Subject-to Deals and Wrap Notes Basics | Real Estate Notes Show

Episode: How to Basics of Subject-to Seller Financing Full Video W/ Attorney Alan Ceshker Dave's Goals and Plans: - Running webinars for 2-3 years providing information on note buying and owner financing - Buying bank-originated notes for 13+ years - Recently shifting focus to seller finance world and engaging with people doing owner finance, subject-tos, and wrap notes - Goal to bridge the gap between note creators and note buyers by educating both parties - Publishing content on YouTube, Facebook, and website about real estate financing strategies Nathan's Goals and Plans: - Juggling approximately 6-7 deals currently in progress - Managing students and social media marketing alongside deal flow - Discovered that note creators don't realize note buyers exist - Focusing on educating people how to structure notes to make them marketable to note buyers - Recently published video about what makes a note valuable and how to maximize sale price Key Recommendations: - Structure notes correctly first - good numbers mean nothing if structure is poor - Create notes in a way that makes them attractive to note buyers to receive top dollar instead of heavy discounts - Promote legal compliance in subject-tos and wrap notes as it makes notes more marketable, not just legal - Consider hypothecation strategy to pull equity from notes without selling them, allowing capital deployment into additional note purchases - Educate both note originators and note buyers about each other's existence and needs Topics Discussed: - Subject-to deals and their structure - Wrap notes and how they're created in owner-financed deals - Note buying and selling strategies - Legal compliance and deceptive trade practices - Hypothecation as alternative to note selling - Making notes marketable to attract note buyers - Life events triggering need for lump sum cash from financed deals Guest Insights: - Alan Ceshker positioned himself as 'wrap note nerd' after staying focused on wrap/subject-to world while other title offices moved back to conventional transactions - Subject-to means taking over mortgage as non-qualified assumption - you are assuming responsibility even if not formally approved by lender - Legal structure of deals directly impacts marketability and attractiveness to note buyers - Historically, notes have not been created with marketability in mind, but this is changing - Increased mortgage rates (not just recessions) drive demand for seller-financed and subject-to transactions near the note buyers you can buy this wrap note for say you know for buck 50 if there's if this number is 150 and the wrap is 300 and you give that person 150 175 Grand and they have a 300 000 wrap note on it and you buy that for three that 300 000 I know for 175 give them 25 Grand their pockets pay off that first you just bought a 300 000 first lien for buck 75.

it means that you pay back everything that the uh the uh buyer has paid you uh and you get the property back uh with some fines associated with it that's a deceptive Trade Practices Act violation which now brings you up to three times damages uh that's allowed [Music] thank you hey everyone Dave putz from jkp Holdings alongside me as always it's written Turner good afternoon Nathan how you been Bud oh very good very good oh it's been fun it's been a busy busy week for me how you been what's been new with you ah you know what I just realized this last week this is one year since we moved and I think we're finally getting a few down to yourselves and uh goodness yeah it's been quite a thing but yeah no it's been it's been good it's been a good week lots of stuff going on got some interesting opportunities coming up we'll talk maybe offline about some different things but uh it looks good I like it man it's been um it's been a world wonderful week for me um we got a bunch of stuff going on uh juggling some stuff personally and then we have we're going away next week and then we're dealing with about six or seven deals are kind of floating around and my mind being crazy so uh plus students and social media marketing and it's been it's been fun though and I'm looking forward to relaxing for a few minutes sitting down and just unplugging so yeah it's gonna be fun so we have a lot of new and you give that person 150 175 Grand and they have a 300 000 wrap note on it and you buy that for three that 300 000 I know for 175 give them 25 Grand their pockets pay off that first you just bought a 300 000 first lien for buck 75.

just saying at 10 12 you're saying that's my favorite that's that's I've always been a first guy I I understand seconds it's not really something I'm generally interested in this like I say from a from a practical standpoint from a legal standpoint it's a second from a practical standpoint it's not exactly a second um but I still prefer that first position so that would be my preference is to pay off that underlying first um but yeah it's an interesting an interesting situation right now we're doing hypothecation which means lending money to borrowers uh to lenders who have a note in their hand and we're typically giving enough money to pay off that underlying lien to move us to First right and give them Capital right most people have equity in their position and they're just trying to cash it out which is awesome and nothing changes in the world of what we're doing now we've talked about dotted Frank a little bit here what is the rule of thumb if let's say the people I hear who created a subject too and they did a rap note and everything else but they didn't underwrite the borrower they didn't do the DTI and the ability to repay is there a a way to fix it and B we've heard about this thing about a three year window that if it's been three years you kind of it doesn't need to be underwritten yeah I don't I don't know about a three-year uh window uh but in term from from a a legal perspective there's no fix uh from y'all's World there could be a fix you you go in and you start trying to go through that uh ability to repay we have a lot of new people joining us um for those who don't know we run we've been running a webinar for two years three years now whatever it is now yeah so it's been fun right it's been a joy I think people um really appreciate the information that we provide and what we do for people but we also been on a journey this year where we've been looking for people to merge with us as note buyers to merge us as note Originators note um you know those kind of things everything to do with that kind of stuff is as note buyers we've been buying Bank origin notes for 13 years now plus yeah but at the same time we've recently found that we're moving towards that summer Finance world so we're really engaging with all these people out there who are doing owner finance subject tubes and some people don't even know this when they sell that subject too they create a rap new and I recently ran to someone who didn't know what rock note was and had a bunch of them so it's really interesting um what we wanted to do is really kind of bridge that Gap we keep saying over and over again and I feel free to those who are new to us go back and check out our YouTube channel our videos on our website and the Facebook page what has been your overall in this eight month Journey we've been in what is your thoughts right now I I've been astounded I it's been very very interesting um the biggest Revelation one of the biggest Revelations is to figure out that note creators have no idea that no buyers exist and to me that that blew my mind because I'm like wait what we can do so much business together yeah um part of what we're doing is is educating those who are creating notes how to do it in a way that makes it a very marketable note how to make it something that is very attractive to us as knows as no buyers so that's been what is no why do we need certain things right um yeah and you're coming with an attorney's background so you've got a bit of a different spin on this as well and so that that's part of why we wanted to have you on yeah I uh you know my focus is going to be uh uh compliance with laws and and protection of parties while y'all are over there uh in the how do we make this note as marketable as possible uh and so um like you said life events occur uh we have not been uh historically making the notes marketable uh but now we're now we're changing that well the legality of it actually makes a big difference for us so so we very much appreciate that uh that angle of it I know there are some people out there teaching subject twos and creative Finance but they're not going through and teaching the legalities uh behind it and so we want to promote the the legal way of doing it uh because not just because it's legal but because honestly it makes it more attractive for us so that is automatically that becomes a more marketable Note 100 so let's back up for a second right how did you get started with what you do how did you get involved in the real estate world give us a little bit of background so in terms of the title work um I just had you know I was construction litigation attorney and I had clients who said hey you should close our deals for us when we purchase and I kind of said we don't do that I saw a couple of settlement statements and these two three million dollar houses being sold I said oh we do closings now and so it got started back in 0304 and then the recession uh 0708 hit and that drove us all to sell our finance transactions which then drove us to wraps sub twos and so I um I stayed in that that area uh when the market came back all the other Title Offices uh that's been part of our push and part of our our you know goal as educating people on how to do that in a way that will make that a sellable note so I did recently a video uh we published this week about what makes a note valuable right and what makes it so they can get the most money for it um but we've really been focused on making sure that it's created correctly first because yeah if you have all the great numbers in the world but how you structure is Big so those people who are looking to structure the note but also looking to possibly sell it now Nathan give me an idea of why someone would want to sell a note what's the advantage of selling out just hold it for 30 years and you totally can uh and then maybe a life event comes up and you think oh shoot I need a lump sum of cash right now uh and or or you're just tired of it or you've got a different opportunity that you can invest money into or you know who knows there's all kinds of reasons why you might want money today versus stretched out over the next 30 Years and that's where we come in that's where we are there to say you know what I'll give you that lump sum of cash yeah and if and again if if you've created it in a way that makes it very attractive to me I don't have to give you very much of a discount I can pay a top dollar for that and we can all make more money in the in the long run so yeah that's that's a big push for us well we've recently found out too is that people are having creating these rap notes in the subject twos or owner finance and they have a ton of equity stuck in it yeah and what they don't realize that they don't have to sell that note they want to keep it right and in our past webinars we've been talking about hypothecations where you literally lend money you borrow money and use your nose collateral nothing changes the new you know we're going to be doing a webinar next um on some that we actually recently did a hypothecation and a great return and why it worked for him and how it held moved out and went back to the retail conventional you know buyer and end user buyer end user seller transactions I just stayed in the mortgage rap world uh really to be ready for another event um and then I didn't know that those events were going to be different than recessions there were going to be coveted events they were going to be a mortgage rate increase events and so we uh we were lucky that we kind of positioned ourselves and we're ready for that so that's that's how I got involved and now I just call myself a rap nerd and I talked with anyone and everyone about mortgage reps yeah awesome awesome stuff that's really cool so we got a bunch of questions in here I really appreciate the questions we're going to get into those questions a few minutes so uh feel free to post them um I'm able to actually trigger it and bring into the feed which is really cool new feature I got going on here yeah so we've been flying in already this is interesting this is awesome guys I appreciate you guys jumping in here so we wanted to back up can you define the word subject to yeah and it'll end up being a little bit different than what folks are maybe learning out there but uh subject two means uh I'm going to take over that mortgage I'm taking the the property subject to the mortgage um there's confusion out there that hey um I'm taking this subject too I'm not assuming the mortgage and I'm trying to dispel that or change that that thinking you are assuming the mortgage is just a non-qualified assumption the lender is not approving you but you are taking over all of the terms and conditions of that mortgage you have to pay that mortgage so you're assuming the responsibility not assuming in terms of a lender saying all right you're approved there's a qualified assumption so a sub two and that's usually your acquisition method uh I'm taking over this node pain a little bit of equity sometimes no equity over to the seller and now you're in control that mortgage as if you're the one that that applied for it and and you're fully controlling near the note buyers you can buy this wrap note for say you know for buck 50 if there's if this number is 150 and the wrap is 300 and you give that person 150 175 Grand and they have a 300 000 wrap note on it and you buy that for three that 300 000 I know for 175 give them 25 Grand their pockets pay off that first you just bought a 300 000 first lien for buck 75.

