Quick question from Dean about speakers for the July 25th “Power Notes” workshop:

Most of you have challenges finding product, some of you have challenges finding buyers for your product, and many of you would like to raise more money for your business.

In order to best serve your needs, help me HELP YOU succeed.

We can have up to two expert guests on July 25th.

Which ones would be most helpful to you?

1. Note Finding Experts – Would you want to able to meet industry experts like Charly Phelan or Saprina Allen in person? Have the chance to ask them all forms of bank/seller related questions?
2. Finding Buyers – Would you want to meet Steve Cohen of Nautilus Capital or Sherry Nickels of Pinnacle Acquisitions to help you find buyers for your product?
3. Support Related Questions – Would you want to meet Kevin Kanuf, the founder of Statebridge, our servicer? To get the inside scoop on servicing, licensing, and asset management? Would you like to meet Ryan Tomazin the Entrepeneur/CFO of Integrated Asset Services, one of our BPO companies?
4. Raising Money – Would you want to meet a hard money lender for your note business? Or a prospective equity investor?

The point I’m making here is…whomever I end up having, you will be able to make a number of very valuable contacts that may very well propel you to the next level (or two) in your business.

These small group hobnobbing sessions amongst industry experts and fellow investors are what form the foundation of the most discreet and powerful business networks.

What will help you most?

Give me feedback and comment below. Please respond by July 2nd, end of business day.

Thanks,

Dean

In today’s economy, news of defaulted mortgages have become a constant refrain. Despite the obviously negative tone you find in the reporting on this subject in the media, many people see the current housing situation as a once-in-a-lifetime opportunity to make money. Today, we’ll talk about one of the hottest trends in real estate investing now–the buying and selling of non- performing “notes, ” i.e. defaulted loans.

Assuming that you’ve learned enough about note buying to want to get into the game, what would you say is one of most important elements in your note buying decision?

Note Buying Basics

Let’s start with the basics. When you’re initially searching for notes, due diligence plays a major role. Take a look at any of the important decisions you make in your life. Don’t you always do your homework? Weigh the positive and the negative? Well, ask yourself, why shouldn’t you apply these same principles to your note buying business?

Exactly…there isn’t any reason why you shouldn’t.

Buying Notes – 4 Source to Determine Value

If you are going to buy some notes, you need to know what those properties are worth. How can you do this? Here are a couple of tips on how you can evaluate those properties without leaving your home.

Your four best sources for estimating value are:

1. Trulia.com 2. Realtor.com 3. Zillow.com 4. Local MLS data (from a local realtor)

How to Buy Notes – Online Research Tools

Let’s focus on the first three for now. Each of these online sites allows you to research comps near your property–all from your computer, without leaving home! You can access recent listing prices, average sold prices, and how long the properties have listed before they were sold. All of this information can give you insight on what these properties (that are attached to your note investments) are worth.

In one online session, you have determined the value of the property. You know generally what the note is worth and furthermore, a price that you should offer.

How to Buy Notes in Today’s Market

Note buying isn’t rocket science. With the correct guidance and knowledge, you can profit in today’s real estate market. Knowing what actions you need to take and how to perform them is a step in the right direction. As with any investment, know what you are investing in.

Stay tuned for my next article as we look further into the last source on my list. In the meantime, get on your computers and explore the three websites we mentioned. Become familiar with all the free information that is available to you.

Check out our Note Buying Forum.

Check out our ‘A-Z Profiting from Discounted Mortgages Business-in- a-Box’. -> 16 hours+ of Video Training, 23 pages of checklists, a complete 8-Week Roadmap, an extensive Table of Contents for quick reference, plus TONS of Bonuses.

Want ongoing support?

Test drive the PRIVATE ACCESS CLUB’ (PAC) for 30 Days! Get Your Questions Answered LIVE & get Ongoing Support & Training! Conference Calls/Webinars, Interviews with Industry Insiders (Bank Reps, Top Note Brokers, etc.), Real-Life Case Studies, Role-Playing, and ‘HOT SEATS’ to get coaching on Your Deals/Business Challenges, and more

I listened in on an interesting call with the FDIC recently.

Note Buying: What I Learned about the Legacy Loan Program

a) FDIC and Treasury are two separate entities, and don’t always see alike. The two need to coordinate on the terms of the non performing debt (guarantee fees, interest capitalization, interest rate,”turbo- charging” returns on the debt side, and equity “control” and loss position for the equity side)

b) when asked how large a typical