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!

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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!

Orlando Note Deal Case Study

I was talking with a fellow note investor the other day about past deals we’ve completed over lunch. While we both swapped stories of great deals and ones that required a bit more work than expected, I was asked if we send out case studies on the deals we do? I’ve heard of doing this before, but had never actually taken the time to make one for our each of our deals, and quickly realized now how terrible that is! I need to continue to put our past deals out there for other investors and interested lenders to see what we’ve done, how we’re doing it, and the real ROI’s were getting on these deals.

So without further adieu, here is our first case study (I say first because there will be many more to come). This was completed with 2 joint venture partners, and worked out completely by us (Dennis Smith and Liz Brumer) owners of Seasoned Funding, LLC and Note Investing Club.com.

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We purchased the note from a fund and began the workout right away. What you don’t see in the case summary is how challenging it was to find the borrower initially. She was living in Georgia but had “relatives” living in the property. Initially, they refused to give us the number, but then realized who we were and what we were trying to do and happily gave us the number to the home she was living in Georgia.

As you saw in the case study, the borrower had a judgement with a credit card company. This took quiet a while to resolve because it required an document signed by the borrower authorizing us to negotiate with the company. When we requested the letter from the borrower, she got scared and worried we were doing some sort of harm and went dark on us for an entire month. Finally, after numerous letters, calls, and pleas with her grandson – she refused to answer the phone, we helped he realize we were there to help and pay off the judgement, we just needed her consent.

It then took another month to receive the release of judgement from the credit card company and get it publicly filed so we had clear title to receive the DIL. This set us back about two and a half months into the work out. All in all it took about 6 months to successfully get the Deed In Lieu from the borrower and have it publicly recorded. From there we did repairs/minor renovations, and got the property on the market. While we got an offer on day 3 of being listed, it was FHA which required an appraisal that put the property $10,000 under what the buyer offered it for! We we’re super bummed about having to lower the price, but still were happy with our ROI.

There were some issues with title when closing, apparently the legal description had been incorrectly recorded for multiple sales and no one had caught it until now. This took another month to rectify which pushed closing back! Talk about frustrating! This deal definitely took longer than expected at 10 months but that’s exactly why you always over estimate timeline, costs, and potential issues that way you over deliver in both the time and results to your partners or lenders. All parties involved were very happy with the outcomes and results and are looking forward to doing more deals!

Google Adwords

I recently got a promotional card in the mail from Google Ads stating if I spent $50 on Google Ads, I would receive $150 in free advertising. I figured with that kind of deal, why not give it a shot? I mean hey, $200 worth of advertising for the price of $50…I can’t really go wrong.

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I started to build my Google Ad watching various video tutorials and reading side note suggestions and tips to help improve my ad from the google site. When I was finished I felt pretty confident in the end result and was excited to see how many leads would come from it. After just two days I had over 100 views to my website! I couldn’t believe that the traffic to my site was increasing at such a fast rate but was disappointed in the number of leads that came from it. Although traffic to my site increased, I had not gained a legitimate lead from it.

About two days later I attended a local meeting through my REIA, where I got the opportunity to speak with the owner of the nation wide wholesale company, IBuyHomes.com. He is not only an extremely successful real estate investor but has an incredible internet marketing system that organically brings him leads daily across the nation! After discussing my recent Google Ad I created, he started asking me questions about our use of “Negative words”,   and “traffic estimator”. I quickly realized that maybe I hadn’t created the “great” ad I thought I had.

He suggested I put an immediate pause on my campaign until I get the opportunity to read Perry Marshall’s book(s) on Google Adwords. I immediately went home and paused my campaign then downloaded Perry Marshall’s Ultimate Guide to Google Adwords and began reading it the next day. Needless to say I was doing everything wrong! I was initially paying per click with no limit as to who was clicking my link and how many times. Wether it was an actually lead or is was for an unrelated “negative” search tool. I don’t know why it surprise me that even with Googles “help” my ad was not a lead generator, but a marketing pit hole.

ImageIf you are are even attempting to create a Google Ad or have already created one without reading these books I urge you to stop and read this! Save your self some money and get the leads that will produce income, not the leads that cost you money!

The Dangers of Brokering

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When you start off in the real estate investing world most “gurus” or educational speakers suggest going into wholesaling or brokering. They talk about the benefits and ease of assigning a contract or mortgage for quick cash. The concept is great and works for many investors, but the negatives that are involved are almost never discussed.

My company, Seasoned Funding, LLC had success in a joint venture deal with two other investors, wholesaling a contract on a house in Central Florida in January of this year but we ran into our first real experience brokering a note this past week. It was a juicy non-performing note deal in Sanford, FL that was listed on a tape we had received from one of our direct contacts. We are in no way shape or form, exclusive to this tape, but took the time to go through and see if there was anything worthwhile. After doing some light due diligence we knew we had a deal. I decided to drive out to the property take some pictures to see it’s current condition and had a local realtor from our REIA group pull comparables and give me a valuation.

The following day we put in our offer and within an hour, it was accepted at $26,000! I immediately pulled an O&E report, which can cost anywhere from $50 – $100 and created a flyer to help us advertise through Postlets. We inserted the deal into our email-advertising host, Mailchimp, and blasted it out to all note investors, real estate investors, and connections our company has acquired on LinkedIn.

Within 30 minutes I received 3 emails inquiring for more information on the NPN. I knew this deal was going to close quickly! The inquiries continued the following day and that night, I met with a fellow investor who was interested in the deal.

Somehow, with all of the advertising our company did on this note, fellow note investors or the people that sent us inquiries discovered who the direct source was and went to the source placing a higher bid than our accepted price, yet lower than our assignment fee (even though our fee was only discussed with 4 people). The timeline for closing had not been discussed with the fund manager after our offer was accepted, and I assumed that I had the typical due diligence period of about 2 – 7 days. Two days after our offer was accepted, the fund manager called to state that because of the increased interest and bids on this note within the last 24 hours if we were not able to have the money wired to the fund by the close of the business week, (which at this point was the following afternoon), we would lose the deal.

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We were fuming! We understood the funds perspectives and were EXTREMELY thankful that they stuck to their word and honored our offer, but we just couldn’t believe that even though a NDA was filled out and NO fund names were disclosed, a fellow investor(s) had no qualms going behind our backs and jeopardizing the deal for our company who did the brunt of the work.

We called the investor we had met with the previous night and disclosed what was happening and why the sudden urgency to close. Luckily, he was extremely understanding, and got to work with his SDIRA to get all of the paperwork completed to get the funding wired by deadline. Even with the sudden urgency, the fund wasn’t able to provide the SDIRA with all of the paperwork they wanted/needed in order to fund, something that happens quiet frequently when investing with NPN’s and SDIRA’s.

When we heard the news we immediately figured we’d not only lost the deal, but lost $100 from pulling the O&E but to our surprise, the fund manager commended our work and agreed to extend the closing date to the following business day using one of our other inquiring investors that they had previously done business with.

We found out that the “inquiring investor” was in fact the one who went directly to the source in an attempt to cut us out and was attempting to continue to do so. We spoke with the investor on Friday, in which they said “yes” to our fee and interest in closing, but then told us they had no interest in the deal on Tuesday (expected closing day). We found out from the fund manager directly that they were now trying to buy the deal for the price we had negotiated leaving no fee at all, even though we had come to an agreement on a fee price Thursday! The fund manager once again stuck to his word and told the investor unless the fee was included, they were not able to purchase the note. He allowed us 2 more days to contact one of our other funders and were able to close the deal for our original asking fee, $6,000! It took a lot longer than expected, and had more complications than I could have ever predicted but we luckily were able to close – all thanks to the fund manager!

Point blank, there are some people that are selfish and unethical. I understand the reason you get into investing is to make money, but I have trouble understanding how a fellow investor could do that to a company that’s simply trying to do the same thing. If you ask me, if someone does the work in finding the deal, crunching the numbers, and pulling/doing due diligence; they deserve a fee.What I want investors to learn from this story is how to better protect themselves when trying to wholesale or broker a deal. If you don’t advertise, the deal won’t be sold but if you advertise you run the risk of other investors attempting to “cut you out of the deal”; it’s a double edged sword.

So here are a few steps we’re going to make sure we are taking in the future to better protect ourselves:

  1. Have ALL inquiring investors fill out an NDA (that has been approved/drafted by an attorney to properly protect you) before giving ANY information out. No matter how badly you want to close or need the leads, if they’re serious, they’ll take the time to sign it and wait for the information. You can state the area (provide pictures and details) but don’t give them everything right away.
  2. When advertising – DO NOT list the address until an NDA has been signed and returned and you’ve spoken face-to-face or over the phone with the inquiring investor(s).
  3. Have a clause within the NDA or a separate agreement that states they will not go directly to the source(s) if it is disclosed or discovered. Remind them of this fact when you send the NDA or have the NDA returned.
  4. If at all possible, discuss having the entire “marked up” price funded directly to the seller. After they have received the funds, they will wire you your fee. This will keep an investor from knowing your negotiated price and keep them from attempting to negotiate your fee down.
  5. If your fund is not willing/able to accept the “marked up” price and wire you your fee, get a brokering or wholesaling agreement signed stating that if they want to follow through with this deal they must agree to pay you a the agreed upon fee.
  6. Try not to disclose the source of the deal if at all possible! Delete their name from any Sale/Purchase Agreements or any documents that could eventually tell the inquiring investor(s) where it is coming from until they are ready to wire the money to close.

Now these are not always going to protect you. People will do what they want to do, ethical or not, but I’m hoping by taking this steps and being smart about your investments you can learn from our mistake and get another deal under your belt.