it means that you pay back everything that the uh the uh buyer has paid you uh and you get the property back uh with some fines associated with it that's a deceptive Trade Practices Act violation which now brings you up to three times damages uh that's allowed [Music] thank you hey everyone Dave putz from jkp Holdings alongside me as always it's written Turner good afternoon Nathan how you been Bud oh very good very good oh it's been fun it's been a busy busy week for me how you been what's been new with you ah you know what I just realized this last week this is one year since we moved and I think we're finally getting a few down to yourselves and uh goodness yeah it's been quite a thing but yeah no it's been it's been good it's been a good week lots of stuff going on got some interesting opportunities coming up we'll talk maybe offline about some different things but uh it looks good I like it man it's been um it's been a world wonderful week for me um we got a bunch of stuff going on uh juggling some stuff personally and then we have we're going away next week and then we're dealing with about six or seven deals are kind of floating around and my mind being crazy so uh plus students and social media marketing and it's been it's been fun though and I'm looking forward to relaxing for a few minutes sitting down and just unplugging so yeah it's gonna be fun so team pull out equity and allowed him to Juice It Up and gave us the return we're looking for but gave him the capital to go out and buy more notes so that features really cool for us yeah and you've done some of those I haven't done those yet so I'm curious to see what you've done and how you've done it yeah see if that's something I want to incorporate as well yeah it was it's been a really cool thing for us um and I think for for us we're trying to learn more about this world of subject Jews owner finance rap notes and we've done a lot we wanted to get the experts on that kind of give us the information and as in those people know we do webinars to learn and then share with you guys so we don't know the answers these questions we're going to ask yeah right legitimate questions yeah so this recording will be found on Facebook LinkedIn in YouTube uh my uh website and everything else so feel free to look at that and get the information I'll put the uh uh the website we have too so we have a bunch of people tuning in this is awesome guys um post your comments questions we're streaming live on LinkedIn Twitter I think Instagram and Facebook live as well so let's let's uh let's let's bring in our guest speaker for today uh Alan it's been a pleasure it's been a long time coming we booked this with you for a while welcome I appreciate it I appreciate it uh really glad to be here um the what y'all are doing and what y'all are talking about has really kind of come around for for me and I think in Texas past oh 18 24 months or so and uh y'all are y'all are causing some disruption uh to us uh changing the way that uh these wraps are structured sometimes so it's been it's been fun been fun to learn yeah and that's what the key is right now Ray we're learning from you while you're learning from us right what is important to a no buyer that mortgage sellers out so that's that's my long definition of it and why would somebody want to do that why would why would somebody living in the house want to allow you to take over their existing mortgage so uh if it was a year ago my answer would have simply been there's some type of event going on uh during foreclosure uh heirs have uh inherited the property don't really know what's going on um someone's just an extremely motivated seller they can't sell their house otherwise open it up to sell our finance you have a bigger Market a bigger pool buyers that would have been my answer and we would have stopped there but now folks are getting pretty darn smart they've got themselves a 2.5 percent interest rate on their mortgage they're trying to now monetize that go out there and sell it for you know six to to nine ten percent and cash flow that so I used to get you know a call every month or every other month about someone trying to monetize their mortgage interest rate uh now it's weekly multiple weekly you've got these people saying hey is there any way for me to you know try to sell this property they don't know about mortgage actually don't know about anything and so now they're they're trying to monetize their 2.5 their three percent uh interest rates awesome interesting oh it's so cool so rap notes we've I run to a few people and one's actually on the call now never heard this word rap no how do you define rap note so uh my my uh my definition of mortgage rep I try to simplify it is just seller financing a property and by the way we don't pay off the mortgage but it is seller financing so in a seller finance transaction you're drafting up a note that the the buyer now now owes over to the seller uh you're drafting up a deed of trust your warranty deed has a vendor's lean in there since there's a a mortgage being created so your wrap note uh in Texas just passed a bit of legislation in regard to managing or or governing how rap mortgages wrap notes are dealt with but it's just simply a seller finance note uh that acts the same as a Wells Fargo or Bank of America note uh has all the protections uh it we we try to mimic a a standard transaction in our wraps or sub twos to just make it more uh legitimized I guess more more protected in the event that there's any kind of problem so it's just a seller finance note so when we talk about these things we're looking to buy that wrap note right or lend money against that wrap note where you own the note you can do as you want with it you can sell it you can sell partial on it you can lend borrow against it we call hypothecation if you want to learn more we I actually have FAQ and take a look at the past webinars but can you talk just briefly about these kind of things can you legally sell that note to a note buyer yeah absolutely absolutely that's where you get into to looking at all right was it closed via rmlo and disclosures did it comply with Dodd-Frank uh comply with state laws comply with SAFE Act um and and you know if you're if you're in the business like for for instance we we mentioned Nick before we got started there yeah fella uh does hundreds and hundreds of these things yeah he never he never does not use an armalo um while an investor isn't necessarily thinking about selling a note so they're trying to decide all right should I use an armalo I'm actually going to post on on our sites today when we're finished up about making your note sellable even if you don't have those in the exit strategy uh because just in case and discount it to get the interest rate higher and it affects us tremendously so you make sure that the rate of that note is high enough right high enough 8 9 10 11 12.

get it above a 12 because I promise you if you we have a chart that if you look at our website and go to our fax you'll see a chart that shows that if you write thing in the eight and we're looking for a 13 the discount you can expect the second part of that is the term the lower the term the better it is with all that said you got to make sure the borrower can qualify right make sure that the billiard pay is there so um when you're creating notes and you're suggesting that people do these kind of things Is it feasible to what do you tell people when they find a borrower that isn't able to afford a note that's sellable what do you tell them to do now when you say uh you said no when it's not separable sellable sellable I mean the fact that you know Hey listen I'm right I have to rate a five because the payment for the borrower doesn't work out right they can't afford a 10.

what do you suggest to people who are writing a four percent five percent note just to make the borrower happy you know for me I think it boils down at least the files that we work with you you kind of have two different buyers you you got a A buyer who is yeah uh seller finance is fine I don't have to necessarily uh I want to try to avoid that six and a half or whatever we're at these days uh and then you have a another barber who uh for some reason or another can't get a conventional mortgage and that's when we start having our interest rates up there between 8 and 12. um but if they're if their reason for not being able to get a conventional mortgage is they don't have an ability to repay then we're back down to a problem of that note getting in place in the first place um you know I don't like seeing someone it's for for for the amount of times that we deal with it dear Lord we talk about it a million times more so do you put it in any type of entity and you said not a trust do you do anything to protect it or you just sell it the uh the uh put putting it in the entity doesn't protect you either now we always advise everyone put their investment properties in entities um but the the Banks don't want properties back um and and they're not they're not watching you know I think uh Wells Fargo has uh three quarter of a million uh loans out there they can't go every single month and check that's been sold so it usually it usually pops up because of some uh error made by the parties um you know they contacted the banking appropriately uh on one occasion we had a weird one uh condo regime went bankrupt changed the legal description of every single condo in there and that triggered the the lender so that was that was a completely innocent uh event but the ones that I've heard of is um some type of uh error or or silliness by the parties yeah okay so online the bank just wants to get paid yeah they they want their money that's it so I remember hearing about this I went my very first nail conference in 2009 and they must have been talking about subject twos I didn't I didn't know what any of that meant at the time but I remember them somebody whoever was speaking on stage stage said you know somebody asked the question about do on sale what do you do about that blah blah blah blah and the speaker said how many people have ever dealt with that and like two hands went up in the in you know a crowd of 200 people and I'm like oh okay so it's not really a thing okay and that was it and move on but and over the years I've heard this come up time and time again and again then you say okay how many people have ever dealt with this and you know three and eight thousand yeah so then when I mentioned earlier y'all were causing some trouble uh what what happened is these folks who know that they want to want to possibly sell the equity portion of a note that they have uh they've they've bifurcated or or dissected a mortgage rep into now a a sub 2 acquisition with a seller finance carry back so they can sell the seller finance carry it back or sell the the stub two portion and so I had to I had to uh acquiesce these people who were dissecting mortgage reps and uh at first I didn't understand the the benefit of it but um if you're if you're going to sell a notice better to dissect them into two different notes so when we're talking about there that you can do an 80 20 loan right you can do an 80 loan at 20 loan instead of doing 100 sale so just just kind of realize that kind of portion of it so we're talking about these kind of things and we have been talking let's go to some of the questions before we dive into some stuff um is the attractiveness of the note subject or the standard of a note buyer want to make a note more attractive so let me I did a webinar on a video on this uh we've talked about before the biggest features of making a note valuable is making sure that collateral file is secure what does that mean we talked about rmlo if you are selling this property to an occupied borrower someone who owns then is borrowing money from you to occupy the property you have to go through the rmlo under right make sure they have the ability to repay and when they do that then it becomes a qualified mortgage that no buyers can buy it and then the attorneys and judges can't fight you on creating a note and make sure you use the rmlo to do all that kind of packing right the next thing is yeah Nathan I was just going to say the arm on low so first of all registered mortgage loan originator is what that stands for registered or I don't know some other r word but anyway mortgage loan originator who's uh in that ability to repay uh problem area signing off on a 12 13 note um so there's there's all kinds of things that can create a situation where you're not able to get a conventional mortgage and those are the one ones that we see up there at the the not nine to nine to twelve or so uh I don't I don't like seeing much above 12.

it seems like it just hurts people yeah and we have to worry about and I keep saying the word wrong use your law how do you pronounce u-s-u-r-y I call it news right yeah it knows usury it's usually and each state may have different uh regulations or we'll have different regulations and what that means is the cap of what the interest rate can be you can go above it but there's some things you have if you do you have to qualify and stuff like that but you have to make sure that you stay below that majority of time so your armalo knows this stuff and can work with that and your attorney can work with that it all based on what state you're in yeah and the armadillo we have two different kinds of rmlos an armalo that will come back and say no you can't do this versus a normal that comes back and says hey here's our data on this in the the seller lender makes a decision on them um and and unfortunately Dodd-Frank is uh not exact it says you need to look at uh debt to income ratios and that give you the exact numbers so you need to um uh look at you know eight different items of ability to repay but doesn't give you specifics on that so it I mean it's good though it allows you some area to come in and say all right well this person has you know substantial income flow but not a lot of savings or this person has a ton of savings but not income flow and start making your decisions yeah so one of the questions you got before the webinar was from Brian uh Bedford was how do you avoid the due on sale Clause um and along with lines what causes uh the question what what Clause do we need inside the paper to hold up on legal action so explain what do on sale means and then it's it's extremely rare as an investor I deal in probabilities so it's extremely rare it's not something I'm concerned about so Nate we did have a question LinkedIn regarding from Randy what is your buying criteria or what's attractive to you I'm not sure if we have that answer that's a very vague question sir Randy if you can clarify in the chat there I appreciate it um and whatnot so let's so we've talked about the fact that you there's no way to protect it um so how asked you know deed back to the cell and back again to the buyer I think what you meant is sell it back to the bar the original borrower Who Sold you the property and indeed it right back to the person you sold it to so so how hopefully that kind of clears it up um so it's interesting right because we've heard all the different ways to avoid it and you're right most people don't have that problem but I like the fact you have offense right uh when we look at this stuff um we had another question from Liz Pryor's what's the best way to hold title and a personal name a business entity or a trust name is there a a way you suggest people yeah so so uh a lot of states have have uh passed some legislation that allows what's called a series LLC I don't know if y'all have it or not um but you know entity selection process is is in theory supposed to be a a person and and uh business specific review however 999 times out of a thousand you're going to end up with an attorney saying all right Mr investors a series LLC is best for you which allows you to separate your properties so you've got a property that has 200 000 Equity you've got a rental property that has no equity um but you know you have high liability of people falling down getting hurt suing you what have you you separate those two into different uh little sub series I call them sub entities it's not actually that but for all intents and purposes you've got your series LLC and really what you're intending here are you trying to get another mortgage and then we educate them hey you don't have to pay this off here's how to fix your dtis uh so that that that does happen occasionally awesome that's good stuff so we wanted to touch upon a few things for the note buyers out there too right so when you create this are you creating a second lien on the property disrupt note can describe what that rap note looks like is it a second lien is it a 1B how is that look in the county records so uh Wells Fargo is going to be that first lean position on that property uh whether it's a sub 2 acquisition or if someone's purchasing via mortgage wrap let's just use some quick numbers here right so we have 150 000 first lien Bank of America Wells Fargo and we wrap it with 200 000 so we have a 50 000 difference good sorry that's perfect yep I mean uh sub two is if you bought it for 150 exactly what so the wrap is like you just described a bigger note around the smaller note so the uh the uh wrap note is going to be a second lean position um and and that's that's the way we did it for years and years and years and years but now folks are coming in and saying hold on a second I may want to just sell the 50 000 the equity in there so they're creating two notes the the 150 000 sub to note and this is usually uh investors selling the property the 150 000 sub to note but now another thirdly of the fifty thousand uh seller carry back note so that we can now sell that equity and not have to get rid of the entire sub 2 portion now if I'm doing my math correct this is one of the questions we had very beginning in January if I add up 200 000 plus the 150 is it total debt on that property three hundred fifty thousand dollars uh if if the uh if the escrow officer doesn't know what she's doing and so I just now uh we we get phone that all came out because of the last crash so though all those laws SAFE Act dodd-franks stuff you'll hear us talking about all that kind of came into existence 2012 2013.

uh so it's been a law now for over 10 years uh and it has not been very closely adhered to I would say generally um but it's being more and more put under the microscope uh it's becoming more and more important to make sure that you're you're doing it correctly and going through the proper channels so all that being said that is that is one of the biggest reasons that we are very concerned about that if you're not using an rmlo it's not necessarily a deal breaker for for me in particular um but I will probably have to Discount that more because I'm going to have to go and fix it I am going to have to go through and and redo some things uh to make sure that it is 100 compliant and that it's it's falling under the the correct rules and laws that are out there so that's number one making sure that it's done properly so that I don't have extra work to do so that it's it's legal and it's compliant and everybody's satisfied on that level I like it it was awesome Nathan so the second ports are this are the numbers right guys you're reaching your notes and no buyers please chime in here right you have a big form of people buying and creating notes we don't want to see a situation where the um the note rate of the borrower is at four five six percent that's not good right because the fact that the rate affects how we can buy it if we're looking at a note that we need to create and that node is written at a six percent and we are going forward and trying to buy it at a 12.

it doesn't work right what happens is is that we try to how do you suggest avoiding that error issue yeah so do on sale Clause is simply just a permissive right of the lender to say hey the the entire note is now due the entire mortgage is now due because you sold our collateral and when you when you say that obviously in a mortgage rep uh or sub 2 you're selling their collateral and so my daughter actually works at my office uh part-time and so she came across this new on sale clause and she knew we're closing all these mortgage reps and such and so she came in just you know confused faces well how do we how do we do this because there's this due on sale clause and so it I mean it sounds substantive it sounds uh like a deal killer the issue is um I haven't done a count lately but at one point in time we had three uh situations where lender called the note due out of more than 8 000 transactions so I did the math on that it's point a lot of zeros percent so it's in in my world is a non-issue uh you cannot prevent it uh people talk about uh land trusts things that nature uh that may confuse a mortgage company uh it doesn't necessarily avoid it uh under the federal act going to change your main act um so there is there is no way to 100 avoid it however the fix is relatively simple if it occurs we do a little cat and mouse game we did the property back now we're in compliance and then did it right back to the buyer um that's uh that's happened on three occasions like I said and it worked perfectly each time uh one as long as 10 years ago and then the other several years ago but it's just a I mean it doesn't come up now lawyers deal and possibilities not not probabilities so I have to say you need to have a plan B you need to be able to pay off that mortgage the Empire may need to sell that environmentally to refinance um but then you can create little sub llc's under those so that's the best entity in in my opinion so later Christopher Wayne Uh Garrett over on LinkedIn uh have you ever had a previous sell blow up a sub 2 um and deal a couple of years later they remarried and wanted to buy another house and then they told the bank they sold it to you or you know that situation come up yeah that's a fantastically intuitive question when when I said that the three that occurred um were some type of inappropriate contact one uh was that exact same scenario that from the question uh he had hit the nail on the head so the I call it the uh hugging your enemy and pulling the pin theory he contacted the bank and asked the bank to foreclose because he sold his property wow how'd you resolve d uh you know it uh it uh was moving towards litigation uh the investor uh paid off the underlying mortgage and that kind of took the wind out of the sales of the fella um but the the other half of the question that was asked um the what what's what's intended there is hey uh uh seller now wants to go buy a a house average guy can't get two mortgages so we have mortgage one on his credit reporting but one of the one of the more important reasons we draft up a promissory note is because the that seller can take that promissory note over to A lender show anywhere between 6 and 12 months of timely payments and that debt to income ratio issue the the debt of that is now removed from his credit at least 80 percent uh depends on the lender somewhere between 70 and 90 percent so that fixes the debt to income ratio so when we have that problem you know we get the phone call seller says you were supposed to pay this off I said well there were 19 different disclosures where you said you understood it was a wrap um I don't think I don't think that's calls all the time you know hey uh y'all closed a file but there's a lien that y'all didn't get released you need to get that lien release and they just don't understand the 150 000 lien stays there so if you fast forward to the ending of a of a wrap so someone's uh refinancing or they're selling the house everything just starts rolling back down to where okay investor uh I'm owed 200 000 and you provide that payoff to the escrow officer but you also get Wells Fargo 150 000.

they have to understand they have to net that out they're not they're not paying out 350 they're paying out 200 000 broken up between the 150 and 50. so technically it's a second lien but it's written up that it incorporates the 150 000 so that the only part of that technique is a fifty thousand dollar second would you say that's correct um or is it technically a 150 and a 200. I I say the 200 uh incorporates and subsumes that 150. okay so I like to look at it as we really just have one big lien for 200 and then it's broken up between the 150 and the 50 that's owed to the to the buyer okay so it's second lien but kind of it's just I mean it's definitely from a legal standpoint it is absolutely a second lien sure from a from a you know numbers standpoint uh it's a net 50 000 Second Lane right right so if I go ahead and I buy your wrap note right and we pay off the first what happens that 200 000 rap note does it subtract 150 Grand off or to stay 200 000.

it's it stays 200. so um you know we are the no buyers you can buy this wrap no for say you know for buck 50 if there's if this number is 150 and the wrap is 300 or Dodd-Frank and Alice or get an armalo uh so business-wise you can fix it law wise you can't and that's actually in Texas the new legislation that was passed was Dodd-Frank wasn't very toothy uh didn't bite you if you didn't comply really too much um uh our new uh Senate Bill 43 amended property code and finance code you don't comply and they come in and unwind the deal for you what's that look like yeah strictly speaking it means that you pay back everything that the uh the uh buyer has paid you uh and you get the property back uh with some fines associated with it so it it's toothy and then it also tucks it in uh if you don't provide the seven day disclosure before closing for example um that's a deceptive Trade Practices Act violation which now brings you up to three times damages uh that's allowed uh so it this one's toothy we're a little bit more respectful of it so I hope that your your group and your tribe is listening yes that right there is a killer so Dave and I have talked to plenty of people that are that are doing seller finance creative finance and often we get response like what you can't tell me what to do and you know they can't tell me what to sell for it I don't I just I don't use a servicer I don't need yeah yeah you you know we had the federal Safe Act and the Texas uh the t-safe ACT Dodd-Frank and those um there just wasn't there wasn't penalty like there is now in Texas uh and and you can't get in trouble under Dodd-Frank they can bring that in uh there's just no Dodd-Frank police and and all all of these things that we're talking about the problem occurs when there's a default right so if everything's fine everything's fine but partner and that just doesn't work because I don't know the other partner and I just know how I do business so it makes it dirty so what we were doing in our strategy we're we're buying a note from someone we're actually doing a hypothecation with that person we're lending money is we're working at a strategy that they sell 50 their 50 shares to their partner so they have 100 ownership there we fund a hypothetication to pay off their first lien and then you sit there and we pay you pay us that rap no payment it's a little higher than what you're making but you only have for 10 years right and after 10 years it's done you collect for the next 20 years so Nathan what's your thoughts on that yeah yeah for me the same thing I would need 100 ownership I the 50 thing that throws me because like you say then I'm then I'm now a partner with somebody that I don't know yeah and I'm just I'm not very comfortable with that so I'd have to get 100 so um what are some of the biggest mistakes you're seeing from people who are getting involved or even experienced people with the substitute and in the selling lease option rap Data Trust whatever entity they created in land contract for those outside Texas what are the biggest issues or concerns you're finding people so the uh I always say the due on sale Clause is the most talked about uh issue in regard to mortgage rep at least seen uh occurrence in the wild out there insurance is the biggest obstacle we need to get over the the homeowner's insurance because you you have a situation where you know Wells Fargo is looking to see that their borrower is the owner and the insured of that property yet we're sending up a declaration a deck page declaration page from the insurance company that says you know Bob Byer is now the the insured and so the the insurance needs to be done correctly uh while I say there's been do you guys work outside of Texas or just Texas um uh only close in Texas I certainly um speak with people educate what have you in regard to mortgage reps and general contracting structuring and exit strategies Etc but I don't pass the boundary of Texas because my law license stops there yeah that makes sense so one last question for me and I um and I'll let Nathan go at his when we're looking to help people who are creating notes right and they say that they want to do a subject to and they need a little bit of cash to give that subject to seller as well as sit there and get some cash flow before they find their buyer we want to create a second lien for them for 36 months or so do we have to go through the underwriting process do we have to go through all that process of creating that no and doing it the billiard pay or can I just write a business a business note from me to Nathan that says I'm gonna give him a thirty thousand dollar lien on that property do I need to do any other additional paper or use an armalo in that state so you're uh that that's a like you said B2B um the the laws are governing uh residential uh loans and so your your analysis is just your normal analysis is my position secure enough and is the borrower have some uh liquidity if I uh if they default so you're you're just going through your normal analysis of due diligence versus any kind of that in any of the armalo stuff yeah so this is awesome guys right so if you guys are doing stuffy twos and you need some cash for that to for that seller right and you sit there and say listen I need some cash cash flow rehab the property maybe and go ahead and borrow from us right we're gonna charge you 130 Rave interest rate right and just get your property going I'm kidding on the interest rate it's only 129.

but what we can do is you course coming September so stay tuned for more details you can go to our Facebook or our web my website and go to the advanced uh education that in September we'll be talking more about this stuff in our Advanced course um and we'll be looking to hold some daily kind of events uh with some of the top people here to learn more about for note buyers and node sellers how you can strategize to get the good return but also on both sides if I'm giving say I'm charging you say a 20 return you can go make 50 because I gave you money it makes sense so don't be fixated on our interest rate because I guarantee you probably can double it with more money right so that's awesome so we're going to disconnect live and do some after talk but I appreciate everyone who's jumped on spend some time with us this Friday afternoon and Alan we have to thank you man it's been awesome chatting with you we've heard so much good things about you and you've lived up to that uh Fame well I appreciate it no I appreciate y'all and uh I think I need to attend a little bit more of y'all's events and then learn all side of things so Nathan has something coming up Nathan plug it before we uh disconnect uh for next year so actually two things so I was just thinking here while you were talking uh our advanced class I think this would be a great thing for people that are creating notes jump in because you've got a base knowledge of what notes are let us add to that because man we we can do a lot we can do a lot more together and if we can understand each other's businesses better and we can do a lot now that being said that's my plug for that so check that out I think that's going to be well worth your time and your time and money on that yeah other than that yeah I run a diversified mortgage Expo uh we are locked in next year for May 31st and June 1st in Nashville and really excited about that this last year was just a fantastic conference we everybody loved it myself included it was just a great great experience so we're looking forward to having more of the seller finance crew out there come meet no buyers come see how we can work together because I guarantee you there are many ways that we can work together we can make a lot of money together yeah that's awesome well I want to get on my disconnect live hang on for a minute I appreciate everyone um so uh Joseph uh we'll get you in there my man I know you're part over our weekly call so I'll get you in there but so thank you again Alan I'm going to stop the feed and we'll go again this will be streamed on YouTube and all the good stuff so be well everyone enjoy your Friday afternoon thanks again Ellen video you have a defaulting uh borrower I always say we're very very polite foreclosing lenders uh we're working with them we're going through loss mitigation we're helping them out um because a we're nice people we have honor and B we don't want to get stuck with a microscope looking down at our our documents absolutely yeah so we we definitely uh want to make sure we do this um so Casey asked a question on LinkedIn uh isn't it technically a third lean when your end buyers are robbed the first is Wells Fargo the second is D to trust from the investor buyer to a third and I think Julia made the comment that we need a whiteboard and I completely agree with Julia right so Casey I I'm trying to dissect your question here my man uh third lean to your so if you do an 80 20 loan technically it's a second and a third so you take a three liens on that property um well as far as the second versus Wells Fargo second is the entrust from the investor buyer to the seller and a third third is from the end buyer to the investor in case I'm not sure if I followed the question no she Casey's doing great she she can move to the front of the class yeah so um yeah I think it's it so I apologize Casey I'll definitely wrap up with uh Alan and get that back to you um so that's cool stuff but this field is amazing right and we do all this stuff and all this kind of cool creative financing and go around the system and those people who are originating these things you know creating a rap no takes a lot of effort finding that buyer is key right find the properties key what do you tell people who are saying I'm just getting started with the subject two world how do you find the asset how do you find the property how do you find the borrower where's your typical strategy you can I mean you can go out and Market specifically for this and and you're three out of 8 000 issues in regard to do on sale there's been dozens and dozens and dozens of insurance issues so you have to you so I'll always say if Aunt Betty's been doing your your insurance and she has your your car and your house and everything she's not doing this one uh you're you're getting someone who knows what what they're doing knows how to structure that deck page that declaration page so that the person receiving that at the mortgage company doesn't fail to check off a box so that's that's that's the biggest issue everything else we can deal with that's a big one that's a huge one because I was reading about is like how do you structure that insurance on that property without triggering the bank that there's a bunch of payees right I can I can tell you what I can parrot the words from my go-to insurance folks uh buyer sellers canceling their insurance because you can't insure a property you don't own buyers get new insurance and they're the their the the insured mortgage company obviously has to be the mortgage e-clause over there they need to see themselves but the the seller the borrower for Wells Fargo they're going to be an additional interest versus additional insured now that's the limit of my understanding of that I let the I let the experts take care of it but that's what he's told me yeah it's so interesting for me as a as a lender you know as I become a lender then I just do forced placed insurance so whether the borrowers got insurance or not or whether they're current or not I'm covered I personally I consider just a cost of doing business and so I just have everything insured uh regardless of whatever is happening with the borrower just just to be absolutely sure I want to make sure that if something happens I'm covered that's that's smart that's smart because I can see insurance companies coming in and saying hey um this is the reason that we're going to not allow this claim they're they're you're going to get that cash you need to give to yourself or two right recreate the second and then you're gonna go ahead and get that borrower we understand that you may pay it off sooner or not but we can lend that money in position but understand our criteria is be very very tight meaning we're not going to do CLTV um so it's the collective loan to value I'm not going to do above 65 just not going to do it especially in today's market but if you have a lot of equity and you can make things happen we can give you a second twenty Thirty forty thousand dollars to hold over and we can amortize it making maybe look at the interest-only situation and that kind of stuff for maybe a year two or three or five years and make it happen for you guys so just keep that eyes open and Alan is there any problem with doing something like that is that a great Avenue for those people who need that extra money to just kind of a bridge loan no no no problem at all and uh you know seven years ago didn't really see it now it's it's pervasive yeah this is a huge world no buyers we've been doing webinars this is awesome stuff guys it is massive as I dive into it I thought tapes and notes were big we're seeing more and more inventory of this kind of stuff is a little bit different I'm not gonna say Harry it's just a little different than getting a list of assets from you know our favorite hedge funds but I'm gonna tell you you're gonna get a better pricing so maybe you shouldn't shop there just leave me and Nathan to buy stuff right so this world is crazy right and we're learning a lot about it and I think that you guys have been such a good way to go through things and your groups are really really awesome to be part of we encourage you guys reach out to Alan reach out to the Facebook group but also we put a pin Post in there to reach out to Alan ask questions his team is awesome so we encourage you guys follow Allen look at some stuff but understand Alan is one person he can't respond to everything right he's got to do a job as well it's been a fun time so need to let you going to be looking at the foreclosures uh looking at probate uh properties where there's an assist owner um looking at properties that are both for sale and lease um vacant uh rental properties and things that so you can you can certainly market for it and there's you know a lot of folks who do and they're doing great um what I usually say is just make sure you understand this you've mastered enough so that you know what's going on so when you see it and and that's that's really actually all that I do I call it opportunistic investing um it's just one of the arrows that we have hey hey Mr seller we want to buy your house all right you don't have much equity in it uh you don't have enough to even sell this thing and pay commissions all right well we're going to move this over to seller finance transaction so you're looking for them when they when they occur at minimum but you can you can go market uh uh you know I don't like the foreclosure list because that means uh I say the vultures are already out there looking yeah so I want pre-foreclosure or pre-pre-foreclosure 30 60 90 day late lists there's there's ways to find them but very very important to understand it so when it comes up you see it and then you take the the advantage of the opportunity so Nathan we had a question from Drake on Facebook here and I was gonna throw that one to you I know and so you just recently came across from a note seller who wanted to sell something um I'm not sure if Brian's on but uh so so we came up with the idea that they did a split note they I guess they did subject too and now they have seller finance note and they split it 50 50 and they sold the property and it's 50 ownership of that note how we buy it so I'm gonna tell you my strategy let Nathan speak on his strategy is what we're doing right now is we're figuring a way out that you buy out your partner and then we give you enough money to pay off the first I can't buy 50 of your of your note because then if the bar default you default I'm now JV with your other wrong but I don't know if you all know this sometimes insurance companies deny claims that are actually rightful a little bit yeah uh frustrations so this big world of online Finance 72 is very critical I I presume you tell people to talk to your attorney and that law attorneys understand this world what typical attorney should they look for right if they're outside Texas outside if an areas that what should they look for an attorney to draft up this paperwork so I'm I'm not I'm not self-promoting I promise but you need to have knowledge uh both the the legal knowledge and the title knowledge uh so someone can understand these things forward and backward from a legal standpoint but not understand what the title office Underwriters are looking for and vice versa so uh an attorney-owned title office is called the fee office in Texas uh you you want you want a a an attorney that's in the title world uh who's also rolling their sleeves up and working in this area um my suggestion on how to find someone like that is you just go over to the to to a Facebook networking create a finance page and say hey who has an attorney referral and you're going to get a half dozen uh real quick well said yeah and we're streaming live in about eight groups so feel free to comment in this group and uh promote it uh thank you to Brian Nick and a bunch of other people who uh let me stream directly into the group School we're trying to educate everyone right there's no buyers we want to make sure you create it correctly so we can buy it uh Nathan and I both buy notes forever um and hypothecate and everything else so we definitely want to talk about that um the insurance part of it I would definitely uh recommendations for that just posting the Facebook group go down stuff in the pinned comment you should see Alan's information you can definitely reach out by creating that form up but I would ask for the recommendations to be put into uh the groups and ask questions there uh that's your favorite we're always curious here you know we're all trying to predict the future and see what's coming down the pipe so from your perspective with with you know you've seized even from a year ago your response on who's doing uh subject twos is different and who's selling in that way so with what you've seen even just over the last 12 months where do you think we're heading I think we're we're heading in the same direction and what I mean by that is uh we're we're in a I got I say a kind of a unique situation where sellers want to sell via seller finance and take advantage of their interest rates buyers want to buy seller finance and avoid the high interest rates and we haven't seen that in 20 30 years or so uh that's gonna I'm gonna I'm gonna project out here absolute guesses that's going to continue going forward from uh most of uh 24 uh in my opinion I think things will start normalizing but I'll tell you um there's no time that mortgage reps aren't a good solution in in several different areas so you you need the the tool you need the arrow in your in your bag back there uh for when it occurs but I think we're going to keep keep on the same uh increased uh incidence of mortgage wraps and sub twos out there for another year or so that's awesome that's very good yeah it's amazing it's been a great great learning experience for us and a new Avenue to explore so uh for those of note buyer and sellers if you want to give information to us I have a website Nath Hickory chutney2 I have a Pacific website where you can find a bunch of FAQs questions webinars everything else uh I put in the chat but just go to uh earnestinvesting or jkp Holdings there is a spot where you can sell your note and get some information to us we can give you a quote and talk about some strategies because we're buying these things regularly we have tons of cash ready to deploy the note buyers um we'll be running our our five-week people joining us um for those who don't know we run we've been running a webinar for two years three years now whatever it is now yeah so it's been fun right it's been a joy I think people um really appreciate the information that we provide and what we do for people but we also been on a journey this year where we've been looking for people to merge with us as note buyers to merge us as note Originators note um you know those kind of things everything to do with that kind of stuff is as note buyers we've been buying Bank origin notes for 13 years now plus yeah but at the same time we've recently found that we're moving towards that summer Finance world so we're really engaging with all these people out there who are doing owner finance subject tubes and some people don't even know this when they sell that subject too they create a rap new and I recently ran to someone who didn't know what rock note was and had a bunch of them so it's really interesting um what we wanted to do is really kind of bridge that Gap we keep saying over and over again and I feel free to those who are new to us go back and check out our YouTube channel our videos on our website and the Facebook page what has been your overall in this eight month Journey we've been in what is your thoughts right now I I've been astounded I it's been very very interesting um the biggest Revelation one of the biggest Revelations is to figure out that note creators have no idea that no buyers exist and to me that that blew my mind because I'm like wait what we can do so much business together yeah um part of what we're doing is is educating those who are creating notes how to do it in a way that makes it a very marketable note how to make it something that is very attractive to us as knows as no buyers so that's been that's been part of our push and part of our our you know goal as educating people on how to do that in a way that will make that a sellable note so I did recently a video uh we published this week about what makes a note valuable right and what makes it so they can get the most money for it um but we've really been focused on making sure that it's created correctly first because yeah if you have all the great numbers in the world but how you structure is Big so those people who are looking to structure the note but also looking to possibly sell it now Nathan give me an idea of why someone would want to sell a note what's the advantage of selling out just hold it for 30 years and you totally can uh and then maybe a life event comes up and you think oh shoot I need a lump sum of cash right now uh and or or you're just tired of it or you've got a different opportunity that you can invest money into or you know who knows there's all kinds of reasons why you might want money today versus stretched out over the next 30 Years and that's where we come in that's where we are there to say you know what I'll give you that lump sum of cash yeah and if and again if if you've created it in a way that makes it very attractive to me I don't have to give you very much of a discount I can pay a top dollar for that and we can all make more money in the in the long run so yeah that's that's a big push for us well we've recently found out too is that people are having creating these rap notes in the subject twos or owner finance and they have a ton of equity stuck in it yeah and what they don't realize that they don't have to sell that note they want to keep it right and in our past webinars we've been talking about hypothecations where you literally lend money you borrow money and use your nose collateral nothing changes the new you know we're going to be doing a webinar next um on some that we actually recently did a hypothecation and a great return and why it worked for him and how it held team pull out equity and allowed him to Juice It Up and gave us the return we're looking for but gave him the capital to go out and buy more notes so that features really cool for us yeah and you've done some of those I haven't done those yet so I'm curious to see what you've done and how you've done it yeah see if that's something I want to incorporate as well yeah it was it's been a really cool thing for us um and I think for for us we're trying to learn more about this world of subject Jews owner finance rap notes and we've done a lot we wanted to get the experts on that kind of give us the information and as in those people know we do webinars to learn and then share with you guys so we don't know the answers these questions we're going to ask yeah right legitimate questions yeah so this recording will be found on Facebook LinkedIn in YouTube uh my uh website and everything else so feel free to look at that and get the information I'll put the uh uh the website we have too so we have a bunch of people tuning in this is awesome guys um post your comments questions we're streaming live on LinkedIn Twitter I think Instagram and Facebook live as well so let's let's uh let's let's bring in our guest speaker for today uh Alan it's been a pleasure it's been a long time coming we booked this with you for a while welcome I appreciate it I appreciate it uh really glad to be here um the what y'all are doing and what y'all are talking about has really kind of come around for for me and I think in Texas past oh 18 24 months or so and uh y'all are y'all are causing some disruption uh to us uh changing the way that uh these wraps are structured sometimes so it's been it's been fun been fun to learn yeah and that's what the key is right now Ray we're learning from you while you're learning from us right what is important to a no buyer what is no why do we need certain things right um yeah and you're coming with an attorney's background so you've got a bit of a different spin on this as well and so that that's part of why we wanted to have you on yeah I uh you know my focus is going to be uh uh compliance with laws and and protection of parties while y'all are over there uh in the how do we make this note as marketable as possible uh and so um like you said life events occur uh we have not been uh historically making the notes marketable uh but now we're now we're changing that well the legality of it actually makes a big difference for us so so we very much appreciate that uh that angle of it I know there are some people out there teaching subject twos and creative Finance but they're not going through and teaching the legalities uh behind it and so we want to promote the the legal way of doing it uh because not just because it's legal but because honestly it makes it more attractive for us so that is automatically that becomes a more marketable Note 100 so let's back up for a second right how did you get started with what you do how did you get involved in the real estate world give us a little bit of background so in terms of the title work um I just had you know I was construction litigation attorney and I had clients who said hey you should close our deals for us when we purchase and I kind of said we don't do that I saw a couple of settlement statements and these two three million dollar houses being sold I said oh we do closings now and so it got started back in 0304 and then the recession uh 0708 hit and that drove us all to sell our finance transactions which then drove us to wraps sub twos and so I um I stayed in that that area uh when the market came back all the other Title Offices uh moved out and went back to the retail conventional you know buyer and end user buyer end user seller transactions I just stayed in the mortgage rap world uh really to be ready for another event um and then I didn't know that those events were going to be different than recessions there were going to be coveted events they were going to be a mortgage rate increase events and so we uh we were lucky that we kind of positioned ourselves and we're ready for that so that's that's how I got involved and now I just call myself a rap nerd and I talked with anyone and everyone about mortgage reps yeah awesome awesome stuff that's really cool so we got a bunch of questions in here I really appreciate the questions we're going to get into those questions a few minutes so uh feel free to post them um I'm able to actually trigger it and bring into the feed which is really cool new feature I got going on here yeah so we've been flying in already this is interesting this is awesome guys I appreciate you guys jumping in here so we wanted to back up can you define the word subject to yeah and it'll end up being a little bit different than what folks are maybe learning out there but uh subject two means uh I'm going to take over that mortgage I'm taking the the property subject to the mortgage um there's confusion out there that hey um I'm taking this subject too I'm not assuming the mortgage and I'm trying to dispel that or change that that thinking you are assuming the mortgage is just a non-qualified assumption the lender is not approving you but you are taking over all of the terms and conditions of that mortgage you have to pay that mortgage so you're assuming the responsibility not assuming in terms of a lender saying all right you're approved there's a qualified assumption so a sub two and that's usually your acquisition method uh I'm taking over this node pain a little bit of equity sometimes no equity over to the seller and now you're in control that mortgage as if you're the one that that applied for it and and you're fully controlling that mortgage sellers out so that's that's my long definition of it and why would somebody want to do that why would why would somebody living in the house want to allow you to take over their existing mortgage so uh if it was a year ago my answer would have simply been there's some type of event going on uh during foreclosure uh heirs have uh inherited the property don't really know what's going on um someone's just an extremely motivated seller they can't sell their house otherwise open it up to sell our finance you have a bigger Market a bigger pool buyers that would have been my answer and we would have stopped there but now folks are getting pretty darn smart they've got themselves a 2.5 percent interest rate on their mortgage they're trying to now monetize that go out there and sell it for you know six to to nine ten percent and cash flow that so I used to get you know a call every month or every other month about someone trying to monetize their mortgage interest rate uh now it's weekly multiple weekly you've got these people saying hey is there any way for me to you know try to sell this property they don't know about mortgage actually don't know about anything and so now they're they're trying to monetize their 2.5 their three percent uh interest rates awesome interesting oh it's so cool so rap notes we've I run to a few people and one's actually on the call now never heard this word rap no how do you define rap note so uh my my uh my definition of mortgage rep I try to simplify it is just seller financing a property and by the way we don't pay off the mortgage but it is seller financing so in a seller finance transaction you're drafting up a note that the the buyer now now owes over to the seller uh you're drafting up a deed of trust your warranty deed has a vendor's lean in there since there's a a mortgage being created so your wrap note uh in Texas just passed a bit of legislation in regard to managing or or governing how rap mortgages wrap notes are dealt with but it's just simply a seller finance note uh that acts the same as a Wells Fargo or Bank of America note uh has all the protections uh it we we try to mimic a a standard transaction in our wraps or sub twos to just make it more uh legitimized I guess more more protected in the event that there's any kind of problem so it's just a seller finance note so when we talk about these things we're looking to buy that wrap note right or lend money against that wrap note where you own the note you can do as you want with it you can sell it you can sell partial on it you can lend borrow against it we call hypothecation if you want to learn more we I actually have FAQ and take a look at the past webinars but can you talk just briefly about these kind of things can you legally sell that note to a note buyer yeah absolutely absolutely that's where you get into to looking at all right was it closed via rmlo and disclosures did it comply with Dodd-Frank uh comply with state laws comply with SAFE Act um and and you know if you're if you're in the business like for for instance we we mentioned Nick before we got started there yeah fella uh does hundreds and hundreds of these things yeah he never he never does not use an armalo um while an investor isn't necessarily thinking about selling a note so they're trying to decide all right should I use an armalo I'm actually going to post on on our sites today when we're finished up about making your note sellable even if you don't have those in the exit strategy uh because just in case and then when I mentioned earlier y'all were causing some trouble uh what what happened is these folks who know that they want to want to possibly sell the equity portion of a note that they have uh they've they've bifurcated or or dissected a mortgage rep into now a a sub 2 acquisition with a seller finance carry back so they can sell the seller finance carry it back or sell the the stub two portion and so I had to I had to uh acquiesce these people who were dissecting mortgage reps and uh at first I didn't understand the the benefit of it but um if you're if you're going to sell a notice better to dissect them into two different notes so when we're talking about there that you can do an 80 20 loan right you can do an 80 loan at 20 loan instead of doing 100 sale so just just kind of realize that kind of portion of it so we're talking about these kind of things and we have been talking let's go to some of the questions before we dive into some stuff um is the attractiveness of the note subject or the standard of a note buyer want to make a note more attractive so let me I did a webinar on a video on this uh we've talked about before the biggest features of making a note valuable is making sure that collateral file is secure what does that mean we talked about rmlo if you are selling this property to an occupied borrower someone who owns then is borrowing money from you to occupy the property you have to go through the rmlo under right make sure they have the ability to repay and when they do that then it becomes a qualified mortgage that no buyers can buy it and then the attorneys and judges can't fight you on creating a note and make sure you use the rmlo to do all that kind of packing right the next thing is yeah Nathan I was just going to say the arm on low so first of all registered mortgage loan originator is what that stands for registered or I don't know some other r word but anyway mortgage loan originator that all came out because of the last crash so though all those laws SAFE Act dodd-franks stuff you'll hear us talking about all that kind of came into existence 2012 2013.

