Originating Wraps & Buying Wraps | Real Estate Notes Show

Episode: Full Length - Originating Wraps & Buying Wraps Dave's Goals and Plans: - Running advanced note investing weekly class covering non-performing note calculator and due diligence systems - Working to bridge gap between originators and note buyers through education and conferences Nathan's Goals and Plans: - Organizing Diversified Mortgage Expo (DME) in Nashville in June as national conference - Goal to facilitate actual deal closings at conference - want attendees to exchange collateral files and close within a week - Teaching advanced class focused on helping investors with some education ramp up their knowledge Key Recommendations: - Learn proper note math before investing - don't bid on BPO or UPB values as they are byproducts that distort actual note calculations - Use non-performing note calculator that accounts for state differences, timeline differences, and costs including patience - Educate yourself on the fundamentals - note investing is not real estate, it is adjacent to real estate Topics Discussed: - Originating wraps and buying wraps - mechanics and strategies - Rising interest rates creating opportunity for creative financing as banks narrow lending criteria - Non-performing note calculations and underwriting math - Secondary marketplace for owner-financed paper - Bridging communication gap between originators and note buyers Guest Insights: - Scott Horn (Texas-based originator) evolved from civil engineer and lawyer through real estate crashes, learning creative finance through necessity - Built business from 1-2 houses/month to 20+ houses/month by 1992, created need for creative financing solutions - Became one of largest providers of owner-financed paper to secondary marketplace through wraparound mortgages and seasoning strategies - 2008-2009 crash increased compliance requirements and expanded creative finance opportunities like subject-to deals and wraparound seller financing Episode: Full Length - Originating Wraps & Buying Wraps Guest: Scott Horn Summary: This episode explores the mechanics of originating and buying wrap notes, the importance of proper underwriting calculations, and how originators and note buyers can create mutually beneficial deals in a rising interest rate environment.

Main Topics: Originating wraps and wrap notes, Note buying and selling strategies, Bridging gap between originators and note buyers, Creative real estate financing, Non-performing note calculations and due diligence, Diversified Mortgage Expo conference, Note math and underwriting fundamentals Key Takeaways: Wrap financing allows originators to create profitable spreads by positioning themselves between borrowers and note buyers | Both originators and note buyers can achieve strong returns in the current rising interest rate environment where bank financing is limited | Proper note math including state differences, timeline differences, and holding costs is critical for successful note investing | Networking between originators and note buyers creates deal-making opportunities and bridges a knowledge gap in the industry | Education and understanding the mechanics of note investing is essential before deploying capital Keywords: wrap notes, note origination, note buying, note math, creative financing, non-performing notes, yield returns, collateral file, first lien position great they leased the house well the problem is is when they did this transaction the lawyer who the lawyer who closed the property gave the seller no protection at all there's no vendors laying the deed there's no need to trust there's no nothing okay so investor a assigned the note to investor B and of course no one told the seller who investor Bean was no notification nothing we see that often yeah it is to it I mean if assignment fee move on that's what they think they don't think about the words case but what's investor be done now they haven't made payments the tenants moved out there's 15 000 20 000 of work to get this house back to market value and the house is going to foreclosure and the seller can't house back protect yourself without filing a lawsuit and why is investor B not paying I don't know if you're not willing to play the game the right way don't play it those are the guys that give good guys like y'all bad names we don't want that we want these guys out of the business I just posted in the Stream to uh finds a calculator for those just I was running some numbers just to get some ideas for people let's say there was a hundred thousand dollar birth balance and when borrower a uh was getting into the asset and it was a hundred thousand dollar note at three and a half percent we bought it three you know five to seven years ago whatever it was and it was a three and a half percent their peni was is three Thirty the thirty thirty year mortgage 336.78 I then sell it to Scott the borrower borrow two at a 9.9 which equates to a thousand eighty seven dollar a month payment and we're looking at almost 700 in profit between those two numbers so now he may have got into this rap for five six thousand dollars with that 72 buyer or something true borrower the original borrower and says listen I'm gonna give you five grand you move out we'll make things happen I'll pay for everything so that that first initial investor me I'm out five grand I sell to Scott the new borrower he gives me twenty five thousand dollars down I'm now positive 20 grand and that's your Nathan comes in as a note buyer and says listen I see you have 125 000 lean and a fifty thousand dollar first I'll pay off the first but I'll pay you 75 000 for the year 125 000 loan I doubt he'll pay off the first for 50.

he's now into a seventy five thousand dollar first lien now for twenty five thousand dollars at a ten percent yield Marshall I'm thinking that would probably kind of solve your question there and why would anyone do that I think the yield would be probably pretty good thank you hey everybody this is Dave putz from jkp Holdings alongside me as always Mr Nathan Turner how are you man good morning you're doing very well doing very well awesome I'm glad to see you connect for a few minutes I know that we've been talking a lot lately um it's it's interesting that uh as world's connected and uh we've been doing this for almost two years now which is shocking yeah we just kind of discovered that the other day and we're like oh man it's been a while how about that it's been great it's been cool we've had some awesome guests on uh which we'll get to in a minute uh when we're having on today um but we're we're excited about a few things that we've got going on before we get into that some housekeeping and stuff um first and foremost uh for those who have not signed up Nathan is live with the Diversified mortgage Expo the DME is to be a national this year yeah in June to ensure that they have the ability to repay the loan in other words Common Sense guys yeah you've got a 35 debt to income ratio you're probably okay if you've got a 70 debt income ratio you're probably not over and I've seen this stuff yes and uh and whatnot so there's a common sense scenario we have to think about along the way and it's not hard and if you learn just you just don't push the numbers but we're wanting into people me Nathan who are not using rmlos not underwriting loans at all and not servicing notes which we'll get to but for those who are watching what are the penalties if you know if you take well what we're hearing people is they get find a property subject to Rapid which will get into what you need to wrap it but then selling it with 20 down and running up a mortgage note and then walking yep well so first off as you do that um I'm gonna get my head around there so first off under the Dodd-Frank Act and this is this gets a little it's not complicated but for instance respa says if you do more than free transactions in a 12-month period you're you're under respa you must provide these explosions SAFE Act says if you do one you must provide it don't forget that three rule but to be under Dodd-Frank that says you have to do five or more transact more than five transactions and a 12-month period do less than five and you originate the deal are you okay and under dot Frank the odds are you're probably not under Dodd-Frank so you may not have to follow those rules per se but by the way you may not follow Dodd-Frank but you're supposed to follow the safe Maps okay transaction we're always going and trying to go online to the mortgage company change the address the once I've either bought the property or I brought the loan current I start getting the mortgage statement so I can pay those appropriately I should have access to a current mortgage statement I want to make sure I see that I want to know that that underlying debt is current payments I don't know is there an online account set up where I can get the password transferred to me I can navigate that account appropriately and change the address so that those are mailed to my attention now so I can pay those and by the way if you should be using a loan servicer in these cases and of course as we're navigating the back end of this I want to leave that loan servicer in place so things don't change yeah I wanted to be consistent on behalf of that Mortgage Company I want the same Servicing Company to be sending that check every month and I don't want to change that but as the the wrap note buyer I want the information from the seller of this rap note provide me this information I want the underlying note to you to trust the insurance I want that most current mortgage statement I want that online password I want all of these sellers original information they should have had in their contract and things of that nature that's out there so for me as a wrap note buyer I'm a first position guy I I that's important to me I always want to be in first position so for me in a rap situation I would want to you know buy the note for whatever price including paying off the underlying first so that right so let's get some numbers here people do that yeah all the things we're talking about go away right the issue there is is that requires a lot more Capital right the Diversified mortgage Expo the DME is to be a national this year yeah in June um I encourage you guys to go take a look at it it's gonna be like no other no conference you've been to before it's Bridging the Gap between no buyers and no Originators yeah one of my major things about the whole conference is I want buyers and sellers to come together and not just like Hi how are you like I'm talking we're gonna make deals I want you to be walking away and saying okay so Monday morning send me over the collateral file and I'll review it and then within a week we'll we'll close kind of thing like I want deals to to really come out of this so I'm excited to bring that together besides being a ton of fun it's Nashville it's going to be a really great time throwing and everything to me really cool thing so I think that what we're trying to do is Bridge put a bridge between two different groups of people right Originators rap wound creators as well as note buyers but we don't know how each other work so yeah we're going to get into what we're going to talk today about but we're feeling that this is the world we're going to live in for the next period of time because the returns are great for both sides returns are great and then uh with Rising interest rates people can't qualify for a bank banks have this you know very narrow window of what they can and cannot do um when you're dealing with people rather than Banks you'll find they're far more flexible and that interest rate may not get any better for you probably even a little bit worse but you'll be able to afford a home and that's uh that's really what The Originators bring to the table so absolutely I love that side of the business I've done a bunch of originations that's how I started in notes uh so I'm excited to kind of come full circle and start talking about to a bunch of these Originators now again let's and before we get there uh Nathan and I do run a advanced note uh when I when I teach classes here in the Texas Marketplace often tell people you know I went out and I put together 100 duplexes to buy at one time put together the money everything that we call a syndication when you marry it all together and uh then they change the tax laws then just cratered everything in the market and of course that deal died well most people would just walk away and instead I just called the bank to her foreclosing on this stuff ask me what they're going to do and they needed help and they hired me to be their property manager or the 800 duplexes of course I had never managed anything in my entire life spent the next three weeks in the SMU law library trying to read up and learn how to do it back in those days guys we had to use this novel thing called the typewriter the type your own leases and all this kind of stuff and when you do that you'll learn it the end grains in your head anyway one thing to the next over the next many years of the commercial real estate world trying to figure things out what you don't realize back then when you're young real estate doesn't move in a real estate crash and recession you simply don't know what you don't know and anyway got involved um had a general contract or a friend of mine who was in one of these duplexes who I had met we decided to buy our first half we got a private lender to do it put it together and sold it that was the first deal we did uh down the road I had a young man come in my office one day and ask me if I knew what Equity was under FHA we kind of hooked up and we started buying houses back in the late 1980s early 1990s using what is now known as hard money of course back then it wasn't called hard money and we were only doing one or two houses a year and we were learning the business and over time we built and grew that where we were actually by about 1992 we now he may have got into this rap for five six thousand dollars with that 72 buyer or something true borrower the original borrower and says listen I'm gonna give you five grand you move out we'll make things happen I'll pay for everything so that that first initial investor me I'm out five grand I sell to Scott the new borrower he gives me twenty five thousand dollars down I'm now positive 20 grand and that's your Nathan comes in as a note buyer and says listen I see you have 125 000 lean and a fifty thousand dollar first I'll pay off the first but I'll pay you 75 000 for the year 125 000 loan I doubt he'll pay off the first for 50.

