Temporary Seller Financing - Notefunding.com

[cparobbins]

Dan,
Thank you for inviting me to join your forum. I have so enjoyed reading over all of the articles and discussion threads that your site has inspired. I see a few familiar faces and several new ones as well! I look forward to reading more and contributing to this site that seems full of collectively creative minds. A little about myself and my company...

Many years ago while I was doing taxes and audits, I noticed that some of my clients were holding seller financed notes. I saw the great returns they were (sometimes) enjoying and began to do a little research of my own. From there I realized that there was a small market (not so small these days, of course) to purchase and sell this type of paper, privately. A few years later, I hung up my CPA hat (although I keep my license active) and began brokering these types of private paper. Eventually, my company Note Funding Resources, LLC emerged and we began purchasing and brokering paper. Our funds come from private retirement plans, lines of credit, private investors and of course, the usual institutional buyers. Because of the increase of brokers in the industry now (due to seminars, advertising, infomercials, etc.) we realized that we needed to streamline our processes and develop a 'niche' in this industry. We have found that it is harder to find a note buyer for the newly created note on the rehabbed property, the Jumbo note, or the flipped transaction. We have taken those areas, streamlined our processes and developed a niche for these types of tough-to-do deals. There is more information about this on our website at http://www.notefunding.com for those that are interested.

My husband and I also own MDhousebuyers, LLC (www.mdhousebuyer.com) where we purchase homes using the same strategies promoted by the experts here on this forum. Because of this, we understand the different sides of this business. We understand what it means to rehab a property, to flip a property, to use Subject2 methods.... and then to hold it, use it and sell it to make a profit. We understand our industry from the buying side, the selling side and the funding side. We hope this helps us to understand and create a better market and experience for those that we associate with whether that is through discussions and brainstorming - or getting actuals deals to closing.

We specialize in simultaneous closings using temporary seller financing - but we also purchase seasoned notes individually or in pools and portfolios. We absolutely love this business. We live, eat and breathe this stuff - and we are so looking forward to joining in your network. Thank you for the opportunity.

Warmly,

Michele Robbins, CPA
Note Funding Resources, LLC
Office (410) 758-0098
Fax (443) 782-0775
http://www.notefunding.com
info@notefunding.com

[Dan Auito]

Outstanding Michelle, you are a VERY welcome addition to the family here!
An expert with your understanding, ability and resources will be invaluable to the family members here Michelle.

We are having an online CHAT this Saturday with the Note Professor here at 7 PM Central 23 Apr. I hope you will join in this chat and add your insights to the discussion.

I will be more than willing to sell you my discounted paper in the future as it seems you have many options to be able to allow investors to get their cash out and move on swiftly to the next big deal.

What a great addition folks, say hello to Michelle! :praise:

[Jeffery (LCLA)]

Michele Robbins it is so wonderful to have you join our family. Welcome aboard and I hope to see many posts from you. Now that you've been captured, uhh, I mean invited to join, I have some questions for you.
1. What kind of deposit do you like to see?
2. What credit score do you approve?
3. What LTV do you want?
4. What's your min and max notes that you buy?
I'm sure I'll have some more questions for you, but those can wait. Oh, don't tell Dan, but I have leads on some RE in Florida and I"ll, umm, never mind, I'll save that for another post.

[cparobbins]

Jefferey,
Ah.. already in the thick of things, I see. I'll try to give some general guidelines for what we like to see on newly created notes - but keep in mind that one factor can be a compensating factor for another and that each individual deal is reviewed based upon it's own criteria and subject to normal due diligence. You already know this... I know, I know. If my comments assume you know less about note buying than you really do, forgive me. Perhaps other readers (that are not as knowledgeable as you) will find it helpful with the more elementary explanations. The following are guidelines (not standards) for what we look for in new notes purchased at the closing table:

Credit: 550 and above is the bare minimum for a new note. But in order to achieve a good purchase price for a note purchase you want to attract buyers with good credit scores that need or desire this technique for other reasons (proof of income, lack of title seasoning, investor purchase, etc). There are many buyers with good credit that desire or need seller financing - and these buyers are those that are the best candidates for this type of deal. The lower the credit score, the higher the note discount. We try to work directly with you to pre-qualify these prospective buyers to meet your goals (and your profit expectation) for each deal. If you structure the note with the right buyer in the beginning it will be much easier to sell the note - either as a simultaneous closing - or later down the road.

Down Payments: For new deals, we like to see at least 5% in real cash down. Remember however, this down payment goes directly in the seller's pocket. This means the higher the down payment, the better the LTV, giving not only more as a purchase price for the note, but also more cash in the seller's pocket. We can do as little as 3% down for owner occupant buyers (assuming the property is not a flip or rehab) but the 5% is a good rule of thumb. The greatest feature is that this applies to owner occupied deals as well as investment purchases (1-4 unit residential properties). This is really nice for investor buyers. They love being able to receive seller financing for a rental property purchase with only 5% down.

LTV: 95% or lower works within our purchasing criteria. No need to set up the deal as an 80/10/10 - unless it is a true flip. Even in those cases an 85/10/5 is usually sufficient.

Interest Rate: We pay the highest for notes set up with interest rates between 8-9%. Believe it or not, a higher interest rate does not mean a better price for the note!

Mins/Max: Our favorite notes range $50k - $250k. However, we will go as low as $20k and have gone as high as $2m for one individual note. Even so, our usual cap is a payout of $400k for any individual note so that is good limit to use for us as a max. The higher estate type notes are possible, but very rare. The comps are usually difficult to achieve and we scrutinize all elements of these deals, as you might imagine.

Jeff, honestly these are merely guidelines. Each deal is reviewed on a case by case basis where these criteria could be challenged. For example, we have purchased a simo on a payor with a 450 credit score before... of course she put 40% down in cash and gave us her first born... but we did it! I have also purchased a $10k 2nd lien at closing before – of course the buyer put down 20%, had great credit, and I only paid 50% for the second, but we did it! My point is that my comments here are just to give you an idea of what we look for in new notes. The best way to determine if it will work for your particular deal is to just call it in, fax it in, email it in, etc. But hopefully, I have given you an idea of where we stand.

We are also very honest about deals that come our way. For example, if I truly see a better alternative (ex. traditional loan, lease/option, etc.) I will tell you right away. We have received more future relationships based on past deals that we have discussed and recommended alternatives on than anything else! So... if you ever just want to brainstorm or strategize, feel free to call me and we'll see if we can put a solution to the deal - whatever the result may be.

Warmly,

Michele Robbins, CPA
Note Funding Resources, LLC
Office (410) 758-0098
Fax (443) 782-0075
http://www.notefunding.com
info@notefunding.com

[Dan Auito]

I'm taking notes too Michele. Note the kind your buying but the kind I'm putting in my head for future reference! Thank you for your overview! Dan :praise:

[Jeffery (LCLA)]

Wow, Michele Robbins, thanks for the info.
"This is really nice for investor buyers. They love being able to receive seller financing for a rental property purchase with only 5% down." That's exactly what I was thinking, expect a phone call from me."
"Interest Rate: We pay the highest for notes set up with interest rates between 8-9%" That's another good thing to know. I would think the higher the interest, the better, but you can't change your mind your now.
"Mins/Max: Our favorite notes range $50k - $250k." This seems to be the a popular range. I know later in that statement you said that you'd go as low as $20k so that's a good thing. It's also understandable with regards to the lower notes. Personally, I would want to service a small note either. I'm sure with a small note, there is a smaller change that the owners will get traditional financing since the banks don't want the small notes either.
Michele Robbins, I truely appreciated your time. Expect a phone call from me today, I need some specific info. Thank you, I think I just found a new tool for my tool box.

[Debbie]

I discovered this tonight and thought I'd bump this up. I think it deserves another chance for those who may have questions, including me.

I am not really clear on this. Is this the same as "regular" seller finance type? Or is there a twist?

Can someone give me a hypothetical strategy or an example in simple english please?

I noticed there was a chat event involving this. Perchance there was an archive somewhere?

Thanx. Debbie

[starkey]

lets say you have a property you owe 50k. that you can sell for 75k with owner financing. you find a buyer with 7k in cash. which leaves 68k to finance.you create a note at closingfor 68k.this note is sold to a note buyer at adiscount of its face value lets say 85% x 68k = 57800.your 50k loan is paid out of note purchase.you sold your note for 57800 you owed 50k =7800 to you plus 7k down payment.you net7800 + 7000 down from your buyer.you net 14800. this is a great way to sell your home fast.you also net as much as you would useing a realtor after holding cost

[Debbie]

After almost three months of no reponse to my question, I actually thought I'll never get an answer! :SM119: (No, this isn't a complaint so I know it's an oversight)

Starkey, Thank You for answering my question :SM081: ......I gotta admit, it's late right now and I'm tired. So, I'll re-read your answer tomorrow morning and don't be surprised if I have question(s) for ya!

BTW, Welcome to the Magic Bullets Fambly!

[Aldo]

.....sold to a note buyer at adiscount of its face value lets say 85%.....
Based on my experience, I don't see 85% happening, but that doesn't stop me from dreaming.

[starkey]

i have gottan 88% to 95% several times iam just learning.what is the average. you see happing i have a few deals im working on. the deals i did where simo close pass through titles.i netted betwee 5k and 7k on these deals.the loan to value was good and the credit scores of buyers where in the 600s. you say 85% not going to happen im trying to get a safe number to keep in mind on future deals

[Debbie]

Mark (Starkey),

Does this only work on free and clear properties when the note selling first begin? Before re-selling?

[Jim FL]

Debbie,
I noticed this thread today, and read thru it.
I have both purchased and sold notes myself before, on a small scale.
Most of my note transactions, I was the seller of the note.
On our last note sale, the house we sold was not free and clear.
There was a small mortgage on the property.
With this particular sale, my buyers came in with a first mortgage from a local bank, for 75% of the purchase price. They put down 10%, leaving another 15% to be covered by a seller carried second I created at close.
The first mortgage funds paid off the underlying loan on the property, put some cash in my pocket, in addition to the down payment the buyers made, which also went to me.
The second, I held it for two months, and then, on happenstance, stumbled on an attny at another close, who said, "if you ever have mortgage notes to sell, call me".
So, we met, he bought my second, which for me was really just 'air' anyway, for about 60% of its face value.

The notes I've purchased, were quite frankly, to use as leverage in dealing with other things attached to properties, to get them thru what I call, 'the back door approach'.

I've also created and sold first notes, for a discount, using the funds to pay of existing financing, and profit.

Not something I do often, because frankly, most buyers over recent years seemed more comfortable getting conventional financing, since it was fairly easy to obtain.
On the other hand, when selling to folks obtaining mortgages, the garbage fees etc drive me nuts, and make me want to sell everything carrying paper.
Discounts most times on paper, do not seem to exceed the fees that come along with conventional financing, especially with buyers of lower credit ratings.

I'm glad michelle is here, as I've read her postings many times before on other forums.

One thing I've always done when creating a note for sale, was to line up local buyers ahead of time, and structure the note to their specs, as long as they worked for my deal, and my buyers.

Take care,
Jim FL

[Debbie]

Hey Jim! Good to see you here---you've been missed!

Thank you for clarifying for me, it helps alot! :SM081: