Why We Love Contract for Deeds

Lately in the Secondary Note Market, a lot of Note Buyers have been purchasing non-performing or performing contract for deed’s/land contracts instead or in addition to traditional bank created 1st or 2nd lien non-performing notes. I’m sure each investor can give you reasons why they are or aren’t buying Non-Performing CFD’s (contract for deeds), but personally, we are loving the opportunity they are bringing to the market for us a Nationwide Note Buyers. While they have a lot of benefits there are negatives involved as with any investment. This post will walk you through why we’re buying as many of these as possible and how some of the benefits/negatives have effected us.

Before we dive in, it’s imperative that you understand what a Contract for Deed is. A Land Contract Installment, also known as a Contract for Deed, is a form of seller financing. It is similar to a mortgage, but rather than borrowing money from a lender or bank to buy real estate, the buyer makes payments to the real estate owner, or seller, who remains on title until the purchase price is paid in full. It is a tool that can allow buyers who either don’t qualify for traditional lending options or who want a faster financing option to purchase property.

The main seller of CFD’s on the secondary market is one large hedge fund that owns A LOT of real estate (almost all CFD’s are being created then sold from this one hedge fund). They buy the properties as REO’s from Fannie or Freddie Mac in bulk, then create a Land Contract Installment with a buyer who likely could not qualify for traditional financing for a variety of factors. Most of the time, they are sold to the buyer in as-is condition.

Benefits:

1. You can buy these notes for CHEAP, and I mean CHEAP!
   • We are picking up non-performing contract for deeds in the range of $6,000 – $12,000 normally around 35% – 45% of the CMV (current market value). If it’s a semi-performing or recently defaulted loan (stopped paying in the past 2 – 3 months), we can typically buy them for around 50% – 60% of the UPB (unpaid balance).  That means we can purchase more deals at a better price allowing for a higher yield for our company and investors. One of our latest Non-Performing contract for deed purchases was in St. Louis, MO, purchased for only $6,500. Our realtor told us, in its as-is condition, we should be able to sell for $43,000! That’s an expected profit of a roughly $30,000 in just 4 – 5 months. The property is vacant and we are maintaining the lawn & property until we have marketable title. Another one we purchased, defaulted recently (only 2 months of non-payment). We are buying it at 37% of the current market value and 59% of the unpaid balance. If we are successful in getting them repaying, as we hope to do, we’ll be passively receiving an 17% return on our money.

Take a look at some of our “slam dunk” Contract For Deed Deals below.

This slideshow requires JavaScript.

2.      There is a lot of Inventory.

• We are getting updated list of recently defaulted or seriously delinquent CFD’s about every month or every other month. The list often has 90+ properties for sale nationwide. When inventory is high, that means we’re able to purchase more quality notes!

3.     Most of the time you can file “Forfeiture” instead of having to Foreclose.

• Since a CFD is a form of seller financing that allows the seller to remain on title, the majority of the time (depending on several factors that very from state to state), you don’t have to foreclose on the loan and mortgage in order to  have marketable title. There is a legal procedure called forfeiture, in which the seller can cancel (“forfeit”) your rights under the contract. Forfeiture is often less expensive than a traditional foreclosure, and is much quicker (average of 45 – 90 days start to finish). While forfeiture is an option in some states, not all 50 states allow forfeiture, and many have restrictions on when you can file forfeiture or when you have to foreclose. We like to use this website for reference to help us understand more about each state’s requirements and procedures. As an official disclaimer, if you are looking at purchasing a CFD in a particular area – contact a local attorney who can give you sound legal advice rather than finding your answer in a blog or online. As we like to say, trust but verify.

  While we know it doesn’t always happen this way, we’ve found the majority of our CFD purchases to end with forfeiture or a Deed in Lieu (DIL). This means we are saving money and gaining title to properties in as little as 4 months from our purchase date. This increases our yield and profits and makes our company and investors happy!

Negatives:

1. Conditions can be great or really, really, REALLY bad.
   • As we mentioned before, the hedge fund that is creating the majority of the CFD’s are selling in “As-Is” condition. Let’s just say the As-Is condition can vary greatly. We’ve seen homes that were move in ready when the seller got them as an REO and we’ve seen some that were a complete inhabitable wreck. Regardless of the condition, the buyer that purchased the home is now responsible for doing the work themselves, or paying (unlikely), to have the work done. We’ve had properties without kitchens, no gas (in Ohio might I add), dead animals in the basement, no flashing behind wood which led to the WHOLE home rotting, and those were just a few of our CFD properties…

Take a look at some of the worst of our CFD’s. 

This slideshow requires JavaScript.

• With notes in general you aren’t able to get inside the home prior to purchasing the note, which is one of the riskiest factors of note investing. We’ve also had CFD’s that once we got inside were in perfectly fine or nice condition, and we’re easy to sell. You just never know.

2.      Know your Value and Price for the worst.

• Considering the variance in condition I mentioned in the previous “negative”, to investing in Contract for Deeds the most important factor of your purchase is your value. You must have a good idea of the As-Is value and price it preparing for the worst. We have seen a few investors pick up CFD’s for just a few grand too many and once they get inside find out the bought it for more than the could sell for because of the condition. You have to be 100% confident and make sure even at a wholesale price, you can walk away with a nice profit.

3.      Know your Laws, Forfeiture is not always the option.

• This one is under benefits and negatives because if you don’t know your laws, or didn’t consult a lawyer (as suggested) you could expect a quick turn around 30 – 90 days and just $1,000 to file forfeiture to only find out it’s $4,500 and 10 months minimum to file foreclosure. If you don’t know the outcome based on the loan information itself, it could make or break your deal.

 

While this is just a drop in the bucket compared to the options and benefits/negatives of buying CFD’s, it does give you a good idea of why our company has benefited from purchasing them, and hopefully help you see how you can benefit too!

Advertisement

2016 Update: A Year in the Life of a Note Investor Recap

While my intentions for this year was to blog once a week on my happenings and successes within the business (see the original post here), I realized it was a lot of time and effort for just a few viewers. I decided to stop posting weekly so I could focus that time instead of furthering my business efforts and to be honest, have just a little extra time for me. If you were one of the followers keeping up, I’m sorry for our lack of recent posts, but I am very glad to give you our year end update today! Our 2016 Business Goal was to make $120,000 in pending or actual profit. Not only was it accomplished but we SURPASSED it! The icing on the cake, we didn’t have to take any “pending profit” into consideration. We made a whopping $153,000 in gross profit from our note investments and members at http://www.tapetechs.com and http://www.NoteInvestingClub.com! If your interested in all the details, take a look at our stats below!

2016 was the most successful year yet. We are beyond excited about our results and are ready for all 2017 has to bring, we know our profits, and deal flow will only continue to increase. We are seeing a huge supply of Non-Performing Inventory and great results with our note deals for both our partnering private investors and our company. If you have idle money sitting in your Roth, IRA, 401K, or savings account, talk to us. We can help increase your return on investment while securing you by real estate. All opportunities are 100% passive. Contact us by email or phone to find out more, 407-205-7363, seasonedfunding@gmail.com

Wishing you the best in 2017!

Bradenton REO Case Study

Another great deal, bought and closed. This was deal was completed with a “JV Partner” (Joint Venture) and was completed in a whopping 47 days! Our company, Seasoned Funding, LLC acquired this deal from a note wholesaler. While this was our first time working with them, we have closed several more and are looking forward to completing many other home run deals like this in 2016.

As you can see, this deal was a seriously killer deal. We ended up selling it for way more than we initially anticipated and in less time (both great things). There were some small complications with the original closing because the title company the seller went with did not understand our creative structuring. We securitized our JV partner with a 1st lien private mortgage with a lenders policy which was rejected by the closing company 3 times before they finally had legal review it and accept it!

We got clean up started right away but had set backs once again because it fell during the Thanksgiving holiday. We finally got everything buttoned up and on the market within about 3 weeks, and as you saw it was smooth sailing from there!

If you want to see some of other portfolio holdings, or find out how to get involved with our company and see returns like these, please visit our website, gives us a call, or email us!

Parlaying your IRA into a Family Fortune

I am in my early 20’s and most of my fellow investor colleagues consider me very young for the real estate game. Knowing that I’m starting earlier than most, I want to be ahead of the game financially and with that comes planning and preparation, especially with IRA’s and taxes.  With that being said I’ve been doing a lot of reading on the power of IRA’s and Tax Protection and just finished reading a wonderful book by Ed Slott, How to Parlay your IRA into a Family Fortune.