he's now into a seventy five thousand dollar first lien now for twenty five thousand dollars at a ten percent yield Marshall I'm thinking that would probably kind of solve your question there and why would anyone do that I think the yield would be probably pretty good thank you hey everybody this is Dave putz from jkp Holdings alongside me as always Mr Nathan Turner how are you man good morning you're doing very well doing very well awesome I'm glad to see you connect for a few minutes I know that we've been talking a lot lately um it's it's interesting that uh as world's connected and uh we've been doing this for almost two years now which is shocking yeah we just kind of discovered that the other day and we're like oh man it's been a while how about that it's been great it's been cool we've had some awesome guests on uh which we'll get to in a minute uh when we're having on today um but we're we're excited about a few things that we've got going on before we get into that some housekeeping and stuff um first and foremost uh for those who have not signed up Nathan is live with experienced that could talk for probably three days about this topic um that this I'm bringing him in and we're screaming him and now Scott horn is from Texas and he's been dealing with originating notes and loans and things like that and all other facets we're bringing back on for for years and years so Scott thank you and Welcome to our Friday Live Well great to be here guys the topic that I love to talk about well the only thing I love talking more about that's more fun is me no this is good so we wanted to know first of all like where where did you come from how did you get into what you're doing now and what's kind of been your progression and you'd realize that's a two-day conversation right I'm trying to keep it to around five minutes or so so real quick I'm a uh civil engineer undergrad who went to law school because I graduated when I was 20 years old and I wasn't ready to grow up again right and uh went to law school got my law degree with postal practice law got a job and this goes back before y'all's time probably it's at 1984.85 and you may remember what happened then which was probably one of the huge real estate crash that went on so my one job I had lasted for a whole year and I was in a real estate development company as an in-house Council and when you're coming out in the street what you don't realize when you're a young kid no one's hiring in the middle of a major recession you know uh at least not in in my world they were and you've got to figure out what you want to do go through the Litany of things on how I started learning things from making creative offers on properties just trying to figure do to Property Management which is really where I learned to do things and um you know investing weekly class for those who were not familiar with the class about we talk about of course the big big one is the big top player we work with a non-performing big calculator that you can literally plug and play tomorrow and get working not the simple performance calculator which we do teach but we talk about that we talk about due diligence systems managing your systems managing your providers uh and those who join the uh classes have been blown away in their experience investors too joining us yeah and that's the thing where you know we're not looking for necessarily fresh off the boat beginners we're looking for people that have some education that have taken maybe a class or two read a couple of books whatever it's been but they have some kind of education behind them or even a little bit of experience we want to take those people and really help them ramp it up because this is a fantastic business but you have to know what you're doing and more education the better and we're running into too many people who just don't get it right they they don't know the math which is crucial in a space right we talk about don't bidding on BPO or upb because it's a byproduct and it really takes out the calculations probably the note which is what you're buying you're buying a note so we talk about a lot of that stuff and the non-performing calculator is very very big because you're including States differences including timeline differences and costs especially with patients and everything that comes into play so yeah there's a lot to it so educate yourself because yeah this is not really we've said that over and over again this is not real estate this is attached to real estate this is adjacent to real estate it's related to real estate but it's nice yes so if you are regioning notes I hopefully you get the note math if you don't let us know if you're a note buyer and you don't get the math let us know yeah but what we're trying to do today is really bridge the gap by bringing in somebody who's extremely were buying 20 plus houses a month and rehabbing and when you're doing that what you learned real quick is when you're buying 20 houses every month they're all rehabs you can't sell them cash you know the next month that they take time and by courts by the time you do two or three months you've got 60 houses in portfolio that are in some form of construction or marketing and what you learn is you learn the creative Finance game and back then we were able to do things such as lease options lease purchases contract for deeds and we found the mechanism to get our properties income producing and uh we would generate mortgages that we would hold in escrow and we learned the the note game back then story is I don't know if you know the name Ken D'Angelo or not and as the guy who started home investors was here in Dallas and so we were flipping houses back and forth with Ken and we'd sit around we'd just brainstorming how to how to do things how make things happen which is what we all try to do in our industry right as investors how can we buy notes better houses better what it might be and anyway we would put together the system we started selling notes and we didn't even know we could sell notes back in those days and um they were wrap around loans but of course when our note buyers would buy them they'd pay off the underlying debt and we were selling the whole note at that time and you create a different strategy and we moved away from the retail World almost 100 exclusive into the creative Finance world of either buying homes with cash or Bank financing doing our wrap loans seasoning and selling them into the secondary Marketplace and back in those days we weren't doing a lot of creative Finance deals on the front end of the transaction because you didn't have to that stuff and inside uh the Facebook live is a link if you want to get Scott's information or ask questions I have a link in there I'll give you a quick quick form and we will provide you Scott's information um we're going to focus today on the rap loan World which I really wasn't involved up to a couple years ago and you're finding out how big it is it is tremendously large um and what they're doing summer doing it right but most are required and let's start with the fact that most rap loans are are done with us you know some accused situation or dominant subject to and for definition subject two is basically you're going to take over another borrower's debt and make payments on their behalf so for whatever reason a Civic shoe owner who has Equity typically in a property wants to take it out of their property and in turn is willing to send it to Nathan as a buyer and transfer the uh the property over to him and then allow him to make the payments what would you say the proper way or is there a concern with the due on sale Clause part of that first transaction so let's start with do on sale so if a let's just talk about an investor who wants to buy a home and they're going to buy it subject to the existing debt meaning that the seller's mortgage is being left in place number one one thing that we teach and preach here very heavily is you just don't buy that property you give that seller back a deed of trust to secure and protect them for always willing to protect our sellers out there because bad things happen to good investors all the time yeah and sometimes you just can't provide the seller a deed in Loom no but you want to make sure you're protected because we don't do that you act I think going back to 1980 that says a homeowner can convey their property into a financial planning Trust okay well you're not talking about the nasal planting pressure talking about a land trust most yeah so is that really a financial planning trust no now we're not here to tell the mortgage company what we did or didn't do which I understand they can figure that out and you convey The Beneficial interest I get it to the new um the new buyer who that might be and they may not know about it so it could be just fine but your goal is to buy that home let's say subject to the existing debt into a trust and you're on the flip side you're going to do a wrap around mortgage well guess what that wrap around mortgages do on sale if it's a due on sale why are you going to do it no you're not so it's just understanding there is a time in a place where a trust guys and I know we're off topic here a little bit but when you're looking at a buying a home subject to I have no objection to putting the property into a trust if you're going to live there yourself personally if you're going to buy it or lease it or if you're going to do a Fix and Flip got it but you're going to do a wrap around loan I prefer not to put it into a trust so there's a lot of this number that goes out in the marketplace and up and my two cents as to why there is is because somebody is trying to sell something to somebody to buy my land trust package oh and here's how this works and again if you're going to lease the property I agree with you if you're going to do a wrap around mortgage which is what we're all here to talk about a very wise thing to do so what is the best is it just keep the way it is what's the best way to trim train of ownership from the current borrower the 72 person to the buyer of may be buying a lawsuits so when we do a subject to type transaction and there is a mortgage the great majority of those mortgages have what is called a new on sale closet and guys do on sale means is what it means when you sell the property you're supposed to pay off your mortgage loan well over the years from what I understand that Clause has kind of morphed I mean many many other things you know it says that if you're you transfer this property into a trust and you assign The Beneficial interest of the trust do on sale comes in um obviously if you do a wrap around work and you sell it in that format even though you are still a liable party on that note which is what the bank cares about and the bank is still in first lien position they can still call the loan do I don't understand that guys I would love to get the the logic behind these Banks calling a do on sale loan when they're still a first lien position and her borrower is still their borrower nothing has changed yeah why is this an issue I don't know that answer why do they care they're getting a demon like mortgage companies care your small commercial Banks they get it and I have two parties for repayment in that regard they love it but anyway it that's that's one of those conundrums we may never know absolutely so do on sale I can talk about sometimes if you sign a leash for more than three years with your resident it could be a potential to do on sale it's all about control in my opinion by the mortgage that's all it is it's control Factor um but along the way I always ask two simple questions we'll see how smart you guys are okay what does a mortgage company really want money money-time payment that's it do you think they want to own a house I believe that of course I love the creation the other Finance note and the seller note I think it's one of the best ways to generate wealth out there I like it much better than the riddle game 10 times better than the Fix and Flip Game and it just depends of course on who you are you want to originate the note and hold it or do you want to buy the note and of course there's time it's using things like that involved so along with all those kind of things we became Texas's largest pardon money lender uh up through 2009 where obviously that quit for a while back in that game again and today we we are one of the foremost law firms that closes creative Finance transactions not only here in the Texas Marketplace but we're now National helping people close these deals we do go on processing and underwriting on a national level we have a Loan Servicing Company so we we play the legal side the title side nationally we are in the origination game as well uh The Lending game where home builders here so we kind of do everything that's vertically integrated within the scope of this uh residential real estate investment industry and all that means with all that stuff I just laid out into some 70 700 houses or so that we have done to date now it just gives you a wide knowledge base of our industry and what's out there and I heard you guys talk about some things earlier because you know you're talking about buying notes from Banks now I don't know who those banking clients work their traditional a plus type credit or not that might be defaulted mortgages or those kind of things or I don't know if you're buying paper such as the investor papers I'll call it out there along the way so there's you a brief history as fast as I can give you a brief history about going on at volume yeah I love it um it's awesome and for those who are curious we are streaming LinkedIn live Facebook so I'm just kind of managing to do that they're not that's why proposal is a problem for some years yeah mortgage companies are lenders they are not the real estate business and there's data out there that says when a mortgage company does foreclose on a home they lose tens of thousands of dollars on average why would you want to do that so by the way great answers guys and those are the universal answers across the board thumbs up baby fast across the board and it's common sense it when you realize that it helps you navigate that your mind a little bit of housing on sale works but it can still happen it does happen I will tell you in the sum 10 000 plus deals that I've closed I've only dealt with due on sale 10 times yeah but what you we always have our clients understand is is just because that might be my data it doesn't mean the next time it's not going to happen and even though I've been able to get around it through some various mechanisms it doesn't mean you can get around it the next time so there's always a risk factor that has to be considered as you go into these kind of transactions and what that's all about is is this disclosure which is one of the most important things to do when we're doing deals like that so do on sale is always an issue for consideration if the mortgage loan is being left in place doing a wrap around mortgaging things of that nature okay so I hope that explains do on sale correct and from what we've learned is the best way you're around it is to put the house no trust beneficiaries well let's just talk about that then so when you're talking about putting the house in a trust yeah you're not that the what people don't understand is is where that comes from is What's called the Garn Saint-Germain one mortgage company they knew exactly what we were doing but of course that bank or mortgage company sold to mortgage company a that sold to another company B and somehow my mortgages wound up Wells Fargo in Chase now of course the original lender that I had agreements with Etc everything was great and this is 15 years later perfect pay history Wells Fargo in the middle of the real estate crash calls one of my loans due and I'm talking to this poor young real estate attorney going what the heck you only have how many hundreds of thousands of defaulted mortgages and you're trying to call a fully performing loan due are you kidding anyway I've never I've never written my Senator before I was just that close to doing it though and it doesn't make sense that's how that's how the common sense this does not exist out there sometimes in the mortgage world absolutely so we have some questions coming in from our feeds uh first was about if a due on sale is triggered what is the worst case scenario that you've gone through and how did you resolve it well there are some things I I talk about on air some things I don't I'll just tell you that um there are potential ways to navigate uh getting around that it does involve putting the property into a trust eventually it's just that it requires three times the paperwork to do that because if that comes out they are going to require you to convey that property back to the original seller and and provide evidence of that and from there that's when we utilize the trust and some of their mechanisms that help us to to navigate that a little bit and again you know there is no 110 guarantee of this anywhere you go there's not 110 guaranteed anything I zero out there you really had to look at that and understand uh what was going on a little bit Texas specific no that's that's National okay Dodd-Frank is National but then um pardon me the eight percent over aprs yeah that's natural eight and a half percent over the apor and that's like there's an index you can look up online well worldwide usury laws uh [Music] probably not but usually to a consumer is going to be an 18 interest rate at least here in Texas right correct do some states are 10 and 12 it's crazy yeah I mean if you go beyond a 12 rate here in Texas there's some additional disclosures you need to provide the borrower that is what that's the armalo's job to do along the way okay and that's just part of the the rest but here in Texas the Constitutions to be able to do that um the the next level of that is one called high price and if you get to that category which guys that's really hard to get there you know then you have to have your borrower go online take a FHA an FHA course I believe you get a certificate and although I've never done that I never even looked at it so I don't ever intend to go that high but I think the certificate says hi I'm an idiot for letting you sell me a house instead of a high interest rate but it's one of those kind of things you want to do to ensure you cover your rear end out there because things can happen so from there you understand the levels of Dodd-Frank the most important thing with Dodd-Frank is what we call the ATR rule the ability to repay that's where the the buzzwords are we as an investor a seller must consider and verify the borrowers financial information provided that subject to well again this is who that buyer is if the buyer is an investor which is what it is instances you have to go back and ask a question what does your back end strategy if it's fixing flip live there or rental I'm okay with putting it into a land trust not a problem but if you're going to do a rack around mortgage for instance is all that we do uh in my offices then putting into a trust in my opinion is just a waste of time and move on gotcha so you you're not afraid to do on sale calls even though it's transferring from the borrower to the LLC uh you go back to those two simple questions right and by the way when you do things right you navigate insurance right you make your payments timely so you don't create an issue out there with somebody the great odds are there's not going to be a problem doesn't mean there won't be a problem it's just that I think you have some limitations out there that won't become a problem yeah and I remember this conversation coming up my very first snow conference in 2009 and it's and it's I think it's been a conversation that goes around around and and inevitably it all comes back to the same conclusion somebody says okay how many people have dealt with doing so do on sale and no hands go up I mean it does it happen obviously yes and it can but it's extremely rare so I I do think it's rare yeah but as a lawyer talking to a client we can't say it will never happen sure of course in real life it does happen it has happened yeah we have had to deal with it hey twice to me yeah one of my stories was this is back in uh probably 2013 or 14.

I had a house I had bought in 2000 I financed it with a uh a mortgage of Finance 50 houses at the same time as supposed to incorporate a knowledgeable real estate attorney into the transaction and but for Texas Most states you do that on every single deal you do Texas had a five popular Dimensions rules now three uh but really it was never more than three because you have to comply with respa if you do more than three transactions in a 12-month period and keep in mind guys we are talking about consumer loan not commercial loan uh the difference is a commercial loan is business purpose non-owner occupied consumer is owner occupied the whole world gets you know exacerbated when we deal with the consumer World which is what we're really taught so you've got to understand the basic tenet of the say that then we have this animal called the Dodd-Frank Act you keep hearing about always and it does apply to us because we are what they call a small predator unless somebody out there is doing five billion dollars a year or more in business and if you are you need to call us and talk to us you'd like to know who you are we're not a large Predator so kids are a little bit easier but todd-frank is there to protect the consumer from unscrupulous investors we know that those guys are out there unfortunately and you know they have three levels of Dodd-Frank they have qm which is qualified mortgage and we don't want to be there that's where the banks live because they're lower interest the next level is one called high cost and that is where if you have an existing mortgage on the property your annual percentage rate or the APR cannot exceed eight and a half percent over the AP or which is the annual Prime offer rate now rarely does it does anything get that high I've seen it a few times when the crime rate was really low almost um and so it's understand those kind of things we recommend and suggest it doesn't matter how many you do follow these rules and regulations every time it's how you protect yourself it's how you protect yourself from yourself because we all move too fast sometimes and the I I don't really know penalty is per se other than the fact that if you go through a foreclosure could this person come back and say you knowingly excuse me sold me a property you took my down payment knowing I couldn't afford this house you did this knowing I was going to default and so could that really happen and you can open your head in front of a judge right and there are people out there that do that I've never seen a lawsuit filed against an investor for something like that per se if I don't know if that's out there or not I've never seen that but the key is just be smart so now let me make another comment also yeah so you buy a someone an investor sells a home to a home buyer they get 20 down the guys moving the property they're making their payments years go by how many years I don't know here in Texas we have a four-year statute of limitations there comes a point in time when you can't complain about a few things because you've been doing it for too long now also the fact that they had money down is evidence that they had the ability to do a few things they've been making their payments in a reusable And Timely fashion I hope for a pay history of some sort that can be verified and and you roll from there you know one of the nice things is is the day when you use a loan servicer you have an independent third-party company to help insurance policy if the seller doesn't have it have them call their agent or the mortgage company there's one out there because I wanted to know what that loss pay e-clause so I want to get enough information when I'm buying this property I know what it is I'm buying and what I'm obligating myself to does it happen between the investor who's buying it and the borrower itself um things like the power of attorney to be able to negotiate in their behalf later in the process oh absolutely so in our disclosure packages um um hang on just one second guys yeah forgive me here my coffee got cold um asking when my gals will be warming up a little bit um you know we we provide an extensive disclosure package between the seller and the investor buyer in that package it does include Powers of Attorney uh specific to the property it includes uh authorization forms to communicate with the mortgage lender it contains things which has to do on sale Clause disclosures various other disclosures between the seller and buyers so that the seller knows exactly what they're doing you know can this seller ask for financial information from the investor sure I have never seen it happen they can uh do they want to use a loan servicer do they want to I mean they have all these things sellers don't know what they don't know correct and even if there's a realtor involved that Realtor doesn't know what they don't know right and rarely is a lawyer involved because usually the seller has the money to pay for it yeah and so because of that we try to idiot-proof these transactions with proper disclosures along the way so that everybody goes in they have an don't know about but we've been successful to navigate that the times I've had to deal with it out fortunately it hasn't been that much and it's just making certain that as investors who buy properties know what you're doing day one not day two especially your insurance is done right make sure your payments are done right things brought current don't be stupid and unfortunately that's a dangerous word in the investor industry because a lot of investors they are they don't pay attention with what they need to be paying attention to all right so now let's see so you've you've gone through you've created this let's talk about creating a wrap how are you doing that what's uh what are some strategies surrounding that oh wow guys so let's take a moment because there are two ways to create that rap or several race the underlying debt could be where there's an existing mortgage through let's say Bank of America yeah ABC more whatever it might be company out there maybe it's your small Commercial Bank maybe it's a private lender okay all that's great you still do the wraparound loan well what anyone who is going to create a wraparound loan has to know is first off what does the Safe Act say well most States you know the safac says that you will incorporate a residential mortgage loan originator which is a loan processor into the equation so that you can provide your rap fire the the respite and respa is the real estate settlement procedures act it's a federal law and there's some 36 disclosures to be provided to the buyer I can't do that y'all can't do that we don't want to do it you let alone processor do it and it's just like any traditional mortgage out and this a fact also says you're you maximize dollars in the market so let's back up for a second right if someone in the year is going to buy a subject to property because broad no buyers for ourselves we're going to try we're going to get to the end here for no buyers here but for someone who's going to buy a subject to and get that transfer over to them we're being told you need a power of attorney and paperwork or that what are some of the items like on a list of what people should gather together from The Substitute borrower just transfer to the investor who's going to wrap the new what should they what kind of documents should they collect okay so we're talking about Acquisitions of property yes yeah yep that original so for instance here in our law firm and we close these transactions nationally for everybody because we like to make sure there's proper disclosures out there and that everybody goes in these deals with their eyes wide open do on sale number one and of course we want to make sure that our seller understands they're still liable on that debt until it's paid off those are the two most important things we're trying to get disclosed along the way but if I'm buying a subject to property um I want a mortgage statement and by the way most sub twos that we buy are a lot that we buy are in pre-foreclosure meaning the mortgage statement that is being originated today isn't the same as it may have been six months ago pretty default so I need to know what it is today in a pre-default so I get all the terms of that loan loan balance interest rate things of that nature EI payment escrow payment is there a mortgage insurance associated with the loan things of that nature I want to get a copy of the note indeed a trust if possible so what if your borrower doesn't have it or your borrower can contact the mortgage company and they'll finally email them a copy of the Native trash I'm going to get a copy of the policy because if not the lender when they get the policy will kick it out so you have to learn how to navigate these now so let's go ahead now let's say we're gonna shift gears here because I want to move towards where the note buyers who are listening in we're probably going I don't understand any of this stuff and I'm never gonna origin no so let I want to ship gears to the point where we're going to talk more for flip to the other side of things and for the note buyer who's gonna the subject to borrower sell it to an investor this investor then wraps that note right and then I come in and I'm gonna buy that wrap dough for those who don't understand this stuff typically what happens is that original note maybe a two three four percent no I come in I buy the note I or I buy the the W2 part of it the borrower sent it to me I now take over payments on that three four percent I then sell that note at nine nine and a half ten whatever I'm selling it at and I'm gonna make payments through that first or pay off the first those two scenarios will get to in a second now as a buyer before we get into if we're going to pay off the first or not how do I properly get that power attorney transferred to me for say Nathan who is the investor who purchased the subitute part of it that's a hard thing to do so I thought so years ago here in Dallas some of my buddies and I in a meeting one day kind of coined this term called sub three now you got substitute now you got sub three which is divine of the rap notes but leaving the existing Mortgage in place and again to me this is all about disclosure where although you don't have to disclose certain things at this level it's a wise thing to do you know I want to make certain first because now you've got to buy the entire note or rewind and pay off that underlying debt yeah whatever it might be get it that's the easy part for the note buying business I think the only issue there is is and by the way as to the origination of that mortgage Etc all that stuff is gone because of the underlying debt because you paid it off the non-issue anymore is to ensure that that bar work has the ability to pay and things of that nature was the investor under Dodd-Frank at the time that this was originated right did they process the buyer to determine that and then based upon many variables such as the pay history the down payment things of that nature you make that decision is it worth going ahead and buying this notes so let's get some numbers for those that people are curious because I think we're getting some questions regarding like they don't understand this what we're trying to do let me lay this out as simple as I can so investor a buys a property subject to the existing debt that debt is left in place so now the seller is no longer the owner of the property they became they become more or less the bank to the you know the investor eight in a sense yeah from there they um they um they own the property they're navigating this loan maybe they brought this mortgage current because it was in default uh whatever that might look like uh out there along the way um which is let me let me give some numbers for people that probably easier so I know Marshall had a question why would anyone do this let's imagine you have a subject to 50 000 first balance loan right and that's a three percent interest rate you verify the painter being made sure uh just like if you're buying a loan from a mortgage company or a bank they provide you a pay history I'm sure that is verifiable and it comes in from a legitimate company source now here in my offices we have our software that allows us to print out a pay history and we can demonstrate when they pay are they paying on time are they paying late are they paying more than 30 days late and you can demonstrate those things which we as investors if you're buying a note you want to know those kind of things to make an informed decision and as if you see these notes out there being originated and there is no blessing I think it's just being cautious maybe it is it's hard to go back and reconstruct the deal so it's kind of hard to put the baby back you know once it's born but um and it's done and if you're buying this property from an investor maybe there's some risks to navigate I don't know what that risk is per se but um it's just being wise maybe asking that investors sell and provide you some evidence as much as possible and gosh I go back to guys to 1992 30.

30 years ago 30 years ago um I don't feel like I'm that old but originally we just took an application only we didn't get verifications of employment or rent we didn't get W-2s and so we started selling our first book package we went oh my gosh we get how much more money by having a what we call a pretty package yeah fully documented with you from your collateral package perspective which is important out there and again for for the investor who does the these loan originations we're going to do that every time no matter what just because it does help opportunity to read the paperwork understand what they're doing and they move forward to the next level so we go through a proper disclosure package and I have a philosophy of we we don't close that deal in one day I like to wait a minimum of 10 to 14 days for closing why I want to give this seller every opportunity to review that paperwork the Council of their choice whether that's through a realtor a lawyer a financial advisor somebody now will they do it usually not but it doesn't matter I want to give them that opportunity it's just a smart thing to do the only time you do something faster is if you are an imminent foreclosure we close lots of deals the day before or two days before the Foreclosure out and there are exemptions for that that instance different scenario but if you have the time if the seller some time just to do that it's a Fail-Safe scenario it's about learning how to be smart it's how you're you stay in this business for a long time by by trying to be as smart as you possibly can along the way now disclosure package is so important getting the proper information and if there is a law firm in maybe this has already been accelerated for foreclosures I think maybe we have to contend with that law firm and or the mortgage company or both in order to get a reinstatement type agreement from them so we know what needs to be paid at the closing to bring this loan current gotcha so you have to know those kind of things equally as important if you're buying a sub 2 deal you better know how to navigate insurance if I'm getting a new insurance policy or if I'm going to sell this home using a wrap around loan to my my wrap buyer over here at emergency new policy that rap buyer in the original seller need to be coinsurance on that insurance you need a note seller to be willing to sell that to you at a discount that's the easy math you described and it doesn't matter how that loan was was bought and then sold now the question becomes the investor buys this home subject to the debt as you said it has a three percent interest rate on it's at this let's say the loan balance is seventy thousand dollars and investor a who bought that home subject to sold it for 100 I sold it I'm subject I'm investor a I'm gonna sell to Scott who's the rock buyer he's a new borrower we're using the original number fifty thousand dollar first I buy it I get into that property for five six grand for that subject to with the borrower for the property may be worth 150 Grand 130 Grand I'm gonna sell to Scott my new borrower for 150 000 dollars and I take 10 12 20 down on that loan and then Nathan comes in and see the note buyer the rap buyer things get paid off the first or keep the first and keep making payments to that first but the problem we're running into is that power of attorney from the original borrower right has to transfer from me who bought the subject to right to Nathan now he's a power of attorney from the original borrower of the subject II part to be able to act on behalf of that borrower and deal with that first lead asset would that be accurate that is accurate the problem of course is how do you get it and the great odds are you're not going to get it gotcha that's number one number two if you are investor a who bought the home subject to and you have the power of attorney between you and the original seller off that the person who bought this the rap buyer you know was given proper disclosures along the way and again most videos every second I want to make sure people understand what that means they have to be notified that there is a first lien that Substitute part of it they didn't know that because when they're buying it they may think they're in first position and they pay off their loans they need to know there's another lien there because that lien can foreclose on that property right and here in Texas by the way guys we have what is called the Texas underlying lean disclosure notice and it is a mandatory seven days prior to closing and if you do not provide that the damages are substantial and I I have spoken to people that have not given that disclosure and I just go oh my goodness like must you know you're in my way I don't know who drafts their mortgage documents for them but when you're doing a wraparound loan you're supposed to have a language in those documents yes that evidences the existence of the underlying mortgage you know in the deed and the note indeed of trust Etc and if you're not doing that that's a problem um and I'm not so sure how you go back and and do it again as the other problem once it's already done um so you have this rap mortgage that exists I think almost half a second would you please yes and as soon as chat I have a couple of the questions are coming into so yeah this is another question I started drilling at you I think so um you know when we're gonna buy this rap note how can you I know if I'm going to buy the rap notes I want to make certain I get all the information about the underlying mortgage this is if I'm buying the house originally what does the note do to trust what was the and by the way when we do a subject to I come in but Nathan comes in he's the investor he toss the subject to gets it situation and then he wraps it with the borrower Scott's the borrower he wraps that loan for 150 000 gets 25 000 hours of down payment right now that loan's 125 000 lean at say 10 percent so he now has a fifty thousand dollar first balance at three percent she can continue paying that and he has a loan for 125 000 at 10 now he may got into this wrap for five six thousand dollars with that 72 buyer or 72 borrower the original borrower and says listen I'm gonna give you five grand you move out we'll make things happen I'll pay for everything so that that first initial investor me I'm out five grand I sell to Scott the new borrower he gives me 25 000 down I'm now positive 20 grand and that's your Nathan comes in as a note buyer and says listen I see you have 125 000 lien and a 50 000 first I'll pay off the first but I'll pay you 75 000 for the year 125 000 loan I doubt he'll pay off the first for 50.

he's now into a 75 000 first lien now for twenty five thousand dollars at a 10 yield Marshall I'm thinking that would probably kind of solve your question there and why would anyone do that I think the yield would be probably pretty good killer dude yeah so the reason you do when you buy a mortgage and you pay all cash for that mortgage then you're buying the face rate of that mortgage and if you're buying it at a discount do the math of what your yield is on that mortgage nine percent 12 16 whatever it might be okay but in order to accomplish those higher yields you're typically buying it for a discount and making seven percent on the 75 you're making 10 of the difference not a bad yield return overall and this really is a cash flow game along the way and how you look at this and I'll give you an example of what what I mean by that in a moment and how you kind of play this up to game uh with wrap around notes in the back end and things of that nature but it's just you you get as much as you can get it's knowing what you need to get in order to make sure you document your file you know I want to get the entire collateral package to the rap fire get as much info and hopefully this investor did something rather than just willy-nilly going out there and sell it with no information hopefully there's at least a 1003 application right you know did he get tax returns I don't know I hope so was he under doc Frank maybe I want to have him sign an affidavit saying that when this loan was originated he did not have to do this in some format now by the way remember you're not Exempted from the Safe Act you might be Exempted from Dodd-Frank but you still should have done this and the question becomes are we as a note buyer who's a third-party note buyer do we get catapulted into that note seller's position or not for failure to originate I don't have that answer could it be a a possibility maybe uh there's probably some uh difference there that we're not but we aren't the person who originated and I think the liability lies with the person who originated so again as that the buyer of this wraparound note I believe what we need to do is just be very wise gather as much information as we possibly can get the collateral package yeah the note one way or the other sell my notes pay it off with cash Finance it out of bank whatever it might be no cover your rear and make sure you've got the ability to do that yeah that's that's not the hard thing to do you're always looking at Playing devil's advocate so that if the worst does happen you're able to do it that's what keeps your noses clean out there if you can't do that I don't know how to put again well enough you do not want to do the game then right um and I'll give you an example of that too but the other thing is is besides understanding those things and knowing what your exit strategy is is be prepared to make your payments what if your borrower your note the rat buyer defaults or if they file bankruptcy real life things happen right you have to continue making that payment regardless and that's where a lot of people in the investment Community Coach South yeah well my buyer didn't pay me I'm not looking the working company you're not willing to play that game don't play the game at all so we get that so if our buyer defaults by the way my default rate guys for the last since 0809 under one percent wow I wish it was a lot higher because I've got tens and tens and tens of millions sitting out there in equity I'd love to capture it just doesn't happen so let me just get the situation that I was talking about where if I bought that wrap and I would want to pay off the first does that work is that is that a viable yeah solution yeah okay absolutely you know some examples real quick you know a negative example I'll give you a positive one so have a house here in the DFW area where seller sold the house to an investor using David's Land Trust in this case the seller is a little desperate they're out they've got another house they can't afford two payments a house can't sell the way it is and shoot them the money to fix it so she's stuck coming to an investor to buy it unfortunately um and they need to move quickly sometimes you don't have time to do anything else so I'm gonna be out of pocket by the time I pay this thirty thousand dollars to 17 000 my interest carry taxes Etc I'm some 53 55 000 out of pocket first off you need money to play the game or to be able to borrow money to play the game secondly as you said when I sell my house for let's say 290 I might get 29 000 down payment we'll talk about a down payment in a moment and maybe I've got to pay attention to a realtor or somebody who brought that deal into me but maybe I net 20 000 bucks if I take that twenty thousand dollars it diminishes my 55 to 35 000 out of pocket okay so I still needed that 35 000 out of pocket to play this game but my positive cash flow between what the buyer is paying me and when I'm paying the mortgage company is fifteen hundred dollars a month if you wanted to use a quick calculation hey what's the return on your 35 it's huge or maybe you borrowed that 35 from a private lender you're paying them a six percent rate and eight percent ten percent whatever the number might be averaging it up how fast could you pay it off right two years two and a half years now your borrower owes you 260 000 in a couple of years what do you owe the mortgage company maybe 140.

look at that you've got this huge spread so then the wrap buyer the the investor who was by that rap loan comes in you know and let's say Nathan is investor B who wants to buy the note unless you can go to that seller and get a new POA which is problematic then maybe Nathan could get the POA from you relative to this property you provide him your original wage well he controls both Simon of Poa more or less but I'm not sure how else you can do that yeah and so there's a certain navigation there by the way if you handle these transactions properly the great odds of having to deal with the mortgage company the great odds of having to provide this power attorney to the mortgage company smart along the way slim to none why I like to recommend and suggest you navigate everything online and so long as that loan is current and maintain current so long as you have the access information online to navigate everything the the great odds are you don't have to worry about it okay but could you yes what I would so if I can't go back to that original seller I can't get the direct POA I'll at least get one from investor a so that I at least had his and I had his original POA that I can provide to either a future title company or I can provide to the mortgage company as needed so in other words you do the best you can like anything else there's always a little risk for our business how we navigate this done when I enter into these kind of transactions and I buy this rat mortgage so this 150 000 sale 25 000 down to 125 note at 10 let's say and this underlying that might be seventy five thousand dollars whatever it is at three percent well obviously you know yeah I'm getting 10 on 125.

I'm only paying three percent on 75 when you're buyer whatever or the rap fire get the entire contract package and disclosures Etc between the seller find out what was out there find out did investor a who bought the subject 2 deal did they give this seller a need to trust to secure performance in some format in order to protect them in case something happens to you as an investors so most people don't know what you're saying there is that we were talking with a rap alone uh rap fire yo day about those you know performance deed and we said you can't do deed and lose with stuff and he said no it wasn't for that it was for the fact the investor who's getting into the subject to it's a deed of a performance that if you fail that them that base of that property over back to that original subject to deed owner which is awesome yeah yeah so one of the question that came up was uh from our our few people we had um one was a great comment from investor addicts but I'll get to that in a second from Cindy uh Coleman which is one of our regulars would having two a co-inserve to a YouTube two a co-insurers on a insurance policy you tip off for the bank for a two on sale clause well again you have to understand a mortgage company wants their borrower to be an insurer yeah so if the home buyer a buyer buys this property they have to be an insured because they're now the actual owner of the property right now remember someone has that sellers the original sellers power of attorney to handle the real estate the insurance taxes Etc on that property and it's just a Fail-Safe for protection in that instance I'm not worried about the seller per se from the insurance policies perspective but you have to have that there and just or else the insurance company will kick it out excuse me the mortgage company will take it back out could you in the POA what if the POA gives mission to the investor a and it's signs can you put an assignment inside of a POA to kind of resolve that because you know you're probably going to sell the note in the future ah maybe you know when you start talking about things like this yeah we can get off of the weeds so fast yeah you know can a seller give can I give David a POA and at the same time authorize David to give Nathan a potential POA whose name I don't know gotcha I don't know that answer could you put it in there maybe would it work Maybe but I think if David gave a POA to Nathan and Nathan has one of those original poas I think Nathan at least is in the best position he can be in most likely that's the cleanest yeah and again if you're gonna do a deal like this and guys this is truly a cash flow business okay yeah sometimes it is a legitimate Equity business that we all look for oftentimes it's a cash flow business as well because you're able to capture great interest rates along the way but the key to preventing the negativity that can come out of this so a when you go into it you got to realize what's the worst things that could happen and be prepared to handle that okay if something was to come up am I prepared to pay off that yet could you hold that and pay 336 a month and be basically tapping 700 a month payment absolutely yeah what we're saying here is to deal with all the issues of Poa and deal with the first borrower and that worrisome it's much easier to go see forget it I can either pay 25 000 and get into the whole world right and have 125 000 note and a 50 Grand note there or I can flip it and say I'll instead of paid 25 off being 75 pay off the 50.

through escrow and they have a 25 000 payment to me and now his loan there's no fifty thousand dollar balance he's now into a student work he's buying a hundred uh basically 75 000 an hour first lien for 25 Grand and then he's getting a thousand eighty seven a month yep so then if that sounds confusing don't do it better yet give your money Dave and I and we'll go this is gonna be if you run the yield on that I'm gonna run it alive and we're talking here and what the return is on this thing right I now know what your game is guys it's crazy well I see people jump on the thing somebody run on a different site here so you guys can play with that one um but let me give you an example the same lie to what you're doing this is from the originator's perspective but it's the same game so we're looking at buying a home right now where there's 145 000 first lean three and a half percent yeah I've got to pay the seller thirty thousand dollars to buy this property it needs seventeen thousand dollars of work so I'm all in it let's let's call it 190 for easy numbers and the house has a value of 290.

nice but I have to create money into it sure than they are in other states we have two different documents that must mandatory to be provided to the buyer a minimum of seven days in advance of closing and if you don't and if you don't close on a law office or a pilot company it's void not avoidable it's void that's pretty heavy if you don't provide these disclosures properly they can ask for their money back at any time five years from now they can ask it back and you may have to pay back everything down payment all monthly payments Piti Etc they put some serious teeth in it so you have to understand that these things are out there now we get it very well here this is what we do and we're on top of this and we follow and then they have this new rap your lending lessons if you do more than three transactions in 12 months you have to be a licensed rmlo your company has been registered to the state of Texas for the savings loan Administration now we we compile all that and we have we have ways to get around it here in the Texas Marketplace now I really doubt any other state has that out there we have it because we're one of the biggest states for this because of our borders with Mexico and things of that nature create the situation but if you're going to play that game in the Texas Marketplace you need to know this so you can ask the right questions up front in advance and of course There's real quick guilt we're not sure we're punishing your question so I apologize um Nathan do you understand Gil's questionable I don't sorry okay so if you can reword it whatever I know we'll be finished in pretty soon this will be recorded to be on YouTube and Facebook and linked everything else so feel free to check it out we'll also have a podcast well which will be all audio I'm not sure if we fully understand your question there so um so I'm I'm hoping that everybody in your world Scott everybody that that you're connected with is is getting the vision of what is possible when they sell that note yeah and you've got this huge Equity spread that you negotiate with your investment I am 25 000 in order to get this rap loan to where it might be so now you capture this fifteen hundred dollars a month positive cash flow or the 25 000 cash maybe you had to pay them 35 000.

maybe you gotta pay him 50 for it it's still an awesome return I'm just sitting here running the numbers a little quicker with my handy dandy yeah while you're doing those numbers I figured out that Nathan bought my deal he's getting a 17.28 return on that money right there yeah mine's a 36 return by the way what I just did yeah yeah and I look at it and I go yeah I'm gonna ask anyone out there in another space who's getting 17s and 30s right now believe me when we first got started 30s and 40s were all over the place we're great but you tell me where you're gonna get your 20s and 30s on a regular basis besides buying these wraps so I know wanted to get here yeah this should start opening Windows for note buyers as well as Rap by people buying rap of creating wraps that you can speak to us me Nathan no one else will bodies right and and sell it to us we'll pay you really good money for your new of this so this is a learned system that you have to understand you have to understand the acquisition mechanisms how you do it the right way you have to understand how do you do a wrap around mortgage the right way what are the influences out there by the way like here in Texas yes we have the same time Dodd-Frank these things that we have to comply with right but we have our Texas property code which is a little bit more strenuous yeah interest rates rise and fall I get it right now you know your your banking rates are horrible from where they were 10 years ago from where they were a year ago they've gone up three percent you know or more and it makes changes and sometimes learning this thing we're talking about gives you an advantage to uh capture some better rates and better returns than going to your your local bank that's out the right but there's a knowledge base that we want you know everybody to learn because again knowledge is power in our business yeah so then given given our current climate uh final question everyone it's our current climate now are you talking Canadian climate are you talking to Texas real estate climate like we're you know we're seeing Rising interest rates dip down a little bit it's going back up uh inflation all these things it it sounds like a perfect perfect storm for seller finance creative Finance people is that accurate I think it is 110 accurate yeah um my offices we are both a cash buyer we are a term spotter but as you know our banking rates have been increasing it doesn't matter you don't still buy a good deal for cash when it comes across the table but we are turning our focus more to the creative Finance side because it's the smart thing to do yeah fascinating so what I'm hearing is there's tons of opportunity for the note buyers and the note creative note sellers to get together and and come together and get married yeah we can do a lot of really great deals it's been awesome a while it's got It's been a really pleasure to have you on here having it turning on here for some people is overwhelming right um some of you are scared of attorneys but I I was one of them when I first got started yeah and this is this is the group we want to come to DME come meet us we are we're dying to buy your stuff yes you're appreciating and creating wraps but it's DME is not expensive to go to the hotel rooms are 200 bucks a night it's one of the cheapest place you can go to um get down and you know check out because you're going to meet people like Nathan and I who are going we'll buy for you and you're gonna get a kill the return because you can go do this multiple times yeah and we'll keep funding it over and over again foreign guys this is an awesome business yeah yeah we want people to learn how to do it the right way absolutely we want if you're and if you're the originator of this paper based on how to do it right yes don't be just haphazard go out and do it understand there are consequences that can happen take the time and get yourself educated properly next I understand that in the marketplace people aren't like me I'm not the rehabber I love real maybe you're just a note buyer that you don't have the time or the bill to do it one by the note if you make a lower return got it got it but you still have to learn the basics of the business have resources for doing it and realize what can be done out there and it's a lot of fun and they're I don't know where else you invest your money to get the returns and yields that we get out there it's just this kind of it and it's not and I'm not putting money in the stock market and once I think up and down 47 times a day okay you know it may not be a and I'm not doing multi-family there's a whole other world for that out there yeah people think it's just the the best thing guys what we're talking about today to me is awesome it's been a business that is important 30 plus years I've been in business it's never gone away interest they can come check us out there about all of our contact info and those kind of items sure if you send an email to if you filled the form we'll send you directly all the information he's he's sharing with you now so it's easily clean simple you'll get the information emailed to you and it'll be in your inbox and thinking all we want to do is be a service to our community this is a great business we don't want it to go away we don't want the government to come in and put more rules and regulations against us and there is even a national owner financed uh company that has a presence in Washington um that is headed up by Eddie speed and I think Glenn Lee out of Houston headed up and they're out there fighting for us to make sure that Washington come in and change the rules nationally as well and that we can maintain doing this business all the way through that would probably be the same group with John hire and and uh it is who else is on there Jeff Watson yeah yeah yeah good guys all the same all good people we know all those guys yeah really anyway um small community as you all say we are tight-knit out there but it's an awesome business and uh y'all just keep maintaining it and just help everybody do it right help them make some more money too absolutely yeah absolutely well I believe it's great thank you Scott it's been awesome to have you on here um it's amazing that people don't know about the stuff I was one of them um but it's good to see the fact that we can have a conversation and Bridge the connection between you guys and us our rich self-regiators as well as build buyers uh because business 2023 will depend on it um it'll be really awesome so Scott I appreciate you jumping on with us and spend some time with us um and look forward to doing it next time in yeah for a while now so I appreciate it thank you Nathan stay warm in Canada absolutely bye guys um but you're there to Keep Us Safe Keep Us protected keep us out of jail right so I encourage those people we have a I have a link inside the chat that you can go to click a button you can automatic email with Scott's information reach out to Scott's team over there um they're great you know answer a lot of your questions if you need to and get into stuff if you're creating raps and stuff like that please do it right because if you don't do it right we can't buy it right easy and simple and you can get yourself in more trouble and guys if I may with your permission just make a few comments so sure we have a company here in Texas it's called the owner finance Network and the email is the ownerpinanced network.com that's our vertically integrated company where all the people on your call and others can find all of our vertically integrated services from legal and title not just in Texas but National I can't represent anybody in other states but we provide Closing Services for them along the way whether it's closing a note which is pretty easy to do and or placing title on it or is it um the origination side of the transaction we have our rmlo and loan processing Services by weapon processing we have our Loan Servicing here ofn Loan Servicing which is a partnership with home key Servicing we have other things for the Texas Marketplace that if you're in the Texas Arena you need to know a weapon lending which helps us to navigate these new rules and regulations out there and of course we just announced a weapon National Escrow Services to our new entity which is uh for the Escrow Services to handle these kind of transactions on National basis just because we find there's such a void out there uh in this world of attorneys or other people who have a knowledge of this business out there so if anybody has an um I encourage you guys to go take a look at it it's gonna be like no other no conference you've been to before it's Bridging the Gap between no buyers and no Originators yeah one of my major things about the whole conference is I want buyers and sellers to come together and not just like Hi how are you like I'm talking we're gonna make deals I want you to be walking away and saying okay so Monday morning send me over the collateral file and I'll review it and then within a week we'll we'll close kind of thing like I want deals to to really come out of this so I'm excited to bring that together besides being a ton of fun it's Nashville it's going to be a really great time throwing and everything to me really cool thing so I think that what we're trying to do is Bridge put a bridge between two different groups of people right Originators rap wound creators as well as note buyers but we don't know how each other work so yeah we're going to get into what we're going to talk today about but we're feeling that this is the world we're going to live in for the next period of time because the returns are great for both sides returns are great and then uh with Rising interest rates people can't qualify for a bank banks have this you know very narrow window of what they can and cannot do um when you're dealing with people rather than Banks you'll find they're far more flexible and that interest rate may not get any better for you probably even a little bit worse but you'll be able to afford a home and that's uh that's really what The Originators bring to the table so absolutely I love that side of the business I've done a bunch of originations that's how I started in notes uh so I'm excited to kind of come full circle and start talking about to a bunch of these Originators now again let's and before we get there uh Nathan and I do run a advanced note uh investing weekly class for those who were not familiar with the class about we talk about of course the big big one is the big top player we work with a non-performing big calculator that you can literally plug and play tomorrow and get working not the simple performance calculator which we do teach but we talk about that we talk about due diligence systems managing your systems managing your providers uh and those who join the uh classes have been blown away in their experience investors too joining us yeah and that's the thing where you know we're not looking for necessarily fresh off the boat beginners we're looking for people that have some education that have taken maybe a class or two read a couple of books whatever it's been but they have some kind of education behind them or even a little bit of experience we want to take those people and really help them ramp it up because this is a fantastic business but you have to know what you're doing and more education the better and we're running into too many people who just don't get it right they they don't know the math which is crucial in a space right we talk about don't bidding on BPO or upb because it's a byproduct and it really takes out the calculations probably the note which is what you're buying you're buying a note so we talk about a lot of that stuff and the non-performing calculator is very very big because you're including States differences including timeline differences and costs especially with patients and everything that comes into play so yeah there's a lot to it so educate yourself because yeah this is not really we've said that over and over again this is not real estate this is attached to real estate this is adjacent to real estate it's related to real estate but it's nice yes so if you are regioning notes I hopefully you get the note math if you don't let us know if you're a note buyer and you don't get the math let us know yeah but what we're trying to do today is really bridge the gap by bringing in somebody who's extremely experienced that could talk for probably three days about this topic um that this I'm bringing him in and we're screaming him and now Scott horn is from Texas and he's been dealing with originating notes and loans and things like that and all other facets we're bringing back on for for years and years so Scott thank you and Welcome to our Friday Live Well great to be here guys the topic that I love to talk about well the only thing I love talking more about that's more fun is me no this is good so we wanted to know first of all like where where did you come from how did you get into what you're doing now and what's kind of been your progression and you'd realize that's a two-day conversation right I'm trying to keep it to around five minutes or so so real quick I'm a uh civil engineer undergrad who went to law school because I graduated when I was 20 years old and I wasn't ready to grow up again right and uh went to law school got my law degree with postal practice law got a job and this goes back before y'all's time probably it's at 1984.85 and you may remember what happened then which was probably one of the huge real estate crash that went on so my one job I had lasted for a whole year and I was in a real estate development company as an in-house Council and when you're coming out in the street what you don't realize when you're a young kid no one's hiring in the middle of a major recession you know uh at least not in in my world they were and you've got to figure out what you want to do go through the Litany of things on how I started learning things from making creative offers on properties just trying to figure do to Property Management which is really where I learned to do things and um you know when I when I teach classes here in the Texas Marketplace often tell people you know I went out and I put together 100 duplexes to buy at one time put together the money everything that we call a syndication when you marry it all together and uh then they change the tax laws then just cratered everything in the market and of course that deal died well most people would just walk away and instead I just called the bank to her foreclosing on this stuff ask me what they're going to do and they needed help and they hired me to be their property manager or the 800 duplexes of course I had never managed anything in my entire life spent the next three weeks in the SMU law library trying to read up and learn how to do it back in those days guys we had to use this novel thing called the typewriter the type your own leases and all this kind of stuff and when you do that you'll learn it the end grains in your head anyway one thing to the next over the next many years of the commercial real estate world trying to figure things out what you don't realize back then when you're young real estate doesn't move in a real estate crash and recession you simply don't know what you don't know and anyway got involved um had a general contract or a friend of mine who was in one of these duplexes who I had met we decided to buy our first half we got a private lender to do it put it together and sold it that was the first deal we did uh down the road I had a young man come in my office one day and ask me if I knew what Equity was under FHA we kind of hooked up and we started buying houses back in the late 1980s early 1990s using what is now known as hard money of course back then it wasn't called hard money and we were only doing one or two houses a year and we were learning the business and over time we built and grew that where we were actually by about 1992 we were buying 20 plus houses a month and rehabbing and when you're doing that what you learned real quick is when you're buying 20 houses every month they're all rehabs you can't sell them cash you know the next month that they take time and by courts by the time you do two or three months you've got 60 houses in portfolio that are in some form of construction or marketing and what you learn is you learn the creative Finance game and back then we were able to do things such as lease options lease purchases contract for deeds and we found the mechanism to get our properties income producing and uh we would generate mortgages that we would hold in escrow and we learned the the note game back then story is I don't know if you know the name Ken D'Angelo or not and as the guy who started home investors was here in Dallas and so we were flipping houses back and forth with Ken and we'd sit around we'd just brainstorming how to how to do things how make things happen which is what we all try to do in our industry right as investors how can we buy notes better houses better what it might be and anyway we would put together the system we started selling notes and we didn't even know we could sell notes back in those days and um they were wrap around loans but of course when our note buyers would buy them they'd pay off the underlying debt and we were selling the whole note at that time and you create a different strategy and we moved away from the retail World almost 100 exclusive into the creative Finance world of either buying homes with cash or Bank financing doing our wrap loans seasoning and selling them into the secondary Marketplace and back in those days we weren't doing a lot of creative Finance deals on the front end of the transaction because you didn't have to and over time we became one of the largest providers of owner finances paper into the secondary Marketplace you learned that industry very well and of course we come across good old 2008 2009 when the whole world came in around our ears again which is what really changed a lot of things as they've changed more compliance issues ETC the banking World changed quite a bit and the creative Finance world really started to Blossom that point in time and along the way this is where the what they call buying homes subject to the existing debt came into play uh buying with a wrap around seller financing and then a lot of people were also selling the homes using wraparound mortgages because I know one of the things that you guys are running into right in 2012 2013 you know they start changing here in Texas our property code is changing to adapt for this a little bit The Safe Act that is initiated good old dodd-frankers initiated which actually covers Us smaller people as a small predator and you have to start to adapt to those items prior to that the loan servicing game didn't exist for owner finance paper prior to that the rmlo the presidential mortgage loan originator didn't exist yes we processed our buyers but we did it all internally not utilizing the rmlo and um all of this started coming to to the Forefront um because of our what we do in the industry we were the guys who initiated all those Industries here in Texas from the loan servicing for the armalo and started to push that out into our Marketplace because nobody was doing and we started to teach people here how to do this business and why it works and I believe that of course I love the creation the other Finance note and the seller note I think it's one of the best ways to generate wealth out there I like it much better than the riddle game 10 times better than the Fix and Flip Game and it just depends of course on who you are you want to originate the note and hold it or do you want to buy the note and of course there's time it's using things like that involved so along with all those kind of things we became Texas's largest pardon money lender uh up through 2009 where obviously that quit for a while back in that game again and today we we are one of the foremost law firms that closes creative Finance transactions not only here in the Texas Marketplace but we're now National helping people close these deals we do go on processing and underwriting on a national level we have a Loan Servicing Company so we we play the legal side the title side nationally we are in the origination game as well uh The Lending game where home builders here so we kind of do everything that's vertically integrated within the scope of this uh residential real estate investment industry and all that means with all that stuff I just laid out into some 70 700 houses or so that we have done to date now it just gives you a wide knowledge base of our industry and what's out there and I heard you guys talk about some things earlier because you know you're talking about buying notes from Banks now I don't know who those banking clients work their traditional a plus type credit or not that might be defaulted mortgages or those kind of things or I don't know if you're buying paper such as the investor papers I'll call it out there along the way so there's you a brief history as fast as I can give you a brief history about going on at volume yeah I love it um it's awesome and for those who are curious we are streaming LinkedIn live Facebook so I'm just kind of managing that stuff and inside uh the Facebook live is a link if you want to get Scott's information or ask questions I have a link in there I'll give you a quick quick form and we will provide you Scott's information um we're going to focus today on the rap loan World which I really wasn't involved up to a couple years ago and you're finding out how big it is it is tremendously large um and what they're doing summer doing it right but most are required and let's start with the fact that most rap loans are are done with us you know some accused situation or dominant subject to and for definition subject two is basically you're going to take over another borrower's debt and make payments on their behalf so for whatever reason a Civic shoe owner who has Equity typically in a property wants to take it out of their property and in turn is willing to send it to Nathan as a buyer and transfer the uh the property over to him and then allow him to make the payments what would you say the proper way or is there a concern with the due on sale Clause part of that first transaction so let's start with do on sale so if a let's just talk about an investor who wants to buy a home and they're going to buy it subject to the existing debt meaning that the seller's mortgage is being left in place number one one thing that we teach and preach here very heavily is you just don't buy that property you give that seller back a deed of trust to secure and protect them for always willing to protect our sellers out there because bad things happen to good investors all the time yeah and sometimes you just can't provide the seller a deed in Loom no but you want to make sure you're protected because we don't do that you may be buying a lawsuits so when we do a subject to type transaction and there is a mortgage the great majority of those mortgages have what is called a new on sale closet and guys do on sale means is what it means when you sell the property you're supposed to pay off your mortgage loan well over the years from what I understand that Clause has kind of morphed I mean many many other things you know it says that if you're you transfer this property into a trust and you assign The Beneficial interest of the trust do on sale comes in um obviously if you do a wrap around work and you sell it in that format even though you are still a liable party on that note which is what the bank cares about and the bank is still in first lien position they can still call the loan do I don't understand that guys I would love to get the the logic behind these Banks calling a do on sale loan when they're still a first lien position and her borrower is still their borrower nothing has changed yeah why is this an issue I don't know that answer why do they care they're getting a demon like mortgage companies care your small commercial Banks they get it and I have two parties for repayment in that regard they love it but anyway it that's that's one of those conundrums we may never know absolutely so do on sale I can talk about sometimes if you sign a leash for more than three years with your resident it could be a potential to do on sale it's all about control in my opinion by the mortgage that's all it is it's control Factor um but along the way I always ask two simple questions we'll see how smart you guys are okay what does a mortgage company really want money money-time payment that's it do you think they want to own a house to do that they're not that's why proposal is a problem for some years yeah mortgage companies are lenders they are not the real estate business and there's data out there that says when a mortgage company does foreclose on a home they lose tens of thousands of dollars on average why would you want to do that so by the way great answers guys and those are the universal answers across the board thumbs up baby fast across the board and it's common sense it when you realize that it helps you navigate that your mind a little bit of housing on sale works but it can still happen it does happen I will tell you in the sum 10 000 plus deals that I've closed I've only dealt with due on sale 10 times yeah but what you we always have our clients understand is is just because that might be my data it doesn't mean the next time it's not going to happen and even though I've been able to get around it through some various mechanisms it doesn't mean you can get around it the next time so there's always a risk factor that has to be considered as you go into these kind of transactions and what that's all about is is this disclosure which is one of the most important things to do when we're doing deals like that so do on sale is always an issue for consideration if the mortgage loan is being left in place doing a wrap around mortgaging things of that nature okay so I hope that explains do on sale correct and from what we've learned is the best way you're around it is to put the house no trust beneficiaries well let's just talk about that then so when you're talking about putting the house in a trust yeah you're not that the what people don't understand is is where that comes from is What's called the Garn Saint-Germain act I think going back to 1980 that says a homeowner can convey their property into a financial planning Trust okay well you're not talking about the nasal planting pressure talking about a land trust most yeah so is that really a financial planning trust no now we're not here to tell the mortgage company what we did or didn't do which I understand they can figure that out and you convey The Beneficial interest I get it to the new um the new buyer who that might be and they may not know about it so it could be just fine but your goal is to buy that home let's say subject to the existing debt into a trust and you're on the flip side you're going to do a wrap around mortgage well guess what that wrap around mortgages do on sale if it's a due on sale why are you going to do it no you're not so it's just understanding there is a time in a place where a trust guys and I know we're off topic here a little bit but when you're looking at a buying a home subject to I have no objection to putting the property into a trust if you're going to live there yourself personally if you're going to buy it or lease it or if you're going to do a Fix and Flip got it but you're going to do a wrap around loan I prefer not to put it into a trust so there's a lot of this number that goes out in the marketplace and up and my two cents as to why there is is because somebody is trying to sell something to somebody to buy my land trust package oh and here's how this works and again if you're going to lease the property I agree with you if you're going to do a wrap around mortgage which is what we're all here to talk about a very wise thing to do so what is the best is it just keep the way it is what's the best way to trim train of ownership from the current borrower the 72 person to the buyer of that subject to well again this is who that buyer is if the buyer is an investor which is what it is instances you have to go back and ask a question what does your back end strategy if it's fixing flip live there or rental I'm okay with putting it into a land trust not a problem but if you're going to do a rack around mortgage for instance is all that we do uh in my offices then putting into a trust in my opinion is just a waste of time and move on gotcha so you you're not afraid to do on sale calls even though it's transferring from the borrower to the LLC uh you go back to those two simple questions right and by the way when you do things right you navigate insurance right you make your payments timely so you don't create an issue out there with somebody the great odds are there's not going to be a problem doesn't mean there won't be a problem it's just that I think you have some limitations out there that won't become a problem yeah and I remember this conversation coming up my very first snow conference in 2009 and it's and it's I think it's been a conversation that goes around around and and inevitably it all comes back to the same conclusion somebody says okay how many people have dealt with doing so do on sale and no hands go up I mean it does it happen obviously yes and it can but it's extremely rare so I I do think it's rare yeah but as a lawyer talking to a client we can't say it will never happen sure of course in real life it does happen it has happened yeah we have had to deal with it hey twice to me yeah one of my stories was this is back in uh probably 2013 or 14.

I had a house I had bought in 2000 I financed it with a uh a mortgage of Finance 50 houses at the same time as one mortgage company they knew exactly what we were doing but of course that bank or mortgage company sold to mortgage company a that sold to another company B and somehow my mortgages wound up Wells Fargo in Chase now of course the original lender that I had agreements with Etc everything was great and this is 15 years later perfect pay history Wells Fargo in the middle of the real estate crash calls one of my loans due and I'm talking to this poor young real estate attorney going what the heck you only have how many hundreds of thousands of defaulted mortgages and you're trying to call a fully performing loan due are you kidding anyway I've never I've never written my Senator before I was just that close to doing it though and it doesn't make sense that's how that's how the common sense this does not exist out there sometimes in the mortgage world absolutely so we have some questions coming in from our feeds uh first was about if a due on sale is triggered what is the worst case scenario that you've gone through and how did you resolve it well there are some things I I talk about on air some things I don't I'll just tell you that um there are potential ways to navigate uh getting around that it does involve putting the property into a trust eventually it's just that it requires three times the paperwork to do that because if that comes out they are going to require you to convey that property back to the original seller and and provide evidence of that and from there that's when we utilize the trust and some of their mechanisms that help us to to navigate that a little bit and again you know there is no 110 guarantee of this anywhere you go there's not 110 guaranteed anything I don't know about but we've been successful to navigate that the times I've had to deal with it out fortunately it hasn't been that much and it's just making certain that as investors who buy properties know what you're doing day one not day two especially your insurance is done right make sure your payments are done right things brought current don't be stupid and unfortunately that's a dangerous word in the investor industry because a lot of investors they are they don't pay attention with what they need to be paying attention to all right so now let's see so you've you've gone through you've created this let's talk about creating a wrap how are you doing that what's uh what are some strategies surrounding that oh wow guys so let's take a moment because there are two ways to create that rap or several race the underlying debt could be where there's an existing mortgage through let's say Bank of America yeah ABC more whatever it might be company out there maybe it's your small Commercial Bank maybe it's a private lender okay all that's great you still do the wraparound loan well what anyone who is going to create a wraparound loan has to know is first off what does the Safe Act say well most States you know the safac says that you will incorporate a residential mortgage loan originator which is a loan processor into the equation so that you can provide your rap fire the the respite and respa is the real estate settlement procedures act it's a federal law and there's some 36 disclosures to be provided to the buyer I can't do that y'all can't do that we don't want to do it you let alone processor do it and it's just like any traditional mortgage out and this a fact also says you're supposed to incorporate a knowledgeable real estate attorney into the transaction and but for Texas Most states you do that on every single deal you do Texas had a five popular Dimensions rules now three uh but really it was never more than three because you have to comply with respa if you do more than three transactions in a 12-month period and keep in mind guys we are talking about consumer loan not commercial loan uh the difference is a commercial loan is business purpose non-owner occupied consumer is owner occupied the whole world gets you know exacerbated when we deal with the consumer World which is what we're really taught so you've got to understand the basic tenet of the say that then we have this animal called the Dodd-Frank Act you keep hearing about always and it does apply to us because we are what they call a small predator unless somebody out there is doing five billion dollars a year or more in business and if you are you need to call us and talk to us you'd like to know who you are we're not a large Predator so kids are a little bit easier but todd-frank is there to protect the consumer from unscrupulous investors we know that those guys are out there unfortunately and you know they have three levels of Dodd-Frank they have qm which is qualified mortgage and we don't want to be there that's where the banks live because they're lower interest the next level is one called high cost and that is where if you have an existing mortgage on the property your annual percentage rate or the APR cannot exceed eight and a half percent over the AP or which is the annual Prime offer rate now rarely does it does anything get that high I've seen it a few times when the crime rate was really low almost zero out there you really had to look at that and understand uh what was going on a little bit Texas specific no that's that's National okay Dodd-Frank is National but then um pardon me the eight percent over aprs yeah that's natural eight and a half percent over the apor and that's like there's an index you can look up online well worldwide usury laws uh [Music] probably not but usually to a consumer is going to be an 18 interest rate at least here in Texas right correct do some states are 10 and 12 it's crazy yeah I mean if you go beyond a 12 rate here in Texas there's some additional disclosures you need to provide the borrower that is what that's the armalo's job to do along the way okay and that's just part of the the rest but here in Texas the Constitutions to be able to do that um the the next level of that is one called high price and if you get to that category which guys that's really hard to get there you know then you have to have your borrower go online take a FHA an FHA course I believe you get a certificate and although I've never done that I never even looked at it so I don't ever intend to go that high but I think the certificate says hi I'm an idiot for letting you sell me a house instead of a high interest rate but it's one of those kind of things you want to do to ensure you cover your rear end out there because things can happen so from there you understand the levels of Dodd-Frank the most important thing with Dodd-Frank is what we call the ATR rule the ability to repay that's where the the buzzwords are we as an investor a seller must consider and verify the borrowers financial information provided to ensure that they have the ability to repay the loan in other words Common Sense guys yeah you've got a 35 debt to income ratio you're probably okay if you've got a 70 debt income ratio you're probably not over and I've seen this stuff yes and uh and whatnot so there's a common sense scenario we have to think about along the way and it's not hard and if you learn just you just don't push the numbers but we're wanting into people me Nathan who are not using rmlos not underwriting loans at all and not servicing notes which we'll get to but for those who are watching what are the penalties if you know if you take well what we're hearing people is they get find a property subject to Rapid which will get into what you need to wrap it but then selling it with 20 down and running up a mortgage note and then walking yep well so first off as you do that um I'm gonna get my head around there so first off under the Dodd-Frank Act and this is this gets a little it's not complicated but for instance respa says if you do more than free transactions in a 12-month period you're you're under respa you must provide these explosions SAFE Act says if you do one you must provide it don't forget that three rule but to be under Dodd-Frank that says you have to do five or more transact more than five transactions and a 12-month period do less than five and you originate the deal are you okay and under dot Frank the odds are you're probably not under Dodd-Frank so you may not have to follow those rules per se but by the way you may not follow Dodd-Frank but you're supposed to follow the safe Maps okay um and so it's understand those kind of things we recommend and suggest it doesn't matter how many you do follow these rules and regulations every time it's how you protect yourself it's how you protect yourself from yourself because we all move too fast sometimes and the I I don't really know penalty is per se other than the fact that if you go through a foreclosure could this person come back and say you knowingly excuse me sold me a property you took my down payment knowing I couldn't afford this house you did this knowing I was going to default and so could that really happen and you can open your head in front of a judge right and there are people out there that do that I've never seen a lawsuit filed against an investor for something like that per se if I don't know if that's out there or not I've never seen that but the key is just be smart so now let me make another comment also yeah so you buy a someone an investor sells a home to a home buyer they get 20 down the guys moving the property they're making their payments years go by how many years I don't know here in Texas we have a four-year statute of limitations there comes a point in time when you can't complain about a few things because you've been doing it for too long now also the fact that they had money down is evidence that they had the ability to do a few things they've been making their payments in a reusable And Timely fashion I hope for a pay history of some sort that can be verified and and you roll from there you know one of the nice things is is the day when you use a loan servicer you have an independent third-party company to help you verify the painter being made sure uh just like if you're buying a loan from a mortgage company or a bank they provide you a pay history I'm sure that is verifiable and it comes in from a legitimate company source now here in my offices we have our software that allows us to print out a pay history and we can demonstrate when they pay are they paying on time are they paying late are they paying more than 30 days late and you can demonstrate those things which we as investors if you're buying a note you want to know those kind of things to make an informed decision and as if you see these notes out there being originated and there is no blessing I think it's just being cautious maybe it is it's hard to go back and reconstruct the deal so it's kind of hard to put the baby back you know once it's born but um and it's done and if you're buying this property from an investor maybe there's some risks to navigate I don't know what that risk is per se but um it's just being wise maybe asking that investors sell and provide you some evidence as much as possible and gosh I go back to guys to 1992 30.

