you're stuck on um it's one of the things I just mentioned or something else jump into some of these groups everybody is super um I kind of like this market right now um because people that can't sell that's where I'm coming in and buying them something on the debt you know so I would definitely highlight you guys to take a look at the DME uh recordings we had the mortgage Bank Association come in and she actually gave a month of when the mortgage mbas think that this recession is going to actually hit she names a month so that's all by data charts so feel free to take a look at the video and you're gonna see some awesome stuff besides just that other thing so mark thank you for joining us Friday afternoon you can hang on for the aftercast but I appreciate those who tune in live meetings will be back will probably be a few weeks off we have some things going on in the summertime is what it is and things yeah so we will be we may be dormant for the month of August but feel free to tune in um or a link sort of stuff at our webinars or on YouTube you can go to our website for it if you have questions reach out if you have notes send them on over all right guys thank you very much for joining us we're gonna go uh go off live and we'll talk to everyone soon thank you thank you super helpful I mean I can't tell you um in today's world um how easy people are there to help people to kind of succeed in real estate I know I was on another podcast a while ago and somebody's like hey what is the number one thing in real estate that surprised you and woke you up and I thought about it because I doubt other businesses especially investing is that your competitors are actually your partners you know that's how I looked at it you end up working together so like in other Industries like man I don't want to tell him anything what I'm doing because blah blah blah but in this you kind of work together so if you have if you don't have the capital or you don't have the resources to kind of understand this stuff go to somebody that's with experience and that's why people are willing to help you because you're bringing value to them and you guys can take deals and work together absolutely quick question before Nathan's final question is Tony Barnes on Facebook asked do you underwrite your loans or do you the third party to underwrite your loans if it's going to be a homestead I'm definitely using a third party um 100 now with the new laws that well then build I'm trying to get through because you're allowed to do three a year where you could actually underwrite it yourself however you still need to make sure you're qualifying through the DTI it doesn't really the credit doesn't really matter it's making sure they can afford the payment that's the biggest thing so you're not considered a predatory lender ability repays yeah yeah but I always use a a third party I'm never going to do it myself yeah we have a couple on our listing if you ever want to reach out to Mark ourselves um via call that underwriter we have Mark Ross over there uh rmlo.us you know those are the people who are living in the home right this is a tenant a landlord you don't need to do that kind of on a writing kind of stuff I would still make sure that you talk to them make sure that usually law is not applied and this is state-specific in certain situations so talk to local attorneys um Tony hopefully I answered your question um but we want to make sure you guys do this correctly and you work with good people like Mark so that you guys can create more notes and bring it to us we'll buy them and we'll just cycle going but what circled back to the very beginning for Nathan's final question is we want you guys to network with us as much as possible let's bring it home with see everyone back down in Nashville next year so we all can get together in one room and really talk um yeah deals happen at our last new at the last DME we had deals happen over the weekend signed and funded that's exactly what I was open for yeah so I'm really glad about that and and get the videos like Mark is saying everyone is so open and so willing to share so get those videos if you haven't if you haven't already and just learn learn from people who are more than willing to share we're not selling anything We're just trying to help you succeed that's it absolutely um go ahead Nathan all right Mark we're always trying to get a sense from from other experts here um see what do you see coming down the pipe uh what's your what's your Chris Ball prediction for housing market where are we going I mean we've been saying since October we're going to be in a major recession you know what I mean I mean look at look at the stock market and a lot in the first quarter I mean the first yeah the first half of the year so I think because just still we've printed so much money there's still a lot of money floating around out there so this is a weird situation that we're in right now um because I mean think how much money we printed I mean 80 of all money in circulation has been printed in the last few years think about that that's a lot so we really should be in a recession some SEC some indicators should wear a recession that's why our inflation went up because all that money but I mean it is definitely slowing down um because but the problem is is nobody's selling because why would you sell at a three and a half percent and go into something at seven percent so that's why there's no inventory however there's a lot of inventory coming online um with a new Builder so we're definitely going to see it slow down for the near future yeah we we can do a ton of business together um I I love the seller finance people and I've done that in the past I really appreciate the hustle and I'm more than happy to let them do the hustling yeah I'm more than happy to cash them out so they can turn around and do it again absolutely I think for most people they they don't realize why each side needs each other um and benefits from each other right you go out there as a seller finance Creator go find the house subject to wrap it whatever you're gonna do and now we're going to cash you out right and we talked about last week with hypothecations we're actually giving a loan right we're actually gonna loan against your your note and give you money where you're going to handle the whole situation we're not take anything of it you're just going to keep working with our money and pay us on a monthly basis and move forward from there which is similar to partials yeah but you know in your conference we had the DME again I'm gonna plug it we have the videos on our website DME 2023 take a look at those videos because we had some really good speakers on both sides of this panel giving some ideas and some understanding of what this note world is about on both edges because it's key for everyone yeah yeah one of the goals was to to bring together all the different facets of notes so I mean there are so many different ways that you can approach notes seller finance residential commercial first seconds I mean there there are dozens of different ways to to approach it yeah uh so that we're trying to do that and bring everyone together and I think we did a pretty good job of that and uh it's great to see all the different areas coming together and you know talking together together and learning from each other just this week we're right we're the note we're trying to close today hopefully we'll get everything situated but it's really a guy who bought a loan got a br has a hard money lender for a short term and needs to cash them out so we're solving his problem by giving him longer term ten years down the road um I had one just recently with one of my students the guy goes in North Carolina they tried selling it they couldn't sell it and they were okay they're like all right we want three years and I just didn't feel comfortable because the the market is at the peak you know and there's and if the market pulls back a little bit there's no room there three years just not enough time to get equity in that property to be able to refinance it so we did an amortization schedule we sent it over to them we pulled it up I jumped on the phone hey do me a favor hope the amortization schedule in the beginning it breaks everything down the finance amount of the payment the terms you know the rate I said go down to line 120.

