I took it easy this week. While I should have dedicated more time to calling new banks, I let
excuses get in the way and simply slacked – no other way to say it. I will say I definitely don’t feel guilty about taking some time off. Dennis and I have been focusing on a lot of personal goals we want to see accomplished in 2016 and next year. While I’m disappointed I did not receive more inventory, I was not taking personal responsibility for calling the banks, sellers, hedge funds I know I need to. Next week I will be making this my primary focus.
Monday April 4th – Sunday April 10th, 2016
Monday (day off)
Tuesday (4 Hours)
- Emailed my Vendors to check (I typically do this Monday, but since I took the day off I did it today).
- Listened to an awesome Monday Night Call (replay) from Scott Carson and WeCloseNotes.com on Due Diligence. You can listen to that here —> https://vimeo.com/161659479
- Updated all of my running checkbooks and workout checklists for my JV partners. I want them to have updated access to how our deal is progressing and where the money is allocated. To do this, I save the running checkbook & workout checklist into their own private Dropbox so they can see everything in real time.
- Verified the closing on our new note went smoothly & got forced place insurance on the property.
- Submitted our most recent deal to be shown in front of our local REIA (CFRI) next month & had a Case Study created from Fiverr.com.
Wednesday (4 Hours)
Attended our local CFRI meeting where I volunteer, network, and hear about other’s investing strategies and deals. I’ll be presenting the “Deal of the Month” next month and teach a class on May 19th about Note Investing!
I also found out the GA and OH note I was hoping to be able to close on in late April fell through because of a lack of collateral files/paperwork to back the note. Bummer, they were good deals!
Thursday – Saturday (days off)
Sunday (3 hours)
- Marketing – watched a few videos, read blog posts, and started a new Facebook campaign.
- I adjusted some of my website features at tapetechs.com to provide our clients more information about our services.
- Listed to a video about Investing in Non Performing Notes that a fellow colleague sent me. Listen to the interview with Gordon Moss here! It’s pretty cool how he describes Bankruptcy and working in 2nds!
Total Profit This Week : $1,1995.00
Number of New Sellers Called: 0
Number of Deals Offered: 0
Number of Deals Accepted: 0
Knowing how to properly complete both preliminary and formal due diligence is an absolute must for a note investor. Your success in the workout and return of the note investment relies on how thorough this is completed before the acquisition of the note. For new note investors, this is a tedious and somewhat intimidating process as there is a great deal of research to conduct on each note. I wanted to dig deeper into this process and give you an idea of how we use this process at NoteInvestingClub.com to train our VA’s to do the preliminary due diligence for us. We then, can make quick and informed decisions to bid on assets.
Preliminary Due Diligence
This is the “informal” stage of due diligence if you will. This research is conducted before submitting bids on properties and is intended to give you the property information, value, and potential costs associated with the note. This stage is extremely important because it allows you to make an educated bid on a note or pool of notes to ensure your position is not jeopardized and you are leaving enough room for profit in your offer.
What to look for in this stage…
- Property Information: This includes number of bedrooms, bathrooms, building type, year built, sqft., and any additional features of the home such as pool, garage, fireplace etc.
- Property Condition: In the preliminary due diligence phase this typically means Google Images. Although google can be quiet outdated, you’re looking to see how old is the picture and what condition the property is in at time of the picture. If it was taken 2 to 3 years ago and was falling apart then, this tells you it’s most likely in worse condition now.
- Neighborhood Demographics/Condition/Crime: I like to use Trulia.com to asses the crime, although there are many other websites out there such as crimereports.com. Look around on google images at the neighborhood. Is it residential in similar condition, is it located on a busy road or in a more industrial area. This will help you asses potential sale factors.
- Property Value (CMV): I like to use comparable properties for a value of my home, not just the estimated values some websites provide like zillow.com, trulia.com eppraisal.com, or realtor.com. Although they are taking the average sales price into factor there a lot of variables that can affect the price of the home that aren’t considered in their valuation systems. I look at condition and style of property, similarities and differences between sold properties and my property (size, sqft. extra features, etc), and location/neighborhood. Sometimes one street can make a difference of $20,000 in value, or more! In addition, I use more recent sold dates, sold within 3 months or sooner, in comparison to a lot of the valuation systems the other websites use, giving me a more accurate Current Market Value (CMV).
- Unpaid Taxes: You will need to locate the tax assessors or tax collectors website for the county the property is located in and determine if there are any unpaid taxes on the property. Many time there can be 2 – 3 years or more (FL, LA, MI, NJ, NY, it’s not uncommon to see 3+ years delinquent). There may or may not be tax liens or potentially tax deed applications on the property. Tax deeds are important to be aware of because they can jeopardize your position as a lender and need to be paid off immediately if it’s pending tax deed sale.
- Liens/Judgements: This part of the process is crucial and completing this search thoroughly can save you LOTS of money in the long run. Some counties do not offer their public records for free or online, which means you cannot complete this process without pulling a formal lien search. If it is offered online, you need to search for any potential liens, secondary positions (such as a 2nd mortgage), or judgements that have been placed on the property/borrower. Creditors such as credit card companies, IRS, HOA, or the county itself can place liens or judgements on properties that will supersede the foreclosure process and remain an unresolved lien/judgement even after you’ve foreclosed. It’s important to be aware of any existing liens and discuss with a local attorney if that has the potential to jeopardize your position, or outlive your foreclosure and eventually have to be paid by you. This has helped me locate a number of notes that I was interested in buying but realized had been sold in a Tax Deed Sale, HOA Foreclosure, or had Judgements and Liens that would outlive a foreclosure that valued $10,000+. Without finding this information out I could have been stuck with a contract on a note that had no profit margin, or worse, bought a note and wasn’t aware these even existed.
- Status of Bankruptcy: You will have to set up a Pacer.gov account to search BK records but is important to be aware if your borrower is actively in bankruptcy or not and what stage or type of bankruptcy they might be involved in. The type and stage within the timeline can potential effect your position as a creditor.
Now you need to use the information you’ve gathered in this process to help you make an educated and informed bid on the note to the lender and if your bid is accepted, you can start the next part of the due diligence process – the formal due diligence which will be coming your way soon! The cool part, once you’ve figured this system out you can 100% outsource this to an assistant or virtual assistant as we have. I’ve talked about how we did that in our free training at NoteInvestingClub.com – Check it out here! As always, let me know how you liked the post or leave me any comments or questions!