30 years ago 30 years ago um I don't feel like I'm that old but originally we just took an application only we didn't get verifications of employment or rent we didn't get W-2s and so we started selling our first book package we went oh my gosh we get how much more money by having a what we call a pretty package yeah fully documented with you from your collateral package perspective which is important out there and again for for the investor who does the these loan originations we're going to do that every time no matter what just because it does help you maximize dollars in the market so let's back up for a second right if someone in the year is going to buy a subject to property because broad no buyers for ourselves we're going to try we're going to get to the end here for no buyers here but for someone who's going to buy a subject to and get that transfer over to them we're being told you need a power of attorney and paperwork or that what are some of the items like on a list of what people should gather together from The Substitute borrower just transfer to the investor who's going to wrap the new what should they what kind of documents should they collect okay so we're talking about Acquisitions of property yes yeah yep that original so for instance here in our law firm and we close these transactions nationally for everybody because we like to make sure there's proper disclosures out there and that everybody goes in these deals with their eyes wide open do on sale number one and of course we want to make sure that our seller understands they're still liable on that debt until it's paid off those are the two most important things we're trying to get disclosed along the way but if I'm buying a subject to property um I want a mortgage statement and by the way most sub twos that we buy are a lot that we buy are in pre-foreclosure meaning the mortgage statement that is being originated today isn't the same as it may have been six months ago pretty default so I need to know what it is today in a pre-default so I get all the terms of that loan loan balance interest rate things of that nature EI payment escrow payment is there a mortgage insurance associated with the loan things of that nature I want to get a copy of the note indeed a trust if possible so what if your borrower doesn't have it or your borrower can contact the mortgage company and they'll finally email them a copy of the Native trash I'm going to get a copy of the insurance policy if the seller doesn't have it have them call their agent or the mortgage company there's one out there because I wanted to know what that loss pay e-clause so I want to get enough information when I'm buying this property I know what it is I'm buying and what I'm obligating myself to does it happen between the investor who's buying it and the borrower itself um things like the power of attorney to be able to negotiate in their behalf later in the process oh absolutely so in our disclosure packages um um hang on just one second guys yeah forgive me here my coffee got cold um asking when my gals will be warming up a little bit um you know we we provide an extensive disclosure package between the seller and the investor buyer in that package it does include Powers of Attorney uh specific to the property it includes uh authorization forms to communicate with the mortgage lender it contains things which has to do on sale Clause disclosures various other disclosures between the seller and buyers so that the seller knows exactly what they're doing you know can this seller ask for financial information from the investor sure I have never seen it happen they can uh do they want to use a loan servicer do they want to I mean they have all these things sellers don't know what they don't know correct and even if there's a realtor involved that Realtor doesn't know what they don't know right and rarely is a lawyer involved because usually the seller has the money to pay for it yeah and so because of that we try to idiot-proof these transactions with proper disclosures along the way so that everybody goes in they have an opportunity to read the paperwork understand what they're doing and they move forward to the next level so we go through a proper disclosure package and I have a philosophy of we we don't close that deal in one day I like to wait a minimum of 10 to 14 days for closing why I want to give this seller every opportunity to review that paperwork the Council of their choice whether that's through a realtor a lawyer a financial advisor somebody now will they do it usually not but it doesn't matter I want to give them that opportunity it's just a smart thing to do the only time you do something faster is if you are an imminent foreclosure we close lots of deals the day before or two days before the Foreclosure out and there are exemptions for that that instance different scenario but if you have the time if the seller some time just to do that it's a Fail-Safe scenario it's about learning how to be smart it's how you're you stay in this business for a long time by by trying to be as smart as you possibly can along the way now disclosure package is so important getting the proper information and if there is a law firm in maybe this has already been accelerated for foreclosures I think maybe we have to contend with that law firm and or the mortgage company or both in order to get a reinstatement type agreement from them so we know what needs to be paid at the closing to bring this loan current gotcha so you have to know those kind of things equally as important if you're buying a sub 2 deal you better know how to navigate insurance if I'm getting a new insurance policy or if I'm going to sell this home using a wrap around loan to my my wrap buyer over here at emergency new policy that rap buyer in the original seller need to be coinsurance on that insurance policy because if not the lender when they get the policy will kick it out so you have to learn how to navigate these now so let's go ahead now let's say we're gonna shift gears here because I want to move towards where the note buyers who are listening in we're probably going I don't understand any of this stuff and I'm never gonna origin no so let I want to ship gears to the point where we're going to talk more for flip to the other side of things and for the note buyer who's gonna the subject to borrower sell it to an investor this investor then wraps that note right and then I come in and I'm gonna buy that wrap dough for those who don't understand this stuff typically what happens is that original note maybe a two three four percent no I come in I buy the note I or I buy the the W2 part of it the borrower sent it to me I now take over payments on that three four percent I then sell that note at nine nine and a half ten whatever I'm selling it at and I'm gonna make payments through that first or pay off the first those two scenarios will get to in a second now as a buyer before we get into if we're going to pay off the first or not how do I properly get that power attorney transferred to me for say Nathan who is the investor who purchased the subitute part of it that's a hard thing to do so I thought so years ago here in Dallas some of my buddies and I in a meeting one day kind of coined this term called sub three now you got substitute now you got sub three which is divine of the rap notes but leaving the existing Mortgage in place and again to me this is all about disclosure where although you don't have to disclose certain things at this level it's a wise thing to do you know I want to make certain first off that the person who bought this the rap buyer you know was given proper disclosures along the way and again most videos every second I want to make sure people understand what that means they have to be notified that there is a first lien that Substitute part of it they didn't know that because when they're buying it they may think they're in first position and they pay off their loans they need to know there's another lien there because that lien can foreclose on that property right and here in Texas by the way guys we have what is called the Texas underlying lean disclosure notice and it is a mandatory seven days prior to closing and if you do not provide that the damages are substantial and I I have spoken to people that have not given that disclosure and I just go oh my goodness like must you know you're in my way I don't know who drafts their mortgage documents for them but when you're doing a wraparound loan you're supposed to have a language in those documents yes that evidences the existence of the underlying mortgage you know in the deed and the note indeed of trust Etc and if you're not doing that that's a problem um and I'm not so sure how you go back and and do it again as the other problem once it's already done um so you have this rap mortgage that exists I think almost half a second would you please yes and as soon as chat I have a couple of the questions are coming into so yeah this is another question I started drilling at you I think so um you know when we're gonna buy this rap note how can you I know if I'm going to buy the rap notes I want to make certain I get all the information about the underlying mortgage this is if I'm buying the house originally what does the note do to trust what was the and by the way when we do a subject to transaction we're always going and trying to go online to the mortgage company change the address the once I've either bought the property or I brought the loan current I start getting the mortgage statement so I can pay those appropriately I should have access to a current mortgage statement I want to make sure I see that I want to know that that underlying debt is current payments I don't know is there an online account set up where I can get the password transferred to me I can navigate that account appropriately and change the address so that those are mailed to my attention now so I can pay those and by the way if you should be using a loan servicer in these cases and of course as we're navigating the back end of this I want to leave that loan servicer in place so things don't change yeah I wanted to be consistent on behalf of that Mortgage Company I want the same Servicing Company to be sending that check every month and I don't want to change that but as the the wrap note buyer I want the information from the seller of this rap note provide me this information I want the underlying note to you to trust the insurance I want that most current mortgage statement I want that online password I want all of these sellers original information they should have had in their contract and things of that nature that's out there so for me as a wrap note buyer I'm a first position guy I I that's important to me I always want to be in first position so for me in a rap situation I would want to you know buy the note for whatever price including paying off the underlying first so that right so let's get some numbers here people do that yeah all the things we're talking about go away right the issue there is is that requires a lot more Capital right because now you've got to buy the entire note or rewind and pay off that underlying debt yeah whatever it might be get it that's the easy part for the note buying business I think the only issue there is is and by the way as to the origination of that mortgage Etc all that stuff is gone because of the underlying debt because you paid it off the non-issue anymore is to ensure that that bar work has the ability to pay and things of that nature was the investor under Dodd-Frank at the time that this was originated right did they process the buyer to determine that and then based upon many variables such as the pay history the down payment things of that nature you make that decision is it worth going ahead and buying this notes so let's get some numbers for those that people are curious because I think we're getting some questions regarding like they don't understand this what we're trying to do let me lay this out as simple as I can so investor a buys a property subject to the existing debt that debt is left in place so now the seller is no longer the owner of the property they became they become more or less the bank to the you know the investor eight in a sense yeah from there they um they um they own the property they're navigating this loan maybe they brought this mortgage current because it was in default uh whatever that might look like uh out there along the way um which is let me let me give some numbers for people that probably easier so I know Marshall had a question why would anyone do this let's imagine you have a subject to 50 000 first balance loan right and that's a three percent interest rate I come in but Nathan comes in he's the investor he toss the subject to gets it situation and then he wraps it with the borrower Scott's the borrower he wraps that loan for 150 000 gets 25 000 hours of down payment right now that loan's 125 000 lean at say 10 percent so he now has a fifty thousand dollar first balance at three percent she can continue paying that and he has a loan for 125 000 at 10 now he may got into this wrap for five six thousand dollars with that 72 buyer or 72 borrower the original borrower and says listen I'm gonna give you five grand you move out we'll make things happen I'll pay for everything so that that first initial investor me I'm out five grand I sell to Scott the new borrower he gives me 25 000 down I'm now positive 20 grand and that's your Nathan comes in as a note buyer and says listen I see you have 125 000 lien and a 50 000 first I'll pay off the first but I'll pay you 75 000 for the year 125 000 loan I doubt he'll pay off the first for 50.

he's now into a 75 000 first lien now for twenty five thousand dollars at a 10 yield Marshall I'm thinking that would probably kind of solve your question there and why would anyone do that I think the yield would be probably pretty good killer dude yeah so the reason you do when you buy a mortgage and you pay all cash for that mortgage then you're buying the face rate of that mortgage and if you're buying it at a discount do the math of what your yield is on that mortgage nine percent 12 16 whatever it might be okay but in order to accomplish those higher yields you're typically buying it for a discount and you need a note seller to be willing to sell that to you at a discount that's the easy math you described and it doesn't matter how that loan was was bought and then sold now the question becomes the investor buys this home subject to the debt as you said it has a three percent interest rate on it's at this let's say the loan balance is seventy thousand dollars and investor a who bought that home subject to sold it for 100 I sold it I'm subject I'm investor a I'm gonna sell to Scott who's the rock buyer he's a new borrower we're using the original number fifty thousand dollar first I buy it I get into that property for five six grand for that subject to with the borrower for the property may be worth 150 Grand 130 Grand I'm gonna sell to Scott my new borrower for 150 000 dollars and I take 10 12 20 down on that loan and then Nathan comes in and see the note buyer the rap buyer things get paid off the first or keep the first and keep making payments to that first but the problem we're running into is that power of attorney from the original borrower right has to transfer from me who bought the subject to right to Nathan now he's a power of attorney from the original borrower of the subject II part to be able to act on behalf of that borrower and deal with that first lead asset would that be accurate that is accurate the problem of course is how do you get it and the great odds are you're not going to get it gotcha that's number one number two if you are investor a who bought the home subject to and you have the power of attorney between you and the original seller you know and let's say Nathan is investor B who wants to buy the note unless you can go to that seller and get a new POA which is problematic then maybe Nathan could get the POA from you relative to this property you provide him your original wage well he controls both Simon of Poa more or less but I'm not sure how else you can do that yeah and so there's a certain navigation there by the way if you handle these transactions properly the great odds of having to deal with the mortgage company the great odds of having to provide this power attorney to the mortgage company smart along the way slim to none why I like to recommend and suggest you navigate everything online and so long as that loan is current and maintain current so long as you have the access information online to navigate everything the the great odds are you don't have to worry about it okay but could you yes what I would so if I can't go back to that original seller I can't get the direct POA I'll at least get one from investor a so that I at least had his and I had his original POA that I can provide to either a future title company or I can provide to the mortgage company as needed so in other words you do the best you can like anything else there's always a little risk for our business how we navigate this done when I enter into these kind of transactions and I buy this rat mortgage so this 150 000 sale 25 000 down to 125 note at 10 let's say and this underlying that might be seventy five thousand dollars whatever it is at three percent well obviously you know yeah I'm getting 10 on 125.

I'm only paying three percent on 75 when you're making seven percent on the 75 you're making 10 of the difference not a bad yield return overall and this really is a cash flow game along the way and how you look at this and I'll give you an example of what what I mean by that in a moment and how you kind of play this up to game uh with wrap around notes in the back end and things of that nature but it's just you you get as much as you can get it's knowing what you need to get in order to make sure you document your file you know I want to get the entire collateral package to the rap fire get as much info and hopefully this investor did something rather than just willy-nilly going out there and sell it with no information hopefully there's at least a 1003 application right you know did he get tax returns I don't know I hope so was he under doc Frank maybe I want to have him sign an affidavit saying that when this loan was originated he did not have to do this in some format now by the way remember you're not Exempted from the Safe Act you might be Exempted from Dodd-Frank but you still should have done this and the question becomes are we as a note buyer who's a third-party note buyer do we get catapulted into that note seller's position or not for failure to originate I don't have that answer could it be a a possibility maybe uh there's probably some uh difference there that we're not but we aren't the person who originated and I think the liability lies with the person who originated so again as that the buyer of this wraparound note I believe what we need to do is just be very wise gather as much information as we possibly can get the collateral package yeah the note buyer whatever or the rap fire get the entire contract package and disclosures Etc between the seller find out what was out there find out did investor a who bought the subject 2 deal did they give this seller a need to trust to secure performance in some format in order to protect them in case something happens to you as an investors so most people don't know what you're saying there is that we were talking with a rap alone uh rap fire yo day about those you know performance deed and we said you can't do deed and lose with stuff and he said no it wasn't for that it was for the fact the investor who's getting into the subject to it's a deed of a performance that if you fail that them that base of that property over back to that original subject to deed owner which is awesome yeah yeah so one of the question that came up was uh from our our few people we had um one was a great comment from investor addicts but I'll get to that in a second from Cindy uh Coleman which is one of our regulars would having two a co-inserve to a YouTube two a co-insurers on a insurance policy you tip off for the bank for a two on sale clause well again you have to understand a mortgage company wants their borrower to be an insurer yeah so if the home buyer a buyer buys this property they have to be an insured because they're now the actual owner of the property right now remember someone has that sellers the original sellers power of attorney to handle the real estate the insurance taxes Etc on that property and it's just a Fail-Safe for protection in that instance I'm not worried about the seller per se from the insurance policies perspective but you have to have that there and just or else the insurance company will kick it out excuse me the mortgage company will take it back out could you in the POA what if the POA gives mission to the investor a and it's signs can you put an assignment inside of a POA to kind of resolve that because you know you're probably going to sell the note in the future ah maybe you know when you start talking about things like this yeah we can get off of the weeds so fast yeah you know can a seller give can I give David a POA and at the same time authorize David to give Nathan a potential POA whose name I don't know gotcha I don't know that answer could you put it in there maybe would it work Maybe but I think if David gave a POA to Nathan and Nathan has one of those original poas I think Nathan at least is in the best position he can be in most likely that's the cleanest yeah and again if you're gonna do a deal like this and guys this is truly a cash flow business okay yeah sometimes it is a legitimate Equity business that we all look for oftentimes it's a cash flow business as well because you're able to capture great interest rates along the way but the key to preventing the negativity that can come out of this so a when you go into it you got to realize what's the worst things that could happen and be prepared to handle that okay if something was to come up am I prepared to pay off that yet one way or the other sell my notes pay it off with cash Finance it out of bank whatever it might be no cover your rear and make sure you've got the ability to do that yeah that's that's not the hard thing to do you're always looking at Playing devil's advocate so that if the worst does happen you're able to do it that's what keeps your noses clean out there if you can't do that I don't know how to put again well enough you do not want to do the game then right um and I'll give you an example of that too but the other thing is is besides understanding those things and knowing what your exit strategy is is be prepared to make your payments what if your borrower your note the rat buyer defaults or if they file bankruptcy real life things happen right you have to continue making that payment regardless and that's where a lot of people in the investment Community Coach South yeah well my buyer didn't pay me I'm not looking the working company you're not willing to play that game don't play the game at all so we get that so if our buyer defaults by the way my default rate guys for the last since 0809 under one percent wow I wish it was a lot higher because I've got tens and tens and tens of millions sitting out there in equity I'd love to capture it just doesn't happen so let me just get the situation that I was talking about where if I bought that wrap and I would want to pay off the first does that work is that is that a viable yeah solution yeah okay absolutely you know some examples real quick you know a negative example I'll give you a positive one so have a house here in the DFW area where seller sold the house to an investor using David's Land Trust great they leased the house well the problem is is when they did this transaction the lawyer who the lawyer who closed the property gave the seller no protection at all there's no vendors laying the deed there's no need to trust there's no nothing okay so investor a assigned the note to investor B and of course no one told the seller who investor Bean was no notification nothing we see that often yeah it is to it I mean if assignment fee move on that's what they think they don't think about the words case but what's investor be done now they haven't made payments the tenants moved out there's 15 000 20 000 of work to get this house back to market value and the house is going to foreclosure and the seller can't house back protect yourself without filing a lawsuit and why is investor B not paying I don't know if you're not willing to play the game the right way don't play it those are the guys that give good guys like y'all bad names we don't want that we want these guys out of the business I just posted in the Stream to uh finds a calculator for those just I was running some numbers just to get some ideas for people let's say there was a hundred thousand dollar birth balance and when borrower a uh was getting into the asset and it was a hundred thousand dollar note at three and a half percent we bought it three you know five to seven years ago whatever it was and it was a three and a half percent their peni was is three Thirty the thirty thirty year mortgage 336.78 I then sell it to Scott the borrower borrow two at a 9.9 which equates to a thousand eighty seven dollar a month payment and we're looking at almost 700 in profit between those two numbers so could you hold that and pay 336 a month and be basically tapping 700 a month payment absolutely yeah what we're saying here is to deal with all the issues of Poa and deal with the first borrower and that worrisome it's much easier to go see forget it I can either pay 25 000 and get into the whole world right and have 125 000 note and a 50 Grand note there or I can flip it and say I'll instead of paid 25 off being 75 pay off the 50.

through escrow and they have a 25 000 payment to me and now his loan there's no fifty thousand dollar balance he's now into a student work he's buying a hundred uh basically 75 000 an hour first lien for 25 Grand and then he's getting a thousand eighty seven a month yep so then if that sounds confusing don't do it better yet give your money Dave and I and we'll go this is gonna be if you run the yield on that I'm gonna run it alive and we're talking here and what the return is on this thing right I now know what your game is guys it's crazy well I see people jump on the thing somebody run on a different site here so you guys can play with that one um but let me give you an example the same lie to what you're doing this is from the originator's perspective but it's the same game so we're looking at buying a home right now where there's 145 000 first lean three and a half percent yeah I've got to pay the seller thirty thousand dollars to buy this property it needs seventeen thousand dollars of work so I'm all in it let's let's call it 190 for easy numbers and the house has a value of 290.

nice but I have to create money into it sure in this case the seller is a little desperate they're out they've got another house they can't afford two payments a house can't sell the way it is and shoot them the money to fix it so she's stuck coming to an investor to buy it unfortunately um and they need to move quickly sometimes you don't have time to do anything else so I'm gonna be out of pocket by the time I pay this thirty thousand dollars to 17 000 my interest carry taxes Etc I'm some 53 55 000 out of pocket first off you need money to play the game or to be able to borrow money to play the game secondly as you said when I sell my house for let's say 290 I might get 29 000 down payment we'll talk about a down payment in a moment and maybe I've got to pay attention to a realtor or somebody who brought that deal into me but maybe I net 20 000 bucks if I take that twenty thousand dollars it diminishes my 55 to 35 000 out of pocket okay so I still needed that 35 000 out of pocket to play this game but my positive cash flow between what the buyer is paying me and when I'm paying the mortgage company is fifteen hundred dollars a month if you wanted to use a quick calculation hey what's the return on your 35 it's huge or maybe you borrowed that 35 from a private lender you're paying them a six percent rate and eight percent ten percent whatever the number might be averaging it up how fast could you pay it off right two years two and a half years now your borrower owes you 260 000 in a couple of years what do you owe the mortgage company maybe 140.

look at that you've got this huge spread so then the wrap buyer the the investor who was by that rap loan comes in and you've got this huge Equity spread that you negotiate with your investment I am 25 000 in order to get this rap loan to where it might be so now you capture this fifteen hundred dollars a month positive cash flow or the 25 000 cash maybe you had to pay them 35 000. maybe you gotta pay him 50 for it it's still an awesome return I'm just sitting here running the numbers a little quicker with my handy dandy yeah while you're doing those numbers I figured out that Nathan bought my deal he's getting a 17.28 return on that money right there yeah mine's a 36 return by the way what I just did yeah yeah and I look at it and I go yeah I'm gonna ask anyone out there in another space who's getting 17s and 30s right now believe me when we first got started 30s and 40s were all over the place we're great but you tell me where you're gonna get your 20s and 30s on a regular basis besides buying these wraps so I know wanted to get here yeah this should start opening Windows for note buyers as well as Rap by people buying rap of creating wraps that you can speak to us me Nathan no one else will bodies right and and sell it to us we'll pay you really good money for your new of this so this is a learned system that you have to understand you have to understand the acquisition mechanisms how you do it the right way you have to understand how do you do a wrap around mortgage the right way what are the influences out there by the way like here in Texas yes we have the same time Dodd-Frank these things that we have to comply with right but we have our Texas property code which is a little bit more strenuous than they are in other states we have two different documents that must mandatory to be provided to the buyer a minimum of seven days in advance of closing and if you don't and if you don't close on a law office or a pilot company it's void not avoidable it's void that's pretty heavy if you don't provide these disclosures properly they can ask for their money back at any time five years from now they can ask it back and you may have to pay back everything down payment all monthly payments Piti Etc they put some serious teeth in it so you have to understand that these things are out there now we get it very well here this is what we do and we're on top of this and we follow and then they have this new rap your lending lessons if you do more than three transactions in 12 months you have to be a licensed rmlo your company has been registered to the state of Texas for the savings loan Administration now we we compile all that and we have we have ways to get around it here in the Texas Marketplace now I really doubt any other state has that out there we have it because we're one of the biggest states for this because of our borders with Mexico and things of that nature create the situation but if you're going to play that game in the Texas Marketplace you need to know this so you can ask the right questions up front in advance and of course There's real quick guilt we're not sure we're punishing your question so I apologize um Nathan do you understand Gil's questionable I don't sorry okay so if you can reword it whatever I know we'll be finished in pretty soon this will be recorded to be on YouTube and Facebook and linked everything else so feel free to check it out we'll also have a podcast well which will be all audio I'm not sure if we fully understand your question there so um so I'm I'm hoping that everybody in your world Scott everybody that that you're connected with is is getting the vision of what is possible when they sell that note yeah yeah and this is this is the group we want to come to DME come meet us we are we're dying to buy your stuff yes you're appreciating and creating wraps but it's DME is not expensive to go to the hotel rooms are 200 bucks a night it's one of the cheapest place you can go to um get down and you know check out because you're going to meet people like Nathan and I who are going we'll buy for you and you're gonna get a kill the return because you can go do this multiple times yeah and we'll keep funding it over and over again foreign guys this is an awesome business yeah yeah we want people to learn how to do it the right way absolutely we want if you're and if you're the originator of this paper based on how to do it right yes don't be just haphazard go out and do it understand there are consequences that can happen take the time and get yourself educated properly next I understand that in the marketplace people aren't like me I'm not the rehabber I love real maybe you're just a note buyer that you don't have the time or the bill to do it one by the note if you make a lower return got it got it but you still have to learn the basics of the business have resources for doing it and realize what can be done out there and it's a lot of fun and they're I don't know where else you invest your money to get the returns and yields that we get out there it's just this kind of it and it's not and I'm not putting money in the stock market and once I think up and down 47 times a day okay you know it may not be a and I'm not doing multi-family there's a whole other world for that out there yeah people think it's just the the best thing guys what we're talking about today to me is awesome it's been a business that is important 30 plus years I've been in business it's never gone away yeah interest rates rise and fall I get it right now you know your your banking rates are horrible from where they were 10 years ago from where they were a year ago they've gone up three percent you know or more and it makes changes and sometimes learning this thing we're talking about gives you an advantage to uh capture some better rates and better returns than going to your your local bank that's out the right but there's a knowledge base that we want you know everybody to learn because again knowledge is power in our business yeah so then given given our current climate uh final question everyone it's our current climate now are you talking Canadian climate are you talking to Texas [ __ ] real estate climate like we're you know we're seeing Rising interest rates dip down a little bit it's going back up uh inflation all these things it it sounds like a perfect perfect storm for seller finance creative Finance people is that accurate I think it is 110 accurate yeah um my offices we are both a cash buyer we are a term spotter but as you know our banking rates have been increasing it doesn't matter you don't still buy a good deal for cash when it comes across the table but we are turning our focus more to the creative Finance side because it's the smart thing to do yeah fascinating so what I'm hearing is there's tons of opportunity for the note buyers and the note creative note sellers to get together and and come together and get married yeah we can do a lot of really great deals it's been awesome a while it's got It's been a really pleasure to have you on here having it turning on here for some people is overwhelming right um some of you are scared of attorneys but I I was one of them when I first got started um but you're there to Keep Us Safe Keep Us protected keep us out of jail right so I encourage those people we have a I have a link inside the chat that you can go to click a button you can automatic email with Scott's information reach out to Scott's team over there um they're great you know answer a lot of your questions if you need to and get into stuff if you're creating raps and stuff like that please do it right because if you don't do it right we can't buy it right easy and simple and you can get yourself in more trouble and guys if I may with your permission just make a few comments so sure we have a company here in Texas it's called the owner finance Network and the email is the ownerpinanced network.com that's our vertically integrated company where all the people on your call and others can find all of our vertically integrated services from legal and title not just in Texas but National I can't represent anybody in other states but we provide Closing Services for them along the way whether it's closing a note which is pretty easy to do and or placing title on it or is it um the origination side of the transaction we have our rmlo and loan processing Services by weapon processing we have our Loan Servicing here ofn Loan Servicing which is a partnership with home key Servicing we have other things for the Texas Marketplace that if you're in the Texas Arena you need to know a weapon lending which helps us to navigate these new rules and regulations out there and of course we just announced a weapon National Escrow Services to our new entity which is uh for the Escrow Services to handle these kind of transactions on National basis just because we find there's such a void out there uh in this world of attorneys or other people who have a knowledge of this business out there so if anybody has an interest they can come check us out there about all of our contact info and those kind of items sure if you send an email to if you filled the form we'll send you directly all the information he's he's sharing with you now so it's easily clean simple you'll get the information emailed to you and it'll be in your inbox and thinking all we want to do is be a service to our community this is a great business we don't want it to go away we don't want the government to come in and put more rules and regulations against us and there is even a national owner financed uh company that has a presence in Washington um that is headed up by Eddie speed and I think Glenn Lee out of Houston headed up and they're out there fighting for us to make sure that Washington come in and change the rules nationally as well and that we can maintain doing this business all the way through that would probably be the same group with John hire and and uh it is who else is on there Jeff Watson yeah yeah yeah good guys all the same all good people we know all those guys yeah really anyway um small community as you all say we are tight-knit out there but it's an awesome business and uh y'all just keep maintaining it and just help everybody do it right help them make some more money too absolutely yeah absolutely well I believe it's great thank you Scott it's been awesome to have you on here um it's amazing that people don't know about the stuff I was one of them um but it's good to see the fact that we can have a conversation and Bridge the connection between you guys and us our rich self-regiators as well as build buyers uh because business 2023 will depend on it um it'll be really awesome so Scott I appreciate you jumping on with us and spend some time with us um and look forward to doing it next time in yeah for a while now so I appreciate it thank you Nathan stay warm in Canada absolutely bye guys.