that's 10 years yeah how much money in this scenario would you have collected she said it was like 86 000 so and then there's a balloon over to the right of that image position how much money is that left she said that dollar I said add those numbers together because she added the two numbers together and it was a really and I said how much is that and it's a large amount much more than she's selling it I said how much are you selling the house for she said whatever I said subtracted so you're making an extra 129 000 becoming the bank over 10 years yeah amazing it's powerful it's really powerful and if you can hang on to it yeah yeah and and not only do you make more money in the end but then you've got regular cash flow in the meantime yeah that's pretty and you don't have new tenants and you have no no tenants no toilets no turnovers no any of that problem I mean that's the being the bank is so powerful and if you lit sat there and you're able to raise the money and do that with borrowed money at six seven percent look what happens then your return is astronomical it's ridiculous so you know more this creative financing world is really interesting but there's ways to do it wrong what are some of the most common pitfalls your tribe sees that you see from those who are getting started or the most common questions you're seeing with those people well I don't the questions are like how do you do it like and that's where everybody's learning like hey I got a deal the seller's open cell financing I don't know how to do it and most people are just saying hey this is how you do it with a contract and this is how you do the transaction however and even people giving advice out there are not even aware of if you're putting a buyer into the property that's going to be Homestead living it as a primary residence there's a ton of consumer protection regulations on a federal and state level and that's where a lot of people go wrong and they don't even understand it and they don't even realize it it said we've been for the last few months us we've been out there promoting at non-started people are starting to kind of see because I am starting to see people asking questions about it um so just make sure like if you're doing a seller financing and if you're going to your extra strategy is you're going to put an environment property and you're trying to wrap it make sure if it's a homestead buyer that you totally truly understand the regulations because um I've actually I remember a few years actually several years back somebody was doing this and actually went to jail but he was doing a predatory he was doing it on purpose so the biggest thing is the definitions let's get some definitions what's homestead mean for those people who may not know what homestead means you're living it that's your home property you're going to be living at your home property and you can get some like in Florida we get a tax Discount Advantage if you're Homestead I don't know is it the same way up in New Jersey uh we don't have that Advantage Jersey likes getting their tax money so you know the hopes that we have that so in Florida we're protected if you're Homestead um you get a lower tax break and in Florida also if you ever get sued or you accidentally get they can't come after your property in Florida other states they could possibly do that the homestead is main if you're selling a property they're going to be living in a property as a primary residence and that's where there's a lot of consumer protection regulations to protect that consumer because technically if you're doing this a full-time you are considered a originator you're originating loans and that's recruiting you whenever you're talking about APR uh Finance about that's when you kind of opening yourself up to the whole uh regulations of financing now you can sell it off to another investor that's not living as a as a primary residence and then you're exempt from those consumer protection right like the dot Frank act that's just one of them to say that these are federal but then you also have state level um what was happening um besides the whole collapse a lot of mom and pop investors are doing the same thing when everything collab jobs they're putting people into the homes not checking their income and seeing they can qualify and we actually seen a couple cases where people investors were being you know part of my language scam bags were taking people's large 30 40 50 000 down payment knowing they couldn't qualify and then turn around and foreclose on them and get them out of the property he kept doing this over and over and uh actually the the Attorney General stepped in and the guy actually went to jail because um he was just a predatory lender at that point so a couple of important points here so the first thing you said back a minute or so ago is uh there's more to it than just the paperwork so the paperwork like there's there's a way to do that these are the documents to use this is the process you do that's part A Part B is actual qualifying and then we're talking about the Safe Act and all those kind of things and then it's state specific so in Florida you've got Homestead in Texas you've got Homestead in New Jersey you don't you know and there and you so you have to know State specific it's vitally important that you understand what the rules are federally and Statewide and which state has which rules and how do you abide by those so it's the process is one thing and that's the easy part the paperwork that's there's nothing to that and understanding general attorney is not going to be the person you need to speak to you need to speak to a specialist exactly that understands creative financing writing a mortgage note or a land contract and a note right um Mark when you're doing a lot of these order financing are you creating land contracts obviously in Texas you don't do land contracts but are you creating land contracts most time are you creating mortgages um well I want to go back one second so all the stuff that we're just talking about about learning don't let that scare you guys um because we threw a lot of stuff at you and I might like whoa wait a minute yeah there's a lot of groups and even these guys you can reach out to the people that are like no buyers and experts that will give you some advice and point you in the right direction so don't let that freak you out so if you're doing one like that and you're like oh my God it's too you know I don't want to go to jail don't worry about it because it's very very profitable just get some proper guidance and there's a lot of people here that would help you out so um one more thing to add to that is if you've already done some seller finance deals and they're not done correctly almost always like it's pretty much everything is fixable so even if you you're hearing this and you're going oh shoot I didn't do that I didn't do this I I did it wrong it's fixable almost everything is fixable so so don't sweat too much about it but just realize there is a right way to do it right and it's going to be costly when you do the owner financing and there's a person living in the home dot Frank say fat come to play you have to make sure that borrow has the ability to repay not just a checkbook that rate you a ten thousand dollar check and you walk away right the idea is to make sure they have the billiard repay and it has to be if you've done more than three originated by someone who is an rmlo license in that state specific most of the time so Texas we had Sarah on from Texas there's people Nationwide uh that we can recommend to you guys to get that set up so we can buy it if we don't we have to spend time money and energy to get that loan corrected so yeah I mean that's the first part I mean also yeah also if you're doing assignments and you and you think you don't you're not responsible be very very careful the North Carolina is actually looking at people the wholesalers assigning seller financing deals you're the one technically originating that note because you're the one who's structuring it so they're looking at it closely and they're they're also looking at assignment fees possibly being rolled into the APR because all upfront fees are considered rolled in APR and then you have usury laws so just kind of be careful that and again I'm not trying to scare you just want to inform yourself that's all I'm saying you know that type of thing so usually for those who don't know usually laws what the max APR or interest rate you can give to a borrower right business to consumer that the the state allows each state has different usury laws look your local state for knowledge about that and that comes to play with us right and I'm gonna flip the switch for a second cover a few note buyers probably going when are you gonna get to us and understand what we want so for you guys who are creating these notes and you're doing it and learning correctly from people like Mark what we recommend is make sure you write a note that's not only legal right that we can buy that's foreclosable mean legal that I can go to a foreclosure a judge won't kick it back and I won't have a problem on the flip side we want to make sure that you do that but the paperwork and the note numbers the five numbers that come into play right is your original balance your interest rate your monthly payment which is your principal interest tax returns are excluded from that right your term and your balloon right obviously five years you can't have a balloon but then a turn right are you running 360 months are you wearing 240 now even if you're doing an 80 20 loan the way we have a chart that shows you the best way to do it is the lowest term you can do and the highest interest rate by law is the best way to get the best price from us so if your originating notes at six percent I encourage you not to do that because you're not going to be able to resell it right and the borrower you want to understand the borrower can't literally go get to a loan from A bank typically so don't undermine the bank where they're giving out seven you're giving out six Mark what do you typically your industry and your loans when you create them what are they typically at let's see for me I have to I take it a little bit step further because when I'm writing when I'm structuring a deal I'm also looking at what's the market rent is so I need to make sure that the market rent is in line to what my monthly payment is so I'm trying to get the max as much as possible like nine percent ten whatever it may be um however if the payment is going to be out of whack I'm not going to move that property so you have to modify and play with your numbers a little bit maybe lower the monthly maybe lower the amount so that's kind of how I look at it so it's very very tricky um if that makes sense does that kind of make sense would you ever write a note at six percent um I hate to say it but I have because it was the only way the deal was gonna but I knew I wasn't gonna sell that note you know that's the key if I'm gonna sell it if I'm gonna sell it yes however I had to do it at that rate because the monthly payments didn't match so like for example like Jacksonville is in a market where if you're doing seller financing the house prices went up so much in the market runs didn't go up enough to cover that and that's the problem so it's a market my market so because the market rents didn't go up and the new prices of the new homes you're almost as an investor there's not enough cash flow to be able to cover that if that kind of makes sense so because of that I had to go a little bit lower actually I had to go down to like five and a half to make that deal work you know so that that particular um buyer I mean you can't get a rate at five and a half nowadays you know it's impossible so that's the only reason why I did that it's just to kind of make that numbers the numbers were but I'm still cash flowing because the underlying debt that I have on that one because I we did a wrap was that uh three and a quarter rate so I had I had enough cash flow spread there and um because um I also shortened down the amortization schedule a little bit to kind of make sure my numbers work so there's a lot of like playing around with numbers but if I'm selling a note yeah if I'm selling a note there's no way I'm going to make sure what the premium is and that's why you know we talked in the beginning of this you know when you're doing the 80 20.

um you can do that and make sure if you plan on selling that note in the secondary Market going into it you kind of know where your rate needs to be to be able to sell that into the secondary Market perfect so it so we've we've kind of talked about it a little bit um there's education involved here so make sure you learn the rules and again it's not rocket science it's not you know we're pretty regular people believe it or not I know we sound like we're pretty smart but the reality is you know we're not yeah we've just learned through experience and and through doing a whole bunch of these deals over time and we're more than happy to share how to do that because there's room for everybody we did a question uh Lincoln's not feeding in through our our system here but uh Rakesh asks a question any thoughts about I-10 lending and investing in these notes uh i t n i n you know what's your thoughts about this idea of having I-10 borrowers um and lending on this kind of money that way any thoughts or Curiosities or individual conversation for that well let me ask you guys that would you guys buy something like that the challenge again for me is at some point I'm going to want to resell this and well maybe if I'm buying for myself and I'm gonna hang on to it I have zero problem with that none uh if it's a note that I know like if I'm buying it for myself no problem if I'm buying it in my fund that's a problem because I'm going to have to resell that at some point uh and that's gonna that's gonna mess things up yep all right so so let's talk about the fact that wrap notes you mentioned that for those people who don't know what that is what is a wrap note and where does it come from okay it's actually I'm doing one right now um so I'm actually uh I wish I had the numbers let's say um just trying to remember if I remember the numbers so what what you're doing is let's just take some rumble just run numbers let's say it's it I'm selling it for two hundred thousand dollars my to my end buyer 200 000 no okay but they have an underlying lien with like say Bank of America uh whoever Chase or whatever it may be and say it's like at uh 150 000 okay then what I want to do is there's 50 000 of equity there me as the investor that's where my profit is so then what I'm doing is I'm taking the hundred thousand dollar note or 150 000 note with Bank of America and then I'm creating my fifty thousand dollar difference putting it in there and then wrapping both notes on the one so my end buyers know it's two hundred thousand dollars so what happens is um once that's done they send the payment directly to the servicer and then the server server distributes the funds to the proper parties like the mortgage in the first position and then any profit to me and any tax Insurance that's also included in the monthly payments so that's kind of how I the wraps of the notes I'm actually doing one right now where I'm buying the property um and I'm turning on I'm talking on uh seventy nine thousand dollars on that particular one because we had to go and do a little bit of work and then we're wrapping it to our Environ and usually you can sell um you know whatever the ARP is after repair value you can usually sell that above the market value a little bit so you can get a premium on it because you're structuring it where they can't go through your traditional uh bank to get the financing a little let's back up a little yeah go ahead go ahead I said What's the total debt on that deal What's the total County Line lien dead on that deal yeah so they had to put um I actually sold that I'm just using that one yeah so the subject what was the online number the online number was 150 you said well yeah for the first mortgage so let's say Bank of America yep and then you brought to a 200 000 rap no so the total we haven't competition yesterday what is that total debt is it 200 plus the 150 or is it 200 total so was that 50 Grand seeing like a secondary or a second note on the property it's it yes so it would be second but the wrapping both into one so it's creating that one note yeah yeah Mark and I talked earlier this weekend so it's it's not your if I'm gonna buy that note I'm not necessarily in first but I'm not really in second either so like I'm I'm like one and a half but you would be you would be the one because what happens is in this scenario you would because you have that note you keep paying the first mortgage the hundred and the mortgage right but you're for closing on with these the buyer the borrower you're for closing but your first got 150 000 or the mortgage and you're gonna keep paying that so that and then you can turn around and resell the property again so you're taking a property back because you're rocking off but meanwhile that rapid 150 000 of Bank of America you're still paying that so they're still getting money and the reason why you want to do that is like you may have a two and a half three percent underlying debt so you're going out there no buyers you're borrowing money what eight ten percent when you have a debt already in place at three percent or whatever and it can be paid off sooner so that's the advantage of that's how that would work now you do have the underlying risk of like What's called the do on sales Clause um however that's very rare that that has happened but you should be aware of that um where the lender could actually uh call the note due um because um for whatever reason usually they don't do that unless the payment is um not being made now or if it's a credit union sometimes Credit Unions may do it um but very the big boys they don't care they just want um especially nowadays the banks and stuff um they don't care as long as that payments do because with the new regulations every time there's an um a delinquent they have to put what is it like two or three dollars for every dollar aside um on that so so they they just want those payments coming in because let's say it's a two hundred thousand dollar delinquent no then they have to put an extra up to six hundred thousand dollars aside on on that I don't know if that's exactly the numbers but it's a roughly about that um so anyways so we have some questions coming in uh and I'm gonna read them since they're on LinkedIn what are some of your thoughts on giving seller mortgage well purchasing power of a dollar is declining are you getting paid in future dollars at today's rate and value is reducing we're not better uh we're not better of borrowing as opposed to lending I'm not sure exactly if we understand that question Rakesh if you can kind of clarify a little bit more uh would the lender not start the Foreclosure as they're prohibited in a second so I guess the question is can when you say lender are you talking about the underlying subject two original lender or are you saying as the rap note the wrap note can foreclose they can still foreclose it that borrower is stop paying um you can do that right it's still look through the lien in the property you're secured by that situation so we're talking recently about the yeah we're talking recently about the the partials and the uh hypothecation is you could go ahead and buy their wrap note from you right especially if you've got it with Equity if you're into that deal for 200 but you're into the property for maybe a hundred grand you could sell me that meal for 150 and you wrote a 10 interest rate we could get a really nice discount and make sense for both of us to get your money out another way of doing is buying a partial where you can buy 60 months of payments right and then I take ownership of a note um last week we talked about hypothecation which I think is probably the best way of doing it where we literally loan you money on that first or second and we just charge an interest rate and we're protected by the security of that note so that if you go bad as my borrower I get your new and if I bought that note that's worth two hundred thousand and I give you a hundred grand right and I'm making game payments and you default guess what I get in my hands a 200 000 note right so the hypothecation I'm not responsible for handling the note you as the seller as the lender original lender gets it can maintain it if it goes bad you can transfer it to a different node so hypothecation is actually a great way for rap no people who own wrap notes just to literally give gets money off their books as well as continue to buy more as long as you keep making payments to us we're becoming your bank and if you have good equity and you wrote numbers well your interest rate's high enough and your term is good you can make a killing and we can do this over and over and over again again remember me and Ethan are two different companies we will buy as much as you have if the numbers work out well and one of the key things for you guys is LTV it's not a killer for us we're more interested in our yield so those who are curious about were interested in our yield numbers yeah yeah so if you have a question about that please put in the chat and we'll do our best to answer um because I know we have different people on right now people in the seller finance create owner finance world uh part of Mark's group listening our group as well as a LinkedIn and I think Twitter's on as well so um this will be recorded put on YouTube so Mark when you do these kind of things um for those are curious where do you find your borrowers where you find your properties are you doing mailers yeah already sourcing Miller's is a good way yeah mailers definitely could work um I don't personally but I have some of my students they do some mailers um what they're doing is they're pulling um some data um you know people that have been owning there's so many different ways like I like to buy seller financing for um people that are originally been investors that own the home for like 15 plus years um Mom and Pops where um they're they like that passive income they don't want to get hit with capital gains so they're willing to carry that note um that's kind of what I like to do and then I also when I'm talking to those people I said you know down the road you can actually sell your no as well so that is another angle where you can kind of go in there like you know if you're buying a property yourself and you want to do solar financing you can have them do seller financing for you and then they could turn around and sell that note if they want some cash out of it so that is another approach um but for me I have a lot of uh referrals um I have about got over 600 dogs that feed me deals I work a lot with Realtors as well I work with a lot of other investors I just built up a big referral network over but also right now like I'm teaching my students to go into systems like prop stream or any of those and look for people that just did an FHA or VA loan like within the last year or two and they're selling it there's not going to be any Equity there because those are 100 financing so we can buy those uh subject to the existing mortgage or an agreement for data contractor needs so that's kind of where I'm finding a lot of our people over there so there's a lot of different ways a lot of times people come in like where do I go if you take a step back and you start networking with people and start listening you'll start to understand what paths to kind of kind of go through try to find these particular sellers do you have do you have specific areas that you like to concentrate in different states that you like or ones you avoid um I will look at every state my extra strategy will determine on what state it is okay um like we have one right now in New York where one of my students you know he wants to exit all this option I'm like this comes back you know because the landlord tenant laws versus I told him the best that might have been an agreement for deed or a land contract um but because of the person doesn't because you have to do a double closing on that you're buying it from the seller then you turn it on routing it so there's not a lot of capital they have to come out of capital put it that so that's kind of why they're doing at least option route because it's less money to get from your end buyer so but usually in those type of states where they're not landlord friendly I'm definitely looking at an ex having a seller financing strategy because at that time you're you're just structuring it putting it together and then and they actually like it because they're they're homeowners you know they take here it's a different different type of person they take it the property a lot more if they know it's their home yeah so I wanted to get into the 80 20 thing you talked about briefly is it this 80 20 what is the 80 20 know and what does it mean for us note buyers and note sellers why create a20 what's the benefit of it and what's it look like okay well let's use that scenario of the 200 000 note that we talked about let's kind of go down that path let's just use that one for example so I am the investor I'm actually going to sell that property for two hundred and twenty thousand dollars okay I'm gonna get twenty thousand dollars down from my buyer you know up front so they have some meet and again if not more um it actually could be more than that that's only ten percent so 15 20 you can get up to Thirty forty thousand dollars down so you wanna get a large down payment and then the remaining balance say the finance amount is two hundred thousand well what they could do is they can structure that where 80 of that is what is that the numbers um eighty percent will be the first position and that's where you can set it up in a word yeah oh I'm sorry 160.

so 80 of 200 160 and then the other 20 would be 40 000. yep exactly so let's so what we would do is take the 160 put that in first position set that up the right way structure it so in a way if you want to sell that note and this is a uh you can sell that no and then meanwhile the remaining forty thousand dollars you hold on to that and then that's what you get your passive income coming in so that's another way of structuring that so it's a win for everybody um and then what happens is the servicer collects the month and monthly for both of them combined and then they go ahead and disperse it all out uh they just follow you understand let's take a second on that right me Nathan got this learning more and more about this from you guys and we were shocked to find out that some people out there who creating these notes rap or self-originated are using different ways to service notes why do you use a servicer and what's for those who are not doing it what's your kind of a sales pitch to start doing it with a servicer well some people use apartments.com yeah because you supposed to do reports you know it's just it's a huge mess um well first of all yes there's like a 30 to 40 fee depending on who you use but what you do is you if you're sending a node up the correct way you just roll that into your note and have your buyer pay for that so you're not paying for it do you hear that buyers no buyers did you just hear that you guys get that did you get that let's repeat that again what can you do with the servicing fee in creative financing you put it into the note the servicing fee so then they will be responsible for paying it not you the borrower pay servicing fee so those are buying notes and you've been discounting the note because the servicing Fair every month if you're buying creative financing notes and it's written the way Mark does it you're not paying it you're actually getting able to buy a fraction more money because you're not subtracting that monthly fee that's awesome we've never seen that buying banknotes that's really great yeah so keep going with that then they do all the reports yeah yeah and they handle all the reporting the taxes I mean they handle all that stuff so and it's just so much use and then if the people are not paying they're the ones calling it their collection department you don't have to worry about it yeah yeah so we had a question from Kendrick was uh looking to create notes with burned out landlords great method what's a good message to craft for marketing to burn off and burn out landlords is that what you're saying yeah burn down landlords what is a good marketing to say Hey listen aren't you tired of Land Learning do you wanna sell it the asset and sell a finance it I presume that's what they're meaning yep so you wanna um yeah you can just say hey you're looking to sell your property um you know just a nice little marketing piece um a mailer um reach out to yellowletter.com um yellow letter they have a lot of great templates already set up up for the seller financing so you can reach out to them they have a lot of examples but uh if you're looking to do it yourself just saying hey um you know you know make sure they're 15 years if you're looking to sell your property um you know sell it you know you like that cash flow so you don't get hit capital gains you know um you know just craft something on that lines to kind of make it intriguing so because the most landlords and that's why I love working with landlords or other investors because they understand the game and the other reason why I like people that owner for 15 plus years they're not so greedy they're living some meat on the bone because um they've already built up their empire with their Capital they just want to sit back and relax now what I've noticed here if it's like less than 10 years or especially five years those investors already took in all the meat off the bone so they there's nothing there it's very challenging to do though so um and then they're gonna they're willing to do solar financing but there's no monthly cash flow so if something goes bad and you need to do repairs you're you're in a little bit of a buying there so that's what I've seen that's why I like 15 plus years they've owned it for a long time they like that monthly cash flow but they're tired they don't want to do any property so and then the other thing is you know have them save your information because they may not be open right now but two years three years guess who they're gonna call if you're staying in touch and follow up with them every so often so just to clarify real quick and I'll go continue with the questions here is waste is 5 or 10 or 15 that's how many years into the mortgage that person is obviously the more years you're into it the more you're paid down right um so you said Kick the Can down Kick the Can of taxes down the road yeah so from a rental property to annuity I like the I want a little pitch line for a rental portfolio to annuity and a lot of people who've been landlords tired of being landlords right we I've been a landlord I'm sure all of us been landlords and I I unless I'm really really really good return it's not fun right that's what we got from rentals to buy news um so we buy notes all the time because I don't want to be a landlord again if I'm defaulted because I'm in a great position okay I was a landlord on one property for three two three years something like that and uh it would I came to realize very very quickly what I liked is the cash flow what I didn't like was everything else there was not any other piece of that that I enjoyed it was just the cash flow so then when I figured out notes it's like okay so it's the cash flow the part that I liked with none of the other stuff I'm in yeah I made 100 the same thing yep that's what exactly that's the same thing like I'll buy it through cell financing and I like to sell it through seller financing and create the Arbitrage and stay in the middle and get that cash flow yeah yeah but as much as possible I don't want to own the house uh if I can ever help it I never want to be a homeowner except for my own home that's fine uh first rental is head of all the window shot out huh that's not a good uh first rental that's for sure um I had one yeah yeah we all have horror story so I'm gonna tell you a line a little trick those people who are looking to talk to landlords either for note buying raising capital or assets go to local Rios you're going to file a landlord talk to them like you've been a landlord tell them all the problems and kind of relate to them get on the you know just share more horror stories if you have to make up one or two that's fine just get on their same page and what they're going to do is say well what'd you do well you say listen I used to do it I'm done doing it and they'll say well you've done what'd you do do you are you out of real estate no no much easier now I'm actually in the notes game and you're gonna find a lot of these landlords turning their heads going what and you're going to get a lot of attention this Rios this is how I started doing raising Capital talking to Riaz and just mentioning that I'm a you know ex-landlord and tired of it and I moved on I moved past it I lost the weight of being a landlord and I think that really kind of energized them to understand hey I want to know more about this and hey I got capital I can sell my properties if I need to and get more into this stuff raise Capital um so we want to make sure you stress the fact that you can get copper from these people but also the property you can do both because a person's interested in learning about what you do well and how you got out of this game right so mark one of the other things we want to make sure is that for those who are looking to buy these notes they need to buy the first the second by apothecation rentals you know you guys love cash because sometimes you run out of it are you guys open to selling to these note buyers who are our tribes to say listen we want to sell a note and we're in a good position where we wrote a 10 11 percent interest no not a three or four like the banks did and I'm able to sell this 11 percent interest rate at a discount and anyone who knows the math on that says holy goodness that's amazing because I can buy a 11 note at a discount where we're trying to fight over eight percent notes at par yeah yeah so Mark are you you and your tribe you know people who follow you are interested in probably selling part of it the whole thing or your hypothecation because cash is probably your biggest funnel biggest struggle point yeah so what I see out there because the people that are in like my group or whatever the people I really kind of talk to are people that are kind of somewhat new so what they're doing and it makes sense they should take it down because what they're saying they can sell the note and make money that way but what a lot of these are doing is they're locking them up and then they're just doing assignments and getting that cash because you are correct as an investor you're always you know you're always putting your Capital to work and then your capital is tied up into an asset so you always need that balancing act so what you're saying what Dave is saying is instead of always doing assignment there David so just to summarize some of the stuff right we want to make sure that you guys are doing it right make sure your paper put together right um You can Echo I'm not sure why but um make sure your paperwork's right make sure you're if you're doing owner finance notes make sure your collateral is written up correctly um if you're doing land contracts make sure it's state specific make sure that the federal law is there make sure you make the ability to repay is there um you know and all that good stuff uh quick question was sorry coming in late 80 20 selling the first and keeping the back end meaning if you're gonna you can keep the first or you can keep the second sell both or either one but most of the time you sell the first lien hold the second lean at 10 12 and you need a cash flow while also being able to get some money up front so that's what you mean by 80 20 cash flow so what you want to do is make sure you break this correctly make sure the borrower has the ability to repay and then make sure you write with an arm Alone um we had it turning on a couple weeks ago uh who talked about they're trying to increase the number from three to 24.

we'll see if that passes um and then make sure you have all that in place make sure you write these loans at a good number no longer six seven percent get as high as you can understand the borrower can only afford what they can afford so make sure you keep that in mind um make sure the entry is high enough the term is low enough get that created that you can either sell a partial the whole thing hypothecation and then go do it again like Nathan started off saying do what you do best find the assets get them created and then you can sell them off and re-cash out re-cash out re-cash out and we're here for that uh I guess the burn method in creative financing yeah yeah we are we're the refinancers yes so we can either buy out and take a note off of you we can give you a loan we can do both these things they're fascinating to you guys uh as rap notes or originating just make sure you're originating correctly talk to a local attorney um and make sure you're doing it right Mark when you got first got started in this what were some of the first stumbling blocks you had lack of capital is one of the first things when you first start out and then probably like the contracts like you know how do I do it you know that's probably was one of the first type of things when you first start out um in real estate so that's why you know nowadays especially with the Internet it's so much easier we had to go to rias back when we were first getting into it we didn't have all we couldn't jump a network like this here when when you guys in Canada and Jersey I'm in here in Boca Raton Florida so it's so much easier back then we actually had to Drive 45 minutes go in there and just kind of network with a small well some of the groups are good um and just kind of learn that way which I did it worked you know but um that's probably one of the things so if that is you're running into whatever you're stuck on um it's one of the things I just mentioned or something else jump into some of these groups everybody is super super helpful I mean I can't tell you um in today's world um how easy people are there to help people to kind of succeed in real estate I know I was on another podcast a while ago and somebody's like hey what is the number one thing in real estate that surprised you and woke you up and I thought about it because I doubt other businesses especially investing is that your competitors are actually your partners you know that's how I looked at it you end up working together so like in other Industries like man I don't want to tell him anything what I'm doing because blah blah blah but in this you kind of work together so if you have if you don't have the capital or you don't have the resources to kind of understand this stuff go to somebody that's with experience and that's why people are willing to help you because you're bringing value to them and you guys can take deals and work together absolutely quick question before Nathan's final question is Tony Barnes on Facebook asked do you underwrite your loans or do you the third party to underwrite your loans if it's going to be a homestead I'm definitely using a third party um 100 now with the new laws that well then build I'm trying to get through because you're allowed to do three a year where you could actually underwrite it yourself however you still need to make sure you're qualifying through the DTI it doesn't really the credit doesn't really matter it's making sure they can afford the payment that's the biggest thing so you're not considered a predatory lender ability repays yeah yeah but I always use a a third party I'm never going to do it myself yeah we have a couple on our listing if you ever want to reach out to Mark ourselves um via call that underwriter we have Mark Ross over there uh rmlo.us you know those are the people who are living in the home right this is a tenant a landlord you don't need to do that kind of on a writing kind of stuff I would still make sure that you talk to them make sure that usually law is not applied and this is state-specific in certain situations so talk to local attorneys um Tony hopefully I answered your question um but we want to make sure you guys do this correctly and you work with good people like Mark so that you guys can create more notes and bring it to us we'll buy them and we'll just cycle going but what circled back to the very beginning for Nathan's final question is we want you guys to network with us as much as possible let's bring it home with see everyone back down in Nashville next year so we all can get together in one room and really talk um yeah deals happen at our last new at the last DME we had deals happen over the weekend signed and funded that's exactly what I was open for yeah so I'm really glad about that and and get the videos like Mark is saying everyone is so open and so willing to share so get those videos if you haven't if you haven't already and just learn learn from people who are more than willing to share we're not selling anything We're just trying to help you succeed that's it absolutely um go ahead Nathan all right Mark we're always trying to get a sense from from other experts here um see what do you see coming down the pipe uh what's your what's your Chris Ball prediction for housing market where are we going I mean we've been saying since October we're going to be in a major recession you know what I mean I mean look at look at the stock market and a lot in the first quarter I mean the first yeah the first half of the year so I think because just still we've printed so much money there's still a lot of money floating around out there so this is a weird situation that we're in right now um because I mean think how much money we printed I mean 80 of all money in circulation has been printed in the last few years think about that that's a lot so we really should be in a recession some SEC some indicators should wear a recession that's why our inflation went up because all that money but I mean it is definitely slowing down um because but the problem is is nobody's selling because why would you sell at a three and a half percent and go into something at seven percent so that's why there's no inventory however there's a lot of inventory coming online um with a new Builder so we're definitely going to see it slow down um I kind of like this market right now um because people that can't sell that's where I'm coming in and buying them something on the debt you know so I would definitely highlight you guys to take a look at the DME uh recordings we had the mortgage Bank Association come in and she actually gave a month of when the mortgage mbas think that this recession is going to actually hit she names a month so that's all by data charts so feel free to take a look at the video and you're gonna see some awesome stuff besides just that other thing so mark thank you for joining us Friday afternoon you can hang on for the aftercast but I appreciate those who tune in live meetings will be back will probably be a few weeks off we have some things going on in the summertime is what it is and things yeah so we will be we may be dormant for the month of August but feel free to tune in um or a link sort of stuff at our webinars or on YouTube you can go to our website for it if you have questions reach out if you have notes send them on over all right guys thank you very much for joining us we're gonna go uh go off live and we'll talk to everyone soon thank you thank you foreign [Music] that we're talking about and then you still get that monthly cash flow and then sell that note off so you can get some cash coming in so that's another way of doing it and you're using your end buyers Capital to put down on the property so you're making money in the front end you're also you can structure the note like we talked about the 80 20.

sell that note off and then you still yourself can still get monthly cash flow coming in [Music] welcome again Dave put some jkp Holdings alongside me Mr Nathan Turner how are you very good very good so I I'm really excited that this week we just did a video last week and we're doing a video this week so if you missed our last week video which was regarding hypothecation versus no partials for both buyers and note sellers yeah definitely tune into that um our podcast how's your week been turning out for you Nathan it's been good it's been good raising some money buying some notes yeah that's what it's all about yeah uh in uh share in our Greek call we actually going on is I'm actually by my first hypothecation hopefully today that's exciting working some stuff out um and we're gonna see how it goes it's been a little bumpy in the beginning but I'm really excited about it and I'll share more about that as we move forward um and uh I'm sure that you guys will learn a lot about that deal as well as I have and if you've done those kind of deals we'd love for you to kind of put in the chat box and whatnot uh yes this recording will be recorded uh it will be on live it will be on Youtube it'll be on LinkedIn everything possible and everything else so so you're buying notes what are you buying right now what are you looking at um so I just got a tape of uh actually I'll share with you later if you're interested but I've got uh some loans a whole bunch of seller finance loans mostly Bridge lending loans so they're short term with payoff after 12 months all in Georgia which is already kind of a scary thing for us however they're all too uh because they're Bridge loans they're all to companies so that circumvents a whole bunch of the things that we're trying to avoid all the time and trying to work around so yeah yeah yeah so I gotta I've got a tape of those that I'm looking at and then um some other solid Finance notes uh in North Carolina that's a guy that I met at uh directed Ira Summit a couple weeks ago that I was at so really interesting stuff there man there's seller financing you know it's been around forever and ever and you and I have been round notes for long enough we've dealt with institutional for the longest time we've been focusing on uh seller finance the last year or so and the more we get into it the more I realize that there's just a ton out there and I think more recently I would say in the last 12 months there's been an upsurge of people that are doing it as a business rather than just the Mom and Pops that have been around for Beyonce and we when we first got because we thought it was the mom and pop so we're focused on and we weren't sure about this stuff but we're finding out rather quickly is that there's a lot of people doing this right and wrong and that we want to take advantage of that as soon as possible Right and I think one of the best ways we can do is to understand that side of it and we've been doing on a mission for 2023 is Bridging the Gap between the seller finance investors and creators and rap no people that are joining our calls right now and us no buyers yeah because this bridge I think will give us plenty of inventory moving forward for the near future yeah we we can do a ton of business together um I I love the seller finance people and I've done that in the past I really appreciate the hustle and I'm more than happy to let them do the hustling yeah I'm more than happy to cash them out so they can turn around and do it again absolutely I think for most people they they don't realize why each side needs each other um and benefits from each other right you go out there as a seller finance Creator go find the house subject to wrap it whatever you're gonna do and now we're going to cash you out right and we talked about last week with hypothecations we're actually giving a loan right we're actually gonna loan against your your note and give you money where you're going to handle the whole situation we're not take anything of it you're just going to keep working with our money and pay us on a monthly basis and move forward from there which is similar to partials yeah but you know in your conference we had the DME again I'm gonna plug it we have the videos on our website DME 2023 take a look at those videos because we had some really good speakers on both sides of this panel giving some ideas and some understanding of what this note world is about on both edges because it's key for everyone yeah yeah one of the goals was to to bring together all the different facets of notes so I mean there are so many different ways that you can approach notes seller finance residential commercial first seconds I mean there there are dozens of different ways to to approach it yeah uh so that we're trying to do that and bring everyone together and I think we did a pretty good job of that and uh it's great to see all the different areas coming together and you know talking together together and learning from each other just this week we're right we're the note we're trying to close today hopefully we'll get everything situated but it's really a guy who bought a loan got a br has a hard money lender for a short term and needs to cash them out so we're solving his problem by giving him longer term money and he's to keep going he may pay us off early we hope he doesn't but if it does it does and for us it really kind of helps clarify that this world of buying banknotes at three four five percent we don't need to do that we're not handcuffed to buy these kind of those kind of notes I think it's huge for us yeah it's huge there and there's so many notes out there um we're hoping we're trying to help those that are doing the seller finance to do it properly and correctly yeah and that's that's been a big nation of ours yeah so for those so those who are creating notes um this is for you as well as well as a note buyers but we're we're doing is we're becoming that bridge for you guys so you guys can build and create originate secure and better notes not just get money put a person on property and be in a spot where you can lose everything in a matter of few years so what we've done since January is really connect with the leading people in the space of creative financing and really kind of network with them so that we can actually help them move forward and create notes but also teach their tribe how to do it the best way possible yeah so they can get the most money out of it they can do it legally without having any you know never having to look over the shoulders see who's can be bringing down all kinds of really heavy penalties um yeah we just we want to help everybody who's doing this do it right and we'll man we can do it yeah we've had the underwriting calls we've had rml locals right so if you're curious about if you have an owner occupied in there make sure you hit that so yeah um I'm getting Dave foots from jkp Holdings Nathan from Earnest investing we're two separate companies both no buyers looking to bridge you guys up but today special guest is a guy who we respect a lot we've talked a lot with him has been awesome right we have Mark Monroe who's been a leader in the space of creative financing for only part of his bit life the other part was doing what we do and and partially what he did so Mark I'm really excited to have you come on today and just share with your group as well as us about creative owner financing you're on mute there Market nope well thank you gentlemen for having me on I appreciate it um you know we actually met what about a month month and a half ago early June up in Nashville and uh I highly recommend uh anybody listening to go to the next event next year it was it was a great networking event you learned so much but the networking is unbelievable at that event so I'm looking forward to the event next year do you guys already have the dates set or not yet yes indeed May 31st June 1st same place I know a lot of good locations downtown is just a little too distracting we're there to learn first of all we'll have fun at this time yeah it's a quick bus ride that's 20 minutes downtown like uh you know and uh I think you guys had a bus from the hotel that took people right downtown so if they wanted to do that but it's convenient right near the airport too so it works out really well so I highly highly highly recommend yes anybody that's looking to get into the note buying you know especially in the Solar financing game uh it's gonna open the door up for a lot of you guys that are out there originating doing these seller financing and you're holding paper but then you have another whole world where you actually can turn around and sell your notes in the beginning a lot of people when they come into doing seller financing they're just structuring enough because they want to acquire it and that's how that's the first leg of what they're trying to accomplish but then what you can do is you can turn around and sell that note and then learn different ways of structuring it because a lot of times you guys are out there structuring it it's just this one note but in fact if you want to sell it you structure it as two notes you do like the 80 20 and then you try to get 20 25 down from the seller so when you see that you're creating more value for yourself we'll have more of a more maybe an in-depth talk about that next year we'll make a note yeah all right so I put the in the comments section the video recording for those people who are curious to see what's about you can definitely order the recordings from this last web uh this last event uh Mark spoke he was one of the guest speakers which was awesome um this is all notes right all real estate notes we've had some people in our trailers land notes all that kind of field is amazing so we want to make sure that people understand that we're both sides of the coin here and I want to stress that as much as I can um mark it's funny most people get into creative financing typically came about it by accident right um how did you get started in creative financing but in real estate in general you've your background is some impressive stuff well I don't know if I ever told you guys what my real what um what uh how I got into this my note my first one I was like 19 years old and I was in a small little town up in Vermont and what happened was I did the Carlton sheets book you know and I went and got these bandit signs and like we buy homes I put them up on the telephone pole meanwhile I got in trouble because I didn't know the Mr coyote I was 19 years old I didn't know any better and I put I put up about 20 throughout that through the area so this guy called me up goes hey I've got this mobile home for sale it's worth 21 000 I want 18 for it and I'm like I'm that interest in a mobile home calls me back another week he goes hey you know I got this mobile home so we're 21.

I'll let it go for 15 000. I'm like ah I'm really not interested calls me back like a week or two later goes hey give me 12 000 for this mobile home and I'm thinking to myself okay but I started asking questions and said do you own the land he goes no I don't own the land I'm like yeah I'm not interested so he calls me back another month goes give me six thousand dollars for this mobile home it's worth 21 000. now I'm thinking to myself okay now there's a deal but I'm like I kept going to the same routine I'm like why do you got to sell it goes I don't live in it I have a lot right do I don't have a lot I'm like I'm gonna be frank I'm not interested in a mobile home but I'll give you 3 000 for it because give me four thousand I go no I'll do three thousand dollars so you agree to three thousand so what I did is um I hung up I said I gotta send somebody out do the inspection I gotta go get a contract we didn't have the internet so I had to go to like you know Staples you know the you know the store and we had to get the carbon copy you know the the the contract so I hung up the phone I called the newspaper up I put a uh an ad um mobile home for sale 25 000 with three thousand dollars down lady called me up and she goes hey we want a lot we lived there we like that so I ended up doing a no she gave me three thousand dollars I took that three thousand dollars and ended up giving it to the seller and I created a note at like seven and a half or seven and three quarters at like seven years so I was 19 years old that was my car payment my insurance payment for like seven years while I was going to school that was my first No Deal so anyways so what happened was then at that time um I kind of got out of doing that a little bit I got sucked into the corporate world a little bit and I got into real estate banking at the age of 24 25 I ended up having a mortgage company up in the Washington DC about a 107 loan officers um so I had that for a few years and that's where I a lot of my clients were investors so I became friends with them I started seeing the different strategies and just over the years I just kind of evolved and really I understand the note world and how to structure it and how to make it work a lot of investors you know they're trying selling seller financing to Sellers and the sellers usually said no but if you guys if you use your amortization schedule and show the seller how much money they're going to make five seven ten years down the road um I had one just recently with one of my students the guy goes in North Carolina they tried selling it they couldn't sell it and they were okay they're like all right we want three years and I just didn't feel comfortable because the the market is at the peak you know and there's and if the market pulls back a little bit there's no room there three years just not enough time to get equity in that property to be able to refinance it so we did an amortization schedule we sent it over to them we pulled it up I jumped on the phone hey do me a favor hope the amortization schedule in the beginning it breaks everything down the finance amount of the payment the terms you know the rate I said go down to line 120.

that's 10 years yeah how much money in this scenario would you have collected she said it was like 86 000 so and then there's a balloon over to the right of that image position how much money is that left she said that dollar I said add those numbers together because she added the two numbers together and it was a really and I said how much is that and it's a large amount much more than she's selling it I said how much are you selling the house for she said whatever I said subtracted so you're making an extra 129 000 becoming the bank over 10 years yeah amazing it's powerful it's really powerful and if you can hang on to it yeah yeah and and not only do you make more money in the end but then you've got regular cash flow in the meantime yeah that's pretty and you don't have new tenants and you have no no tenants no toilets no turnovers no any of that problem I mean that's the being the bank is so powerful and if you lit sat there and you're able to raise the money and do that with borrowed money at six seven percent look what happens then your return is astronomical it's ridiculous so you know more this creative financing world is really interesting but there's ways to do it wrong what are some of the most common pitfalls your tribe sees that you see from those who are getting started or the most common questions you're seeing with those people well I don't the questions are like how do you do it like and that's where everybody's learning like hey I got a deal the seller's open cell financing I don't know how to do it and most people are just saying hey this is how you do it with a contract and this is how you do the transaction however and even people giving advice out there are not even aware of if you're putting a buyer into the property that's going to be Homestead living it as a primary residence there's a ton of consumer protection regulations on a federal and state level and that's where a lot of people go wrong and they don't even understand it and they don't even realize it it said we've been for the last few months us we've been out there promoting at non-started people are starting to kind of see because I am starting to see people asking questions about it um so just make sure like if you're doing a seller financing and if you're going to your extra strategy is you're going to put an environment property and you're trying to wrap it make sure if it's a homestead buyer that you totally truly understand the regulations because um I've actually I remember a few years actually several years back somebody was doing this and actually went to jail but he was doing a predatory he was doing it on purpose so the biggest thing is the definitions let's get some definitions what's homestead mean for those people who may not know what homestead means you're living it that's your home property you're going to be living at your home property and you can get some like in Florida we get a tax Discount Advantage if you're Homestead I don't know is it the same way up in New Jersey uh we don't have that Advantage Jersey likes getting their tax money so you know the hopes that we have that so in Florida we're protected if you're Homestead um you get a lower tax break and in Florida also if you ever get sued or you accidentally get they can't come after your property in Florida other states they could possibly do that the homestead is main if you're selling a property they're going to be living in a property as a primary residence and that's where there's a lot of consumer protection regulations to protect that consumer because technically if you're doing this a full-time you are considered a originator you're originating loans and that's recruiting you whenever you're talking about APR uh Finance about that's when you kind of opening yourself up to the whole uh regulations of financing now you can sell it off to another investor that's not living as a as a primary residence and then you're exempt from those consumer protection right like the dot Frank act that's just one of them to say that these are federal but then you also have state level um what was happening um besides the whole collapse a lot of mom and pop investors are doing the same thing when everything collab jobs they're putting people into the homes not checking their income and seeing they can qualify and we actually seen a couple cases where people investors were being you know part of my language scam bags were taking people's large 30 40 50 000 down payment knowing they couldn't qualify and then turn around and foreclose on them and get them out of the property he kept doing this over and over and uh actually the the Attorney General stepped in and the guy actually went to jail because um he was just a predatory lender at that point so a couple of important points here so the first thing you said back a minute or so ago is uh there's more to it than just the paperwork so the paperwork like there's there's a way to do that these are the documents to use this is the process you do that's part A Part B is actual qualifying and then we're talking about the Safe Act and all those kind of things and then it's state specific so in Florida you've got Homestead in Texas you've got Homestead in New Jersey you don't you know and there and you so you have to know State specific it's vitally important that you understand what the rules are federally and Statewide and which state has which rules and how do you abide by those so it's the process is one thing and that's the easy part the paperwork that's there's nothing to that and understanding general attorney is not going to be the person you need to speak to you need to speak to a specialist exactly that understands creative financing writing a mortgage note or a land contract and a note right um Mark when you're doing a lot of these order financing are you creating land contracts obviously in Texas you don't do land contracts but are you creating land contracts most time are you creating mortgages um well I want to go back one second so all the stuff that we're just talking about about learning don't let that scare you guys um because we threw a lot of stuff at you and I might like whoa wait a minute yeah there's a lot of groups and even these guys you can reach out to the people that are like no buyers and experts that will give you some advice and point you in the right direction so don't let that freak you out so if you're doing one like that and you're like oh my God it's too you know I don't want to go to jail don't worry about it because it's very very profitable just get some proper guidance and there's a lot of people here that would help you out so um one more thing to add to that is if you've already done some seller finance deals and they're not done correctly almost always like it's pretty much everything is fixable so even if you you're hearing this and you're going oh shoot I didn't do that I didn't do this I I did it wrong it's fixable almost everything is fixable so so don't sweat too much about it but just realize there is a right way to do it right and it's going to be costly when you do the owner financing and there's a person living in the home dot Frank say fat come to play you have to make sure that borrow has the ability to repay not just a checkbook that rate you a ten thousand dollar check and you walk away right the idea is to make sure they have the billiard repay and it has to be if you've done more than three originated by someone who is an rmlo license in that state specific most of the time so Texas we had Sarah on from Texas there's people Nationwide uh that we can recommend to you guys to get that set up so we can buy it if we don't we have to spend time money and energy to get that loan corrected so yeah I mean that's the first part I mean also yeah also if you're doing assignments and you and you think you don't you're not responsible be very very careful the North Carolina is actually looking at people the wholesalers assigning seller financing deals you're the one technically originating that note because you're the one who's structuring it so they're looking at it closely and they're they're also looking at assignment fees possibly being rolled into the APR because all upfront fees are considered rolled in APR and then you have usury laws so just kind of be careful that and again I'm not trying to scare you just want to inform yourself that's all I'm saying you know that type of thing so usually for those who don't know usually laws what the max APR or interest rate you can give to a borrower right business to consumer that the the state allows each state has different usury laws look your local state for knowledge about that and that comes to play with us right and I'm gonna flip the switch for a second cover a few note buyers probably going when are you gonna get to us and understand what we want so for you guys who are creating these notes and you're doing it and learning correctly from people like Mark what we recommend is make sure you write a note that's not only legal right that we can buy that's foreclosable mean legal that I can go to a foreclosure a judge won't kick it back and I won't have a problem on the flip side we want to make sure that you do that but the paperwork and the note numbers the five numbers that come into play right is your original balance your interest rate your monthly payment which is your principal interest tax returns are excluded from that right your term and your balloon right obviously five years you can't have a balloon but then a turn right are you running 360 months are you wearing 240 now even if you're doing an 80 20 loan the way we have a chart that shows you the best way to do it is the lowest term you can do and the highest interest rate by law is the best way to get the best price from us so if your originating notes at six percent I encourage you not to do that because you're not going to be able to resell it right and the borrower you want to understand the borrower can't literally go get to a loan from A bank typically so don't undermine the bank where they're giving out seven you're giving out six Mark what do you typically your industry and your loans when you create them what are they typically at let's see for me I have to I take it a little bit step further because when I'm writing when I'm structuring a deal I'm also looking at what's the market rent is so I need to make sure that the market rent is in line to what my monthly payment is so I'm trying to get the max as much as possible like nine percent ten whatever it may be um however if the payment is going to be out of whack I'm not going to move that property so you have to modify and play with your numbers a little bit maybe lower the monthly maybe lower the amount so that's kind of how I look at it so it's very very tricky um if that makes sense does that kind of make sense would you ever write....