john murray version 3 14
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GOODBYE REO! HELLO NOTES Presented By: John Murray
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Self-Directed ROTH IRA’s and 401-K’s• Building a retirement
account as your own mini-bank
• Phenomenal leveraging techniques that are possible with notes
• How you can own 100,000 note for a $100 investment in a self-directed Roth IRA or 401K account
SELF-DIRECTED
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PropertyNotes
One Path
©NoteSchool 2012
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What’s a Note?
1,000
Eddie SpeedP.O. Box 1234South Lake, TX
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John Eddie Owes $1,000
Check Cashing Service
John Murray 1,000
Pays John $850
Sells Note at Discount
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Buyer
Ownership Deed
Seller
Mortgage NOTE
Mortgage Lender
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Two Types of Notes
Non-Performin
g Notes
Performing
Notes
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What Determines Note’s Value?
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Good Payment Record
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Bad Payment Record
Re-Performing Note Re-Performing Note Cost 60% - 80%Cost 60% - 80%
Non-Performing Note Non-Performing Note Cost 10% - 40%Cost 10% - 40%
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CASH BUYERSState of the Industry
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Source: NAR National Address
20132013
Cash Buyers
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HOUSING INVENTORY DOWN
State of the Industry
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Source: Calculated Risk, Lawler
310,000 Properties
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400,000 REOs
Bank Foreclosed Properties
Where’s the Real Opportunity?
10 MillionDiscountedMortgages
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Market Conditions
DemandSupply
10 Million Notes
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MAJOR SHIFT FROM REO TO SELLING NOTES
REO’s NOTESREO’sNOTES
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REAL ESTATE
As-Is Value of Collateral
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Esta
blish
As-
IS V
alue
Esta
blish
As-
IS V
alue What % ?What % ?
Investment to Value Ratio = 85%
Investment to Value Ratio = 20%
Performing Notes Performing Notes
Non-Performing Notes Non-Performing Notes
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Est
ablis
h A
s-IS
Valu
e
Price NotePrice Note
Cost of Note
What % ?What % ?
Investment to
Value Ratio
Investment to
Value Ratio
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Performing Notes
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Est
ab
lish
As-
IS V
alu
eEst
ab
lish
As-
IS V
alu
eWhat % ?What % ?
Investment to Value Ratio = 85%
Investment to Value Ratio = 60%
Performing Notes
Performing Notes
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec100% 100% 100% 100
%100% 100% 100% 100% 100% 100
%100% 100%
Re-Performing Note
Re-Performing Note
Cost 60% - 80%
Cost 60% - 80%
Good Payment Record
Buy Future Payments
at a Discount
Buy Future Payments
at a Discount
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Case Study
Property:
Memphis, TNCurrent Market Value:
$200,000 “Re-Performing
Note” “Re-Performing
Note”
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Non-Performing
Note
Non-Performing
Note
Eddie’s ROTH IRA
Account
Bank Sells loans to Hedge Fund
Non-Perfoming
NoteNon-Perfoming
Note
Profits from Note grow Tax-free inside Roth IRA
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Remaining Loan Balance$1
,081
$1,08
1
$1,08
1$1
,081
$1,08
1
$1,08
1
$1,08
1$1
,081
$1,08
1$1
,081
$1,08
1$1
,081
271 pmts
Negotiated Price for Entire Note of $105,000
$160,316 @ 6% Pmt / $1,081 271 Mos Remain
Yield = 12.5% annually
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Buys 271 Pmts
Note Amortization Schedule
Fund
$10
5,00
0
Note bought for $55,316 discount
Note Interest Rate = 6%
Yield = 12.15%
$160,316 Balance
$55,316
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$Pm
t
$Pm
t
$Pm
t$P
mt
$Pm
t
$Pm
t
$Pm
t$P
mt
$Pm
t$P
mt
$Pm
t$P
mt
271 mos
Loan Servicer Monthly Pmts
Eddie’s IRA
$Pm
t min
us fe
e
$18
Serv
icin
g fe
e =
$18
one
tim
e fe
e =
$150
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Remaining Loan Balance$1
,081
$1,08
1
$1,08
1$1
,081
$1,08
1
$1,08
1
$1,08
1$1
,081
$1,08
1$1
,081
$1,08
1$1
,081
271 pmts
Negotiated Price for Entire Note of $105,000
$160,316 @ 6% Pmt / $1,081 271 Mos Remain
Yield = 12.5% annually
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Buys 271 Pmts
Note Amortization Schedule
Fund
$10
5,00
0
Note bought for $55,316 discount
Note Interest Rate = 6%
Yield = 12.15%
$160,316 Balance
$55,316
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Own Note Without Having to Manage It
Loan Servicer • Collects Pmts • Taxes / Insurance• Borrower Work-out • Foreclosure Mgt
Note Owner
Work done by Who??
Mortgage NOTE
Outsource!!
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Hous
e Va
lue
$20
0,00
0Ho
use
Valu
e $
200,
000
Cost of Note IRA Invested$105,000
IRA Invested$105,000
52% ITV52% ITV
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Non-Performin
g Notes
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Buyer
Defaulted Note?Modify Loan
Deed In Lieu
Foreclose
Buyer Stops
Paying!Non-Performing
Loans
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Non-Performing Notes
Modify Deed in Lieu Foreclosure
40% 40% 20%
©NoteSchool 2013
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Non-Performing Notes
Modify Deed in Lieu Foreclosure
40% 40% 20%
©NoteSchool 2013
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Non-Performing Notes
REO Property
Modify Deed in Lieu
Foreclosure
Re-Performing Note
Owner Finance or Cash or Rental
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The Model - Who Sells Non-PerformingLoans?
Banks – Bulk Only Re-Aggregators “Private Firms”
- How To Price For Problems- Making Capital Feel Comfortable
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Buyer
Mortgage NOTE
Mortgage Lender
Mortgage NOTE
Mortgage NOTEMortgage
NOTEMortgage
NOTE
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REAL ESTATE
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Esta
blish
As-
IS V
alue
Esta
blish
As-
IS V
alue
What % ?What % ?
Investment to Value Ratio = 50%
Investment to Value Ratio = 20%
Non-Performing Notes Non-Performing Notes
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NoteSchool “Student”
Russ Brucks Fort Worth TXCertified Note
Investor
Purchased 4 NPLs Within Two Months
FTC DISCLAIMER: While these case studies are REAL DEALS that my students have closed recently, These results are NOT typical. As with all courses, you should not expect to make this much money or any money with
“how-to” advice.
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Paid $9,500 for Note
• 4/2, 1,800 sf • $150k “Listing”
Comps • Rent $1,250/mo
Stone Mtn , GA
“I didn’t need a calculator to pull the trigger on this one!”
Total Cost approx $30,000
Property worth $100,000
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Non-Performing Notes
REO Property
Foreclosure
Note or Cash or Rental
Stone Mtn , GA
Modify Deed in Lieu
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Own Note Without Having to Manage It
Loan Servicer • Collects Pmts • Taxes / Insurance• Borrower Work-out • Foreclosure Mgt
Note Owner
Work done by Who??
Mortgage NOTEOutsource!
!
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$50,000 Today
Realtor’s BPO says Mid
$60Ks
5yrs X $950/month