The Main Idea of the Book:

You can “Parlay for your IRA into a Family Fortune” by setting up your Roth IRA to be given to a beneficiary (typically someone that is younger than you such as a child or a younger spouse) which allows something called a “stretch”. The beneficiary can continue to make contributions to the IRA growing and building your original retirement based on their  life expectancy according to the IRS, tax free, taking only the minimum distribution the entire time.

Let’s use an example from the book to make this a little more clear.

“Bob” leaves his 39 year old daughter, his beneficiary, a 1.5 million Roth IRA. Because of his daughters current age, the IRS says she has a life-expectancy for 43.6 years remaining to contribute to that IRA before the required withdrawal date. Now Bob was no dummy, he planned for this day properly, ensuring that the structuring of his estate and IRA allowed maximum growth and minimum tax payments (if he did not set this up before his death it would have been left to his estate and a large portion of his IRA would have gone to paying estate taxes). His daughter then inherits this money 100% tax free because of his structuring and now has the ability to continue growing that wealth by self-directing it getting a 8% return (which let’s be honest is a very feasible return this day in age). By the end of her 43.6 year life expectancy she grew the 1.5 million inherited IRA into $11,903,767 all tax free while slightly increasing her annual income taking the required minimum distributions! Talk about the power of growth!

Okay, you’re probably thinking “well I don’t have 1.5 million in an IRA for my kids”,  but the major point Ed Slott is trying to make in this book is the that the power of time, growth, and compounding interest work just as well in an IRA that is stretched with $100,000 or $1,000,0000. It’s tax free growth regardless!

In order to be able to STRETCH your IRA to maximize growth and contribution limits and minimize taxes you need to:

1. Get a ROTH IRA (you can do this by rolling over an existing IRA, 401K, or other traditional investment plan or if time allows, starting one while you are young).

• Check with your IRA custodian to ensure they allow stretch IRA’s and can set up everything needed prior to your death to allow the stretch.

2. Name a Beneficiary to each ROTH IRA you own. This can be 1 person or multiple but discuss with your custodian the proper way to do this.

• There are a number of suggestions he gives in the book on this topic, and it is highly suggested that you keep your IRA beneficiary forms updated as much as possible in the event of death, divorce, or other circumstances. If this form is in existence after death, it supersedes your will and all of your IRA will be given to the beneficiary, hence the reason you want to keep it updated as best as possible.

3. Provide instructions and incentives to your beneficiaries to ensure they maximize this opportunity after you pass.

• You cannot control if your beneficiary takes advantage of the wealth building opportunity you provided to them or not, but you can however provide them incentives and the tools to utilize and maximize the stretch. Leaving them explicit instructions on what steps to take to properly stretch the IRA with a chart showing the possible growth vs. taking the money and paying 30% or more in taxes upfront.

Now I am not expert in this area, nor am I an accountant, lawyer, estate planner, or IRA advisor, so I highly suggest if you are interested in what you read here that you pick up your own copy of the book and explore the many details, laws, and regulations that were not discussed in detail. The book is extremely well written and easy to understand. It makes learning about growing your wealth enjoyable and exciting! I hope this blog helps you take the right step toward parlaying your IRA into a family fortune!

1 Year Later and Where Are We Now?

November 2nd, 2013 marks Seasoned Funding, LLC’s official one year anniversary of being in business. My boyfriend and business partner, Dennis Smith and I, created Seasoned Funding, LLC after hearing about real estate investing from my sister and brother-in-law in the summer of 2012. They were in the process of taking educational courses in real estate investing and were starting a company of their own. After hearing more about it and reassessing our future goals, their new found ambition resonated in us and we decided to take action of our own.

So it’s one year later. Where are we today? Our company, Seasoned Funding progresses each and every day. We are constantly learning, growing, and networking in order to improve and excel in what we do. When I originally sat down to write this post, I felt like the successes we’ve had were not as I hoped and imagined for our first year. We have completed three deals and are in the process of trying to finalize a fourth. Our original ambitions were far more extravagant than what we’ve currently accomplished, but now that I am looking back at where we were, to where we are today, I could not be more proud of our successes.

I can honestly say that we are doing something that 98% of our family, friends, and colleagues will never do. We are taking control of our lives and creating a means to achieving our dreams. We’re not settling for a mediocre life that will result in numerous hours of stressful work for little pay or satisfaction. We are not settling by living paycheck to paycheck saving what little money is leftover. We are not settling for one or two vacations a year for at most a week. We are not settling for the things we can only afford and not the things we really want.

We are creating the life that we’ve always dreamed of but never thought was possible. Our dreams are no longer dreams, they are goals that we will make happen. Yes, it will take time and dedication, and yes, there will be mistakes; but the overall outcome is worth it all. This time two years ago I would have never dreamed of being where I am today. I hope in two years I can positively say the same. Our one year anniversary seemed like the perfect time to look out our past goals, reassess what we want for our future, what we need to achieve to get there, and make a new plan of action.

We are now embarking in a new area of our industry and will be working with a coach over the next 4 months to help further develop our understanding and expertise in the area of purchasing income producing properties for long term holdings using seller financing. We look forward to branching out to a new area of investing as we continue to grow our non-performing note business and seeing all we accomplish in the next year.

I hope this post will remind you to take the time every once in a while and look back at all you’ve accomplished. Remind your yourself why you’re doing this in the first place. When there’s doubt, rejection, or distractions all around us it’s easy to lose sight of your goal. So stop for a second and look at all you have done. Use that to motivate you to do even more. Continue to take action and be the change you want to see!

 

The Power of 72: Prepare for Retirement by Making Money Work for You

I first heard of the rule of 72 at my local County Chapter REIA monthly meeting. We had a guest speaker from a local Self Directed IRA Company, NuView IRA. I was excited to hear his presentation because I love hearing new ways to shelter and grow my wealth using alternative methods such as solo 401Ks and Self Directed IRA’s. During his speech he showed us a very odd-looking chart that had the numbers 1 – 65 on them. There were 7 consecutive squares of the chart blocked out in white instead of the bold blue color of the remaining 58 blocks. He began to explain what we were looking at and the “Rule of 72“, a simplified method that helps you determine the amount of time that would be needed to double your investment  (72/interest rate = time to double).

“The most powerful force in the universe is compound interest” – Albert Einstein 

The 7 white blocks on the chart he showed us was demonstrating the doubling period or 7 years time it would take to double your money if you were receiving a 10% interest rate, which let’s be real – the average person is nowhere near receiving. The point of the chart was to emphasize how important time is when investing money.  With that being said, your age can greatly affect your ability to double your money or not.  The chart below should give you a better idea of that timeline.

So let’s give an example. If you are 25 and you are receiving a 5% interest rate on the $100,000 you have in your IRA (which is a higher than average rate of return, even for investing in stocks/mutual funds). That means it would take you 14.4 years to double your money and you would have $200,000 in the IRA by the time you are 39. If you did nothing additional to the money and continued to receive that 5% interest rate, by the time you were at retirement age (65) you would have around $775,000 in your IRA. That’s not a bad amount of savings if you have a good pension plan with benefits from your previous employer. If you have no additional pension plan; with the average life expectancy rate rising, you will be living on a $51,000 year salary that will disappear at the age of 80 (15 years from retirement).

Can you imagine what your rate of return would be if you started with $100,000 at 5% interest at the age of 45, or 55…You’re ability to double your money is greatly diminished in return affecting your ability to retire at the age you desire.

So what’s the solution?

To be honest, there is none; but there are ways that you can grow your wealth at a much faster rate than the annual contribution limit (which is $5,500 for anyone under the age of 55) or from putting your money into a savings account (current national average 0.21%), CD (5 year CD average 1.34%), or  Mutual Fund/Stocks (current average yield 3.4%).

A Self-Directed IRA (SDIRA) is similar to a traditional IRA with the exception that you as the individual owner are allowed to choose and direct what investments you would like to pursue with your IRA such as real estate, gold, promissory notes, and even limited liability companies (LLC) or partnerships while receiving the traditional tax benefits such as tax deferment and even tax-free growth within your IRA.

When used properly, SDIRA’s can be an incredible vehicle for building wealth inside your retirement plan although there are regulations when using a Self-Directed IRA that should be closely followed and understood prior to making any investment decisions (you can see some of those rules and regulations by clicking here).

Our company, Seasoned Funding, LLC  is a privately funded real estate investment company that works with private individuals who often have money sitting idle in IRA accounts, 401Ks, or even saving accounts. After becoming an approved  investor, we assist the individuals in the process of rolling over their current IRA or 401K into a Self-Directed IRA. We then form a LLC or partnership with their SDIRA and invest in various forms of real estate such as residential and commercial properties and/or promissory notes.  We give the individuals the opportunity to build their wealth at a much faster rate by giving a higher than average rate of return on investment and it’s all done legally, passively, and tax deferred or tax-free. The IRA owner can make their annual contribution while putting their existing IRA money to work with a higher annual rate of return. The chart below is a great demonstration of how we work with SDIRA’s (click on it to make it larger);

There are endless ways to build your wealth using solo 401K plans or Self-Directed IRA’s. There is no need to fear retirement when you can learn alternative methods for investing and can take control of your future. Check out our website to see how we are getting higher than average rate of returns for our partners.

*This is not an offer to purchase or sell securities. This overview is for informational purposes only and is not an offer to sell or solicitation of an offer to buy any securities, and may not be relied upon in connection with the purchase or sale of any security. Interest in the fund, if offered, will only be available to parties who are “accredited investors” (as defined in the Rule 501 promulgated pursuant to the Securities Act of 1933, as amended). Any offering will be made only to qualified prospective investors pursuant to a confidential offering memorandum and subscription agreement, all of which should be read in their entirety prior to investment.

Are you Letting Life Get in the Way? Time Blocking and How it Can Help You!

The concept behind time blocking is to break your day down, hour-by-hour, and dedicate certain times to certain tasks and goals. This means you would literally mark your calendar stating what phone calls you would be making and when, what time you would be working out and what workout you wanted to do, who you were going to meet, for what purpose, and when, etc.

Time Blocking helps you determine what is truly important which maximizes your productivity, and minimizes the rest.

I initially heard of time blocking in the book The 7 Habits of Highly Effective People by Stephen R. Covey. I loved the idea but didn’t necessarily take it to heart. I felt like I was being productive enough and didn’t want to waste my time writing out my hour-by-hour plans for the week.

It didn’t hit me that I was actually spending around 50% of my day being highly unproductive until I recently attended a seminar for real estate investing. The coach discussed the importance of time blocking, and challenged us to sit down and right out what we did the day before coming to him. When I did, I realized that I was being productive in certain areas of my life and neglecting the truly important things in my life, such as real estate investing, relationship building, and health.

The Benefits of Time Blocking:

• You focus on your task at hand.

If you’re anything like me, you’re trying to juggle 10 tasks at once and can often get extremely distracted while being productive. Time blocking keeps your distractions in check and helps you stay focused on your original task or goal.

• You come prepared (both mentally and physically).

Knowing what challenges your going to tackle for the week can better help you mentally and physically prepare for it. Do you need to bring gear, contracts, tools, etc and if so when do you need to gather those materials? Will any problems arise at the future meeting/task and how can you better prepare for those?

• You become more productive.

Prior to time blocking, when I was “highly effective” I was often neglecting certain areas of my life that positively benefited me. When I am forced to time block my week I find time to accomplish both my work goals and my personal goals, keeping me both balanced and productive.

• You Feel Less Stressed.

Have you ever been overwhelmed by the amount of things you had to accomplish that day or week? Time Blocking can help you productively plan for those events, prepare for them, and then in result help you feel less stressed. Not only do you accomplish your “stressful” goals but you do so while properly managing your time and fitting in things that you might have neglected previously.

So here is my challenge to you:

Time Block your day yesterday and be HONEST! No productive change will come if you skip marking the 30 minutes you spent looking on Facebook, ESPN, or Pinterest or the hour or two you spent watching your favorite TV show. After you map out your time block, take a look and see if you can move certain things around that are still productive but are being done during business operating hours that could be spent doing other highly productive things.

For example, a lot of people do Internet marketing during normal business hours. Although this is a highly effective activity that is essential to the operation of their business, I wouldn’t consider it a highly effective use of their time. This is something that could easily have an hour or so dedicate to after normal business hours (anywhere from 8 – 10 pm) and allows you to free up time during your day for more productive things.

Now take a look at your impending week and think about what is essential to your success both personally and financially, and prioritize your week. What can be accomplished at home, after normal business hours, or early in the morning before beginning work? Who do you need to meet with, what jobs can be tasked to others to free up more productive time for yourself, and what do you need to bring to be prepared?

If you’d like an example Time Blocking spreadsheet to use on paper this is a great resource. I personally like to use Google Calendars to help me time block. I can link it to my gmail and it allows others to see and access it if needed. This is extremely helpful if your allocating certain jobs to others such as a personal or virtual assistant. It also alerts or reminds me of specific tasks, meetings, etc on my phone, email, or computer.

Taking these steps will not only make you a highly effective person but it will also make you a more balanced person. I wish you all success in your endeavors and hope this helps you become a more highly effective person!