uh so it's been a law now for over 10 years uh and it has not been very closely adhered to I would say generally um but it's being more and more put under the microscope uh it's becoming more and more important to make sure that you're you're doing it correctly and going through the proper channels so all that being said that is that is one of the biggest reasons that we are very concerned about that if you're not using an rmlo it's not necessarily a deal breaker for for me in particular um but I will probably have to Discount that more because I'm going to have to go and fix it I am going to have to go through and and redo some things uh to make sure that it is 100 compliant and that it's it's falling under the the correct rules and laws that are out there so that's number one making sure that it's done properly so that I don't have extra work to do so that it's it's legal and it's compliant and everybody's satisfied on that level I like it it was awesome Nathan so the second ports are this are the numbers right guys you're reaching your notes and no buyers please chime in here right you have a big form of people buying and creating notes we don't want to see a situation where the um the note rate of the borrower is at four five six percent that's not good right because the fact that the rate affects how we can buy it if we're looking at a note that we need to create and that node is written at a six percent and we are going forward and trying to buy it at a 12.

it doesn't work right what happens is is that we try to discount it to get the interest rate higher and it affects us tremendously so you make sure that the rate of that note is high enough right high enough 8 9 10 11 12. get it above a 12 because I promise you if you we have a chart that if you look at our website and go to our fax you'll see a chart that shows that if you write thing in the eight and we're looking for a 13 the discount you can expect the second part of that is the term the lower the term the better it is with all that said you got to make sure the borrower can qualify right make sure that the billiard pay is there so um when you're creating notes and you're suggesting that people do these kind of things Is it feasible to what do you tell people when they find a borrower that isn't able to afford a note that's sellable what do you tell them to do now when you say uh you said no when it's not separable sellable sellable I mean the fact that you know Hey listen I'm right I have to rate a five because the payment for the borrower doesn't work out right they can't afford a 10.

what do you suggest to people who are writing a four percent five percent note just to make the borrower happy you know for me I think it boils down at least the files that we work with you you kind of have two different buyers you you got a A buyer who is yeah uh seller finance is fine I don't have to necessarily uh I want to try to avoid that six and a half or whatever we're at these days uh and then you have a another barber who uh for some reason or another can't get a conventional mortgage and that's when we start having our interest rates up there between 8 and 12. um but if they're if their reason for not being able to get a conventional mortgage is they don't have an ability to repay then we're back down to a problem of that note getting in place in the first place um you know I don't like seeing someone who's uh in that ability to repay uh problem area signing off on a 12 13 note um so there's there's all kinds of things that can create a situation where you're not able to get a conventional mortgage and those are the one ones that we see up there at the the not nine to nine to twelve or so uh I don't I don't like seeing much above 12.

it seems like it just hurts people yeah and we have to worry about and I keep saying the word wrong use your law how do you pronounce u-s-u-r-y I call it news right yeah it knows usury it's usually and each state may have different uh regulations or we'll have different regulations and what that means is the cap of what the interest rate can be you can go above it but there's some things you have if you do you have to qualify and stuff like that but you have to make sure that you stay below that majority of time so your armalo knows this stuff and can work with that and your attorney can work with that it all based on what state you're in yeah and the armadillo we have two different kinds of rmlos an armalo that will come back and say no you can't do this versus a normal that comes back and says hey here's our data on this in the the seller lender makes a decision on them um and and unfortunately Dodd-Frank is uh not exact it says you need to look at uh debt to income ratios and that give you the exact numbers so you need to um uh look at you know eight different items of ability to repay but doesn't give you specifics on that so it I mean it's good though it allows you some area to come in and say all right well this person has you know substantial income flow but not a lot of savings or this person has a ton of savings but not income flow and start making your decisions yeah so one of the questions you got before the webinar was from Brian uh Bedford was how do you avoid the due on sale Clause um and along with lines what causes uh the question what what Clause do we need inside the paper to hold up on legal action so explain what do on sale means and then how do you suggest avoiding that error issue yeah so do on sale Clause is simply just a permissive right of the lender to say hey the the entire note is now due the entire mortgage is now due because you sold our collateral and when you when you say that obviously in a mortgage rep uh or sub 2 you're selling their collateral and so my daughter actually works at my office uh part-time and so she came across this new on sale clause and she knew we're closing all these mortgage reps and such and so she came in just you know confused faces well how do we how do we do this because there's this due on sale clause and so it I mean it sounds substantive it sounds uh like a deal killer the issue is um I haven't done a count lately but at one point in time we had three uh situations where lender called the note due out of more than 8 000 transactions so I did the math on that it's point a lot of zeros percent so it's in in my world is a non-issue uh you cannot prevent it uh people talk about uh land trusts things that nature uh that may confuse a mortgage company uh it doesn't necessarily avoid it uh under the federal act going to change your main act um so there is there is no way to 100 avoid it however the fix is relatively simple if it occurs we do a little cat and mouse game we did the property back now we're in compliance and then did it right back to the buyer um that's uh that's happened on three occasions like I said and it worked perfectly each time uh one as long as 10 years ago and then the other several years ago but it's just a I mean it doesn't come up now lawyers deal and possibilities not not probabilities so I have to say you need to have a plan B you need to be able to pay off that mortgage the Empire may need to sell that environmentally to refinance um but it's for for for the amount of times that we deal with it dear Lord we talk about it a million times more so do you put it in any type of entity and you said not a trust do you do anything to protect it or you just sell it the uh the uh put putting it in the entity doesn't protect you either now we always advise everyone put their investment properties in entities um but the the Banks don't want properties back um and and they're not they're not watching you know I think uh Wells Fargo has uh three quarter of a million uh loans out there they can't go every single month and check that's been sold so it usually it usually pops up because of some uh error made by the parties um you know they contacted the banking appropriately uh on one occasion we had a weird one uh condo regime went bankrupt changed the legal description of every single condo in there and that triggered the the lender so that was that was a completely innocent uh event but the ones that I've heard of is um some type of uh error or or silliness by the parties yeah okay so online the bank just wants to get paid yeah they they want their money that's it so I remember hearing about this I went my very first nail conference in 2009 and they must have been talking about subject twos I didn't I didn't know what any of that meant at the time but I remember them somebody whoever was speaking on stage stage said you know somebody asked the question about do on sale what do you do about that blah blah blah blah and the speaker said how many people have ever dealt with that and like two hands went up in the in you know a crowd of 200 people and I'm like oh okay so it's not really a thing okay and that was it and move on but and over the years I've heard this come up time and time again and again then you say okay how many people have ever dealt with this and you know three and eight thousand yeah so it's it's extremely rare as an investor I deal in probabilities so it's extremely rare it's not something I'm concerned about so Nate we did have a question LinkedIn regarding from Randy what is your buying criteria or what's attractive to you I'm not sure if we have that answer that's a very vague question sir Randy if you can clarify in the chat there I appreciate it um and whatnot so let's so we've talked about the fact that you there's no way to protect it um so how asked you know deed back to the cell and back again to the buyer I think what you meant is sell it back to the bar the original borrower Who Sold you the property and indeed it right back to the person you sold it to so so how hopefully that kind of clears it up um so it's interesting right because we've heard all the different ways to avoid it and you're right most people don't have that problem but I like the fact you have offense right uh when we look at this stuff um we had another question from Liz Pryor's what's the best way to hold title and a personal name a business entity or a trust name is there a a way you suggest people yeah so so uh a lot of states have have uh passed some legislation that allows what's called a series LLC I don't know if y'all have it or not um but you know entity selection process is is in theory supposed to be a a person and and uh business specific review however 999 times out of a thousand you're going to end up with an attorney saying all right Mr investors a series LLC is best for you which allows you to separate your properties so you've got a property that has 200 000 Equity you've got a rental property that has no equity um but you know you have high liability of people falling down getting hurt suing you what have you you separate those two into different uh little sub series I call them sub entities it's not actually that but for all intents and purposes you've got your series LLC and then you can create little sub llc's under those so that's the best entity in in my opinion so later Christopher Wayne Uh Garrett over on LinkedIn uh have you ever had a previous sell blow up a sub 2 um and deal a couple of years later they remarried and wanted to buy another house and then they told the bank they sold it to you or you know that situation come up yeah that's a fantastically intuitive question when when I said that the three that occurred um were some type of inappropriate contact one uh was that exact same scenario that from the question uh he had hit the nail on the head so the I call it the uh hugging your enemy and pulling the pin theory he contacted the bank and asked the bank to foreclose because he sold his property wow how'd you resolve d uh you know it uh it uh was moving towards litigation uh the investor uh paid off the underlying mortgage and that kind of took the wind out of the sales of the fella um but the the other half of the question that was asked um the what what's what's intended there is hey uh uh seller now wants to go buy a a house average guy can't get two mortgages so we have mortgage one on his credit reporting but one of the one of the more important reasons we draft up a promissory note is because the that seller can take that promissory note over to A lender show anywhere between 6 and 12 months of timely payments and that debt to income ratio issue the the debt of that is now removed from his credit at least 80 percent uh depends on the lender somewhere between 70 and 90 percent so that fixes the debt to income ratio so when we have that problem you know we get the phone call seller says you were supposed to pay this off I said well there were 19 different disclosures where you said you understood it was a wrap um I don't think I don't think that's really what you're intending here are you trying to get another mortgage and then we educate them hey you don't have to pay this off here's how to fix your dtis uh so that that that does happen occasionally awesome that's good stuff so we wanted to touch upon a few things for the note buyers out there too right so when you create this are you creating a second lien on the property disrupt note can describe what that rap note looks like is it a second lien is it a 1B how is that look in the county records so uh Wells Fargo is going to be that first lean position on that property uh whether it's a sub 2 acquisition or if someone's purchasing via mortgage wrap let's just use some quick numbers here right so we have 150 000 first lien Bank of America Wells Fargo and we wrap it with 200 000 so we have a 50 000 difference good sorry that's perfect yep I mean uh sub two is if you bought it for 150 exactly what so the wrap is like you just described a bigger note around the smaller note so the uh the uh wrap note is going to be a second lean position um and and that's that's the way we did it for years and years and years and years but now folks are coming in and saying hold on a second I may want to just sell the 50 000 the equity in there so they're creating two notes the the 150 000 sub to note and this is usually uh investors selling the property the 150 000 sub to note but now another thirdly of the fifty thousand uh seller carry back note so that we can now sell that equity and not have to get rid of the entire sub 2 portion now if I'm doing my math correct this is one of the questions we had very beginning in January if I add up 200 000 plus the 150 is it total debt on that property three hundred fifty thousand dollars uh if if the uh if the escrow officer doesn't know what she's doing and so I just now uh we we get phone calls all the time you know hey uh y'all closed a file but there's a lien that y'all didn't get released you need to get that lien release and they just don't understand the 150 000 lien stays there so if you fast forward to the ending of a of a wrap so someone's uh refinancing or they're selling the house everything just starts rolling back down to where okay investor uh I'm owed 200 000 and you provide that payoff to the escrow officer but you also get Wells Fargo 150 000.

they have to understand they have to net that out they're not they're not paying out 350 they're paying out 200 000 broken up between the 150 and 50. so technically it's a second lien but it's written up that it incorporates the 150 000 so that the only part of that technique is a fifty thousand dollar second would you say that's correct um or is it technically a 150 and a 200. I I say the 200 uh incorporates and subsumes that 150. okay so I like to look at it as we really just have one big lien for 200 and then it's broken up between the 150 and the 50 that's owed to the to the buyer okay so it's second lien but kind of it's just I mean it's definitely from a legal standpoint it is absolutely a second lien sure from a from a you know numbers standpoint uh it's a net 50 000 Second Lane right right so if I go ahead and I buy your wrap note right and we pay off the first what happens that 200 000 rap note does it subtract 150 Grand off or to stay 200 000.

it's it stays 200. so um you know we are the no buyers you can buy this wrap no for say you know for buck 50 if there's if this number is 150 and the wrap is 300 and you give that person 150 175 Grand and they have a 300 000 wrap note on it and you buy that for three that 300 000 I know for 175 give them 25 Grand their pockets pay off that first you just bought a 300 000 first lien for buck 75. just saying at 10 12 you're saying that's my favorite that's that's I've always been a first guy I I understand seconds it's not really something I'm generally interested in this like I say from a from a practical standpoint from a legal standpoint it's a second from a practical standpoint it's not exactly a second um but I still prefer that first position so that would be my preference is to pay off that underlying first um but yeah it's an interesting an interesting situation right now we're doing hypothecation which means lending money to borrowers uh to lenders who have a note in their hand and we're typically giving enough money to pay off that underlying lien to move us to First right and give them Capital right most people have equity in their position and they're just trying to cash it out which is awesome and nothing changes in the world of what we're doing now we've talked about dotted Frank a little bit here what is the rule of thumb if let's say the people I hear who created a subject too and they did a rap note and everything else but they didn't underwrite the borrower they didn't do the DTI and the ability to repay is there a a way to fix it and B we've heard about this thing about a three year window that if it's been three years you kind of it doesn't need to be underwritten yeah I don't I don't know about a three-year uh window uh but in term from from a a legal perspective there's no fix uh from y'all's World there could be a fix you you go in and you start trying to go through that uh ability to repay or Dodd-Frank and Alice or get an armalo uh so business-wise you can fix it law wise you can't and that's actually in Texas the new legislation that was passed was Dodd-Frank wasn't very toothy uh didn't bite you if you didn't comply really too much um uh our new uh Senate Bill 43 amended property code and finance code you don't comply and they come in and unwind the deal for you what's that look like yeah strictly speaking it means that you pay back everything that the uh the uh buyer has paid you uh and you get the property back uh with some fines associated with it so it it's toothy and then it also tucks it in uh if you don't provide the seven day disclosure before closing for example um that's a deceptive Trade Practices Act violation which now brings you up to three times damages uh that's allowed uh so it this one's toothy we're a little bit more respectful of it so I hope that your your group and your tribe is listening yes that right there is a killer so Dave and I have talked to plenty of people that are that are doing seller finance creative finance and often we get response like what you can't tell me what to do and you know they can't tell me what to sell for it I don't I just I don't use a servicer I don't need yeah yeah you you know we had the federal Safe Act and the Texas uh the t-safe ACT Dodd-Frank and those um there just wasn't there wasn't penalty like there is now in Texas uh and and you can't get in trouble under Dodd-Frank they can bring that in uh there's just no Dodd-Frank police and and all all of these things that we're talking about the problem occurs when there's a default right so if everything's fine everything's fine but you have a defaulting uh borrower I always say we're very very polite foreclosing lenders uh we're working with them we're going through loss mitigation we're helping them out um because a we're nice people we have honor and B we don't want to get stuck with a microscope looking down at our our documents absolutely yeah so we we definitely uh want to make sure we do this um so Casey asked a question on LinkedIn uh isn't it technically a third lean when your end buyers are robbed the first is Wells Fargo the second is D to trust from the investor buyer to a third and I think Julia made the comment that we need a whiteboard and I completely agree with Julia right so Casey I I'm trying to dissect your question here my man uh third lean to your so if you do an 80 20 loan technically it's a second and a third so you take a three liens on that property um well as far as the second versus Wells Fargo second is the entrust from the investor buyer to the seller and a third third is from the end buyer to the investor in case I'm not sure if I followed the question no she Casey's doing great she she can move to the front of the class yeah so um yeah I think it's it so I apologize Casey I'll definitely wrap up with uh Alan and get that back to you um so that's cool stuff but this field is amazing right and we do all this stuff and all this kind of cool creative financing and go around the system and those people who are originating these things you know creating a rap no takes a lot of effort finding that buyer is key right find the properties key what do you tell people who are saying I'm just getting started with the subject two world how do you find the asset how do you find the property how do you find the borrower where's your typical strategy you can I mean you can go out and Market specifically for this and and you're going to be looking at the foreclosures uh looking at probate uh properties where there's an assist owner um looking at properties that are both for sale and lease um vacant uh rental properties and things that so you can you can certainly market for it and there's you know a lot of folks who do and they're doing great um what I usually say is just make sure you understand this you've mastered enough so that you know what's going on so when you see it and and that's that's really actually all that I do I call it opportunistic investing um it's just one of the arrows that we have hey hey Mr seller we want to buy your house all right you don't have much equity in it uh you don't have enough to even sell this thing and pay commissions all right well we're going to move this over to seller finance transaction so you're looking for them when they when they occur at minimum but you can you can go market uh uh you know I don't like the foreclosure list because that means uh I say the vultures are already out there looking yeah so I want pre-foreclosure or pre-pre-foreclosure 30 60 90 day late lists there's there's ways to find them but very very important to understand it so when it comes up you see it and then you take the the advantage of the opportunity so Nathan we had a question from Drake on Facebook here and I was gonna throw that one to you I know and so you just recently came across from a note seller who wanted to sell something um I'm not sure if Brian's on but uh so so we came up with the idea that they did a split note they I guess they did subject too and now they have seller finance note and they split it 50 50 and they sold the property and it's 50 ownership of that note how we buy it so I'm gonna tell you my strategy let Nathan speak on his strategy is what we're doing right now is we're figuring a way out that you buy out your partner and then we give you enough money to pay off the first I can't buy 50 of your of your note because then if the bar default you default I'm now JV with your other partner and that just doesn't work because I don't know the other partner and I just know how I do business so it makes it dirty so what we were doing in our strategy we're we're buying a note from someone we're actually doing a hypothecation with that person we're lending money is we're working at a strategy that they sell 50 their 50 shares to their partner so they have 100 ownership there we fund a hypothetication to pay off their first lien and then you sit there and we pay you pay us that rap no payment it's a little higher than what you're making but you only have for 10 years right and after 10 years it's done you collect for the next 20 years so Nathan what's your thoughts on that yeah yeah for me the same thing I would need 100 ownership I the 50 thing that throws me because like you say then I'm then I'm now a partner with somebody that I don't know yeah and I'm just I'm not very comfortable with that so I'd have to get 100 so um what are some of the biggest mistakes you're seeing from people who are getting involved or even experienced people with the substitute and in the selling lease option rap Data Trust whatever entity they created in land contract for those outside Texas what are the biggest issues or concerns you're finding people so the uh I always say the due on sale Clause is the most talked about uh issue in regard to mortgage rep at least seen uh occurrence in the wild out there insurance is the biggest obstacle we need to get over the the homeowner's insurance because you you have a situation where you know Wells Fargo is looking to see that their borrower is the owner and the insured of that property yet we're sending up a declaration a deck page declaration page from the insurance company that says you know Bob Byer is now the the insured and so the the insurance needs to be done correctly uh while I say there's been three out of 8 000 issues in regard to do on sale there's been dozens and dozens and dozens of insurance issues so you have to you so I'll always say if Aunt Betty's been doing your your insurance and she has your your car and your house and everything she's not doing this one uh you're you're getting someone who knows what what they're doing knows how to structure that deck page that declaration page so that the person receiving that at the mortgage company doesn't fail to check off a box so that's that's that's the biggest issue everything else we can deal with that's a big one that's a huge one because I was reading about is like how do you structure that insurance on that property without triggering the bank that there's a bunch of payees right I can I can tell you what I can parrot the words from my go-to insurance folks uh buyer sellers canceling their insurance because you can't insure a property you don't own buyers get new insurance and they're the their the the insured mortgage company obviously has to be the mortgage e-clause over there they need to see themselves but the the seller the borrower for Wells Fargo they're going to be an additional interest versus additional insured now that's the limit of my understanding of that I let the I let the experts take care of it but that's what he's told me yeah it's so interesting for me as a as a lender you know as I become a lender then I just do forced placed insurance so whether the borrowers got insurance or not or whether they're current or not I'm covered I personally I consider just a cost of doing business and so I just have everything insured uh regardless of whatever is happening with the borrower just just to be absolutely sure I want to make sure that if something happens I'm covered that's that's smart that's smart because I can see insurance companies coming in and saying hey um this is the reason that we're going to not allow this claim they're they're wrong but I don't know if you all know this sometimes insurance companies deny claims that are actually rightful a little bit yeah uh frustrations so this big world of online Finance 72 is very critical I I presume you tell people to talk to your attorney and that law attorneys understand this world what typical attorney should they look for right if they're outside Texas outside if an areas that what should they look for an attorney to draft up this paperwork so I'm I'm not I'm not self-promoting I promise but you need to have knowledge uh both the the legal knowledge and the title knowledge uh so someone can understand these things forward and backward from a legal standpoint but not understand what the title office Underwriters are looking for and vice versa so uh an attorney-owned title office is called the fee office in Texas uh you you want you want a a an attorney that's in the title world uh who's also rolling their sleeves up and working in this area um my suggestion on how to find someone like that is you just go over to the to to a Facebook networking create a finance page and say hey who has an attorney referral and you're going to get a half dozen uh real quick well said yeah and we're streaming live in about eight groups so feel free to comment in this group and uh promote it uh thank you to Brian Nick and a bunch of other people who uh let me stream directly into the group School we're trying to educate everyone right there's no buyers we want to make sure you create it correctly so we can buy it uh Nathan and I both buy notes forever um and hypothecate and everything else so we definitely want to talk about that um the insurance part of it I would definitely uh recommendations for that just posting the Facebook group go down stuff in the pinned comment you should see Alan's information you can definitely reach out by creating that form up but I would ask for the recommendations to be put into uh the groups and ask questions there do you guys work outside of Texas or just Texas um uh only close in Texas I certainly um speak with people educate what have you in regard to mortgage reps and general contracting structuring and exit strategies Etc but I don't pass the boundary of Texas because my law license stops there yeah that makes sense so one last question for me and I um and I'll let Nathan go at his when we're looking to help people who are creating notes right and they say that they want to do a subject to and they need a little bit of cash to give that subject to seller as well as sit there and get some cash flow before they find their buyer we want to create a second lien for them for 36 months or so do we have to go through the underwriting process do we have to go through all that process of creating that no and doing it the billiard pay or can I just write a business a business note from me to Nathan that says I'm gonna give him a thirty thousand dollar lien on that property do I need to do any other additional paper or use an armalo in that state so you're uh that that's a like you said B2B um the the laws are governing uh residential uh loans and so your your analysis is just your normal analysis is my position secure enough and is the borrower have some uh liquidity if I uh if they default so you're you're just going through your normal analysis of due diligence versus any kind of that in any of the armalo stuff yeah so this is awesome guys right so if you guys are doing stuffy twos and you need some cash for that to for that seller right and you sit there and say listen I need some cash cash flow rehab the property maybe and go ahead and borrow from us right we're gonna charge you 130 Rave interest rate right and just get your property going I'm kidding on the interest rate it's only 129.

but what we can do is you you're going to get that cash you need to give to yourself or two right recreate the second and then you're gonna go ahead and get that borrower we understand that you may pay it off sooner or not but we can lend that money in position but understand our criteria is be very very tight meaning we're not going to do CLTV um so it's the collective loan to value I'm not going to do above 65 just not going to do it especially in today's market but if you have a lot of equity and you can make things happen we can give you a second twenty Thirty forty thousand dollars to hold over and we can amortize it making maybe look at the interest-only situation and that kind of stuff for maybe a year two or three or five years and make it happen for you guys so just keep that eyes open and Alan is there any problem with doing something like that is that a great Avenue for those people who need that extra money to just kind of a bridge loan no no no problem at all and uh you know seven years ago didn't really see it now it's it's pervasive yeah this is a huge world no buyers we've been doing webinars this is awesome stuff guys it is massive as I dive into it I thought tapes and notes were big we're seeing more and more inventory of this kind of stuff is a little bit different I'm not gonna say Harry it's just a little different than getting a list of assets from you know our favorite hedge funds but I'm gonna tell you you're gonna get a better pricing so maybe you shouldn't shop there just leave me and Nathan to buy stuff right so this world is crazy right and we're learning a lot about it and I think that you guys have been such a good way to go through things and your groups are really really awesome to be part of we encourage you guys reach out to Alan reach out to the Facebook group but also we put a pin Post in there to reach out to Alan ask questions his team is awesome so we encourage you guys follow Allen look at some stuff but understand Alan is one person he can't respond to everything right he's got to do a job as well it's been a fun time so need to let you uh that's your favorite we're always curious here you know we're all trying to predict the future and see what's coming down the pipe so from your perspective with with you know you've seized even from a year ago your response on who's doing uh subject twos is different and who's selling in that way so with what you've seen even just over the last 12 months where do you think we're heading I think we're we're heading in the same direction and what I mean by that is uh we're we're in a I got I say a kind of a unique situation where sellers want to sell via seller finance and take advantage of their interest rates buyers want to buy seller finance and avoid the high interest rates and we haven't seen that in 20 30 years or so uh that's gonna I'm gonna I'm gonna project out here absolute guesses that's going to continue going forward from uh most of uh 24 uh in my opinion I think things will start normalizing but I'll tell you um there's no time that mortgage reps aren't a good solution in in several different areas so you you need the the tool you need the arrow in your in your bag back there uh for when it occurs but I think we're going to keep keep on the same uh increased uh incidence of mortgage wraps and sub twos out there for another year or so that's awesome that's very good yeah it's amazing it's been a great great learning experience for us and a new Avenue to explore so uh for those of note buyer and sellers if you want to give information to us I have a website Nath Hickory chutney2 I have a Pacific website where you can find a bunch of FAQs questions webinars everything else uh I put in the chat but just go to uh earnestinvesting or jkp Holdings there is a spot where you can sell your note and get some information to us we can give you a quote and talk about some strategies because we're buying these things regularly we have tons of cash ready to deploy the note buyers um we'll be running our our five-week course coming September so stay tuned for more details you can go to our Facebook or our web my website and go to the advanced uh education that in September we'll be talking more about this stuff in our Advanced course um and we'll be looking to hold some daily kind of events uh with some of the top people here to learn more about for note buyers and node sellers how you can strategize to get the good return but also on both sides if I'm giving say I'm charging you say a 20 return you can go make 50 because I gave you money it makes sense so don't be fixated on our interest rate because I guarantee you probably can double it with more money right so that's awesome so we're going to disconnect live and do some after talk but I appreciate everyone who's jumped on spend some time with us this Friday afternoon and Alan we have to thank you man it's been awesome chatting with you we've heard so much good things about you and you've lived up to that uh Fame well I appreciate it no I appreciate y'all and uh I think I need to attend a little bit more of y'all's events and then learn all side of things so Nathan has something coming up Nathan plug it before we uh disconnect uh for next year so actually two things so I was just thinking here while you were talking uh our advanced class I think this would be a great thing for people that are creating notes jump in because you've got a base knowledge of what notes are let us add to that because man we we can do a lot we can do a lot more together and if we can understand each other's businesses better and we can do a lot now that being said that's my plug for that so check that out I think that's going to be well worth your time and your time and money on that yeah other than that yeah I run a diversified mortgage Expo uh we are locked in next year for May 31st and June 1st in Nashville and really excited about that this last year was just a fantastic conference we everybody loved it myself included it was just a great great experience so we're looking forward to having more of the seller finance crew out there come meet no buyers come see how we can work together because I guarantee you there are many ways that we can work together we can make a lot of money together yeah that's awesome well I want to get on my disconnect live hang on for a minute I appreciate everyone um so uh Joseph uh we'll get you in there my man I know you're part over our weekly call so I'll get you in there but so thank you again Alan I'm going to stop the feed and we'll go again this will be streamed on YouTube and all the good stuff so be well everyone enjoy your Friday afternoon thanks again Ellen video near the note buyers you can buy this wrap note for say you know for buck 50 if there's if this number is 150 and the wrap is 300 and you give that person 150 175 Grand and they have a 300 000 wrap note on it and you buy that for three that 300 000 I know for 175 give them 25 Grand their pockets pay off that first you just bought a 300 000 first lien for buck 75.

it means that you pay back everything that the uh the uh buyer has paid you uh and you get the property back uh with some fines associated with it that's a deceptive Trade Practices Act violation which now brings you up to three times damages uh that's allowed [Music] thank you hey everyone Dave putz from jkp Holdings alongside me as always it's written Turner good afternoon Nathan how you been Bud oh very good very good oh it's been fun it's been a busy busy week for me how you been what's been new with you ah you know what I just realized this last week this is one year since we moved and I think we're finally getting a few down to yourselves and uh goodness yeah it's been quite a thing but yeah no it's been it's been good it's been a good week lots of stuff going on got some interesting opportunities coming up we'll talk maybe offline about some different things but uh it looks good I like it man it's been um it's been a world wonderful week for me um we got a bunch of stuff going on uh juggling some stuff personally and then we have we're going away next week and then we're dealing with about six or seven deals are kind of floating around and my mind being crazy so uh plus students and social media marketing and it's been it's been fun though and I'm looking forward to relaxing for a few minutes sitting down and just unplugging so yeah it's gonna be fun so we have a lot of new people joining us um for those who don't know we run we've been running a webinar for two years three years now whatever it is now yeah so it's been fun right it's been a joy I think people um really appreciate the information that we provide and what we do for people but we also been on a journey this year where we've been looking for people to merge with us as note buyers to merge us as note Originators note um you know those kind of things everything to do with that kind of stuff is as note buyers we've been buying Bank origin notes for 13 years now plus yeah but at the same time we've recently found that we're moving towards that summer Finance world so we're really engaging with all these people out there who are doing owner finance subject tubes and some people don't even know this when they sell that subject too they create a rap new and I recently ran to someone who didn't know what rock note was and had a bunch of them so it's really interesting um what we wanted to do is really kind of bridge that Gap we keep saying over and over again and I feel free to those who are new to us go back and check out our YouTube channel our videos on our website and the Facebook page what has been your overall in this eight month Journey we've been in what is your thoughts right now I I've been astounded I it's been very very interesting um the biggest Revelation one of the biggest Revelations is to figure out that note creators have no idea that no buyers exist and to me that that blew my mind because I'm like wait what we can do so much business together yeah um part of what we're doing is is educating those who are creating notes how to do it in a way that makes it a very marketable note how to make it something that is very attractive to us as knows as no buyers so that's been that's been part of our push and part of our our you know goal as educating people on how to do that in a way that will make that a sellable note so I did recently a video uh we published this week about what makes a note valuable right and what makes it so they can get the most money for it um but we've really been focused on making sure that it's created correctly first because yeah if you have all the great numbers in the world but how you structure is Big so those people who are looking to structure the note but also looking to possibly sell it now Nathan give me an idea of why someone would want to sell a note what's the advantage of selling out just hold it for 30 years and you totally can uh and then maybe a life event comes up and you think oh shoot I need a lump sum of cash right now uh and or or you're just tired of it or you've got a different opportunity that you can invest money into or you know who knows there's all kinds of reasons why you might want money today versus stretched out over the next 30 Years and that's where we come in that's where we are there to say you know what I'll give you that lump sum of cash yeah and if and again if if you've created it in a way that makes it very attractive to me I don't have to give you very much of a discount I can pay a top dollar for that and we can all make more money in the in the long run so yeah that's that's a big push for us well we've recently found out too is that people are having creating these rap notes in the subject twos or owner finance and they have a ton of equity stuck in it yeah and what they don't realize that they don't have to sell that note they want to keep it right and in our past webinars we've been talking about hypothecations where you literally lend money you borrow money and use your nose collateral nothing changes the new you know we're going to be doing a webinar next um on some that we actually recently did a hypothecation and a great return and why it worked for him and how it held team pull out equity and allowed him to Juice It Up and gave us the return we're looking for but gave him the capital to go out and buy more notes so that features really cool for us yeah and you've done some of those I haven't done those yet so I'm curious to see what you've done and how you've done it yeah see if that's something I want to incorporate as well yeah it was it's been a really cool thing for us um and I think for for us we're trying to learn more about this world of subject Jews owner finance rap notes and we've done a lot we wanted to get the experts on that kind of give us the information and as in those people know we do webinars to learn and then share with you guys so we don't know the answers these questions we're going to ask yeah right legitimate questions yeah so this recording will be found on Facebook LinkedIn in YouTube uh my uh website and everything else so feel free to look at that and get the information I'll put the uh uh the website we have too so we have a bunch of people tuning in this is awesome guys um post your comments questions we're streaming live on LinkedIn Twitter I think Instagram and Facebook live as well so let's let's uh let's let's bring in our guest speaker for today uh Alan it's been a pleasure it's been a long time coming we booked this with you for a while welcome I appreciate it I appreciate it uh really glad to be here um the what y'all are doing and what y'all are talking about has really kind of come around for for me and I think in Texas past oh 18 24 months or so and uh y'all are y'all are causing some disruption uh to us uh changing the way that uh these wraps are structured sometimes so it's been it's been fun been fun to learn yeah and that's what the key is right now Ray we're learning from you while you're learning from us right what is important to a no buyer what is no why do we need certain things right um yeah and you're coming with an attorney's background so you've got a bit of a different spin on this as well and so that that's part of why we wanted to have you on yeah I uh you know my focus is going to be uh uh compliance with laws and and protection of parties while y'all are over there uh in the how do we make this note as marketable as possible uh and so um like you said life events occur uh we have not been uh historically making the notes marketable uh but now we're now we're changing that well the legality of it actually makes a big difference for us so so we very much appreciate that uh that angle of it I know there are some people out there teaching subject twos and creative Finance but they're not going through and teaching the legalities uh behind it and so we want to promote the the legal way of doing it uh because not just because it's legal but because honestly it makes it more attractive for us so that is automatically that becomes a more marketable Note 100 so let's back up for a second right how did you get started with what you do how did you get involved in the real estate world give us a little bit of background so in terms of the title work um I just had you know I was construction litigation attorney and I had clients who said hey you should close our deals for us when we purchase and I kind of said we don't do that I saw a couple of settlement statements and these two three million dollar houses being sold I said oh we do closings now and so it got started back in 0304 and then the recession uh 0708 hit and that drove us all to sell our finance transactions which then drove us to wraps sub twos and so I um I stayed in that that area uh when the market came back all the other Title Offices uh moved out and went back to the retail conventional you know buyer and end user buyer end user seller transactions I just stayed in the mortgage rap world uh really to be ready for another event um and then I didn't know that those events were going to be different than recessions there were going to be coveted events they were going to be a mortgage rate increase events and so we uh we were lucky that we kind of positioned ourselves and we're ready for that so that's that's how I got involved and now I just call myself a rap nerd and I talked with anyone and everyone about mortgage reps yeah awesome awesome stuff that's really cool so we got a bunch of questions in here I really appreciate the questions we're going to get into those questions a few minutes so uh feel free to post them um I'm able to actually trigger it and bring into the feed which is really cool new feature I got going on here yeah so we've been flying in already this is interesting this is awesome guys I appreciate you guys jumping in here so we wanted to back up can you define the word subject to yeah and it'll end up being a little bit different than what folks are maybe learning out there but uh subject two means uh I'm going to take over that mortgage I'm taking the the property subject to the mortgage um there's confusion out there that hey um I'm taking this subject too I'm not assuming the mortgage and I'm trying to dispel that or change that that thinking you are assuming the mortgage is just a non-qualified assumption the lender is not approving you but you are taking over all of the terms and conditions of that mortgage you have to pay that mortgage so you're assuming the responsibility not assuming in terms of a lender saying all right you're approved there's a qualified assumption so a sub two and that's usually your acquisition method uh I'm taking over this node pain a little bit of equity sometimes no equity over to the seller and now you're in control that mortgage as if you're the one that that applied for it and and you're fully controlling that mortgage sellers out so that's that's my long definition of it and why would somebody want to do that why would why would somebody living in the house want to allow you to take over their existing mortgage so uh if it was a year ago my answer would have simply been there's some type of event going on uh during foreclosure uh heirs have uh inherited the property don't really know what's going on um someone's just an extremely motivated seller they can't sell their house otherwise open it up to sell our finance you have a bigger Market a bigger pool buyers that would have been my answer and we would have stopped there but now folks are getting pretty darn smart they've got themselves a 2.5 percent interest rate on their mortgage they're trying to now monetize that go out there and sell it for you know six to to nine ten percent and cash flow that so I used to get you know a call every month or every other month about someone trying to monetize their mortgage interest rate uh now it's weekly multiple weekly you've got these people saying hey is there any way for me to you know try to sell this property they don't know about mortgage actually don't know about anything and so now they're they're trying to monetize their 2.5 their three percent uh interest rates awesome interesting oh it's so cool so rap notes we've I run to a few people and one's actually on the call now never heard this word rap no how do you define rap note so uh my my uh my definition of mortgage rep I try to simplify it is just seller financing a property and by the way we don't pay off the mortgage but it is seller financing so in a seller finance transaction you're drafting up a note that the the buyer now now owes over to the seller uh you're drafting up a deed of trust your warranty deed has a vendor's lean in there since there's a a mortgage being created so your wrap note uh in Texas just passed a bit of legislation in regard to managing or or governing how rap mortgages wrap notes are dealt with but it's just simply a seller finance note uh that acts the same as a Wells Fargo or Bank of America note uh has all the protections uh it we we try to mimic a a standard transaction in our wraps or sub twos to just make it more uh legitimized I guess more more protected in the event that there's any kind of problem so it's just a seller finance note so when we talk about these things we're looking to buy that wrap note right or lend money against that wrap note where you own the note you can do as you want with it you can sell it you can sell partial on it you can lend borrow against it we call hypothecation if you want to learn more we I actually have FAQ and take a look at the past webinars but can you talk just briefly about these kind of things can you legally sell that note to a note buyer yeah absolutely absolutely that's where you get into to looking at all right was it closed via rmlo and disclosures did it comply with Dodd-Frank uh comply with state laws comply with SAFE Act um and and you know if you're if you're in the business like for for instance we we mentioned Nick before we got started there yeah fella uh does hundreds and hundreds of these things yeah he never he never does not use an armalo um while an investor isn't necessarily thinking about selling a note so they're trying to decide all right should I use an armalo I'm actually going to post on on our sites today when we're finished up about making your note sellable even if you don't have those in the exit strategy uh because just in case and then when I mentioned earlier y'all were causing some trouble uh what what happened is these folks who know that they want to want to possibly sell the equity portion of a note that they have uh they've they've bifurcated or or dissected a mortgage rep into now a a sub 2 acquisition with a seller finance carry back so they can sell the seller finance carry it back or sell the the stub two portion and so I had to I had to uh acquiesce these people who were dissecting mortgage reps and uh at first I didn't understand the the benefit of it but um if you're if you're going to sell a notice better to dissect them into two different notes so when we're talking about there that you can do an 80 20 loan right you can do an 80 loan at 20 loan instead of doing 100 sale so just just kind of realize that kind of portion of it so we're talking about these kind of things and we have been talking let's go to some of the questions before we dive into some stuff um is the attractiveness of the note subject or the standard of a note buyer want to make a note more attractive so let me I did a webinar on a video on this uh we've talked about before the biggest features of making a note valuable is making sure that collateral file is secure what does that mean we talked about rmlo if you are selling this property to an occupied borrower someone who owns then is borrowing money from you to occupy the property you have to go through the rmlo under right make sure they have the ability to repay and when they do that then it becomes a qualified mortgage that no buyers can buy it and then the attorneys and judges can't fight you on creating a note and make sure you use the rmlo to do all that kind of packing right the next thing is yeah Nathan I was just going to say the arm on low so first of all registered mortgage loan originator is what that stands for registered or I don't know some other r word but anyway mortgage loan originator that all came out because of the last crash so though all those laws SAFE Act dodd-franks stuff you'll hear us talking about all that kind of came into existence 2012 2013.

uh so it's been a law now for over 10 years uh and it has not been very closely adhered to I would say generally um but it's being more and more put under the microscope uh it's becoming more and more important to make sure that you're you're doing it correctly and going through the proper channels so all that being said that is that is one of the biggest reasons that we are very concerned about that if you're not using an rmlo it's not necessarily a deal breaker for for me in particular um but I will probably have to Discount that more because I'm going to have to go and fix it I am going to have to go through and and redo some things uh to make sure that it is 100 compliant and that it's it's falling under the the correct rules and laws that are out there so that's number one making sure that it's done properly so that I don't have extra work to do so that it's it's legal and it's compliant and everybody's satisfied on that level I like it it was awesome Nathan so the second ports are this are the numbers right guys you're reaching your notes and no buyers please chime in here right you have a big form of people buying and creating notes we don't want to see a situation where the um the note rate of the borrower is at four five six percent that's not good right because the fact that the rate affects how we can buy it if we're looking at a note that we need to create and that node is written at a six percent and we are going forward and trying to buy it at a 12.

it doesn't work right what happens is is that we try to discount it to get the interest rate higher and it affects us tremendously so you make sure that the rate of that note is high enough right high enough 8 9 10 11 12. get it above a 12 because I promise you if you we have a chart that if you look at our website and go to our fax you'll see a chart that shows that if you write thing in the eight and we're looking for a 13 the discount you can expect the second part of that is the term the lower the term the better it is with all that said you got to make sure the borrower can qualify right make sure that the billiard pay is there so um when you're creating notes and you're suggesting that people do these kind of things Is it feasible to what do you tell people when they find a borrower that isn't able to afford a note that's sellable what do you tell them to do now when you say uh you said no when it's not separable sellable sellable I mean the fact that you know Hey listen I'm right I have to rate a five because the payment for the borrower doesn't work out right they can't afford a 10.

what do you suggest to people who are writing a four percent five percent note just to make the borrower happy you know for me I think it boils down at least the files that we work with you you kind of have two different buyers you you got a A buyer who is yeah uh seller finance is fine I don't have to necessarily uh I want to try to avoid that six and a half or whatever we're at these days uh and then you have a another barber who uh for some reason or another can't get a conventional mortgage and that's when we start having our interest rates up there between 8 and 12. um but if they're if their reason for not being able to get a conventional mortgage is they don't have an ability to repay then we're back down to a problem of that note getting in place in the first place um you know I don't like seeing someone who's uh in that ability to repay uh problem area signing off on a 12 13 note um so there's there's all kinds of things that can create a situation where you're not able to get a conventional mortgage and those are the one ones that we see up there at the the not nine to nine to twelve or so uh I don't I don't like seeing much above 12.

it seems like it just hurts people yeah and we have to worry about and I keep saying the word wrong use your law how do you pronounce u-s-u-r-y I call it news right yeah it knows usury it's usually and each state may have different uh regulations or we'll have different regulations and what that means is the cap of what the interest rate can be you can go above it but there's some things you have if you do you have to qualify and stuff like that but you have to make sure that you stay below that majority of time so your armalo knows this stuff and can work with that and your attorney can work with that it all based on what state you're in yeah and the armadillo we have two different kinds of rmlos an armalo that will come back and say no you can't do this versus a normal that comes back and says hey here's our data on this in the the seller lender makes a decision on them um and and unfortunately Dodd-Frank is uh not exact it says you need to look at uh debt to income ratios and that give you the exact numbers so you need to um uh look at you know eight different items of ability to repay but doesn't give you specifics on that so it I mean it's good though it allows you some area to come in and say all right well this person has you know substantial income flow but not a lot of savings or this person has a ton of savings but not income flow and start making your decisions yeah so one of the questions you got before the webinar was from Brian uh Bedford was how do you avoid the due on sale Clause um and along with lines what causes uh the question what what Clause do we need inside the paper to hold up on legal action so explain what do on sale means and then how do you suggest avoiding that error issue yeah so do on sale Clause is simply just a permissive right of the lender to say hey the the entire note is now due the entire mortgage is now due because you sold our collateral and when you when you say that obviously in a mortgage rep uh or sub 2 you're selling their collateral and so my daughter actually works at my office uh part-time and so she came across this new on sale clause and she knew we're closing all these mortgage reps and such and so she came in just you know confused faces well how do we how do we do this because there's this due on sale clause and so it I mean it sounds substantive it sounds uh like a deal killer the issue is um I haven't done a count lately but at one point in time we had three uh situations where lender called the note due out of more than 8 000 transactions so I did the math on that it's point a lot of zeros percent so it's in in my world is a non-issue uh you cannot prevent it uh people talk about uh land trusts things that nature uh that may confuse a mortgage company uh it doesn't necessarily avoid it uh under the federal act going to change your main act um so there is there is no way to 100 avoid it however the fix is relatively simple if it occurs we do a little cat and mouse game we did the property back now we're in compliance and then did it right back to the buyer um that's uh that's happened on three occasions like I said and it worked perfectly each time uh one as long as 10 years ago and then the other several years ago but it's just a I mean it doesn't come up now lawyers deal and possibilities not not probabilities so I have to say you need to have a plan B you need to be able to pay off that mortgage the Empire may need to sell that environmentally to refinance um but it's for for for the amount of times that we deal with it dear Lord we talk about it a million times more so do you put it in any type of entity and you said not a trust do you do anything to protect it or you just sell it the uh the uh put putting it in the entity doesn't protect you either now we always advise everyone put their investment properties in entities um but the the Banks don't want properties back um and and they're not they're not watching you know I think uh Wells Fargo has uh three quarter of a million uh loans out there they can't go every single month and check that's been sold so it usually it usually pops up because of some uh error made by the parties um you know they contacted the banking appropriately uh on one occasion we had a weird one uh condo regime went bankrupt changed the legal description of every single condo in there and that triggered the the lender so that was that was a completely innocent uh event but the ones that I've heard of is um some type of uh error or or silliness by the parties yeah okay so online the bank just wants to get paid yeah they they want their money that's it so I remember hearing about this I went my very first nail conference in 2009 and they must have been talking about subject twos I didn't I didn't know what any of that meant at the time but I remember them somebody whoever was speaking on stage stage said you know somebody asked the question about do on sale what do you do about that blah blah blah blah and the speaker said how many people have ever dealt with that and like two hands went up in the in you know a crowd of 200 people and I'm like oh okay so it's not really a thing okay and that was it and move on but and over the years I've heard this come up time and time again and again then you say okay how many people have ever dealt with this and you know three and eight thousand yeah so it's it's extremely rare as an investor I deal in probabilities so it's extremely rare it's not something I'm concerned about so Nate we did have a question LinkedIn regarding from Randy what is your buying criteria or what's attractive to you I'm not sure if we have that answer that's a very vague question sir Randy if you can clarify in the chat there I appreciate it um and whatnot so let's so we've talked about the fact that you there's no way to protect it um so how asked you know deed back to the cell and back again to the buyer I think what you meant is sell it back to the bar the original borrower Who Sold you the property and indeed it right back to the person you sold it to so so how hopefully that kind of clears it up um so it's interesting right because we've heard all the different ways to avoid it and you're right most people don't have that problem but I like the fact you have offense right uh when we look at this stuff um we had another question from Liz Pryor's what's the best way to hold title and a personal name a business entity or a trust name is there a a way you suggest people yeah so so uh a lot of states have have uh passed some legislation that allows what's called a series LLC I don't know if y'all have it or not um but you know entity selection process is is in theory supposed to be a a person and and uh business specific review however 999 times out of a thousand you're going to end up with an attorney saying all right Mr investors a series LLC is best for you which allows you to separate your properties so you've got a property that has 200 000 Equity you've got a rental property that has no equity um but you know you have high liability of people falling down getting hurt suing you what have you you separate those two into different uh little sub series I call them sub entities it's not actually that but for all intents and purposes you've got your series LLC and then you can create little sub llc's under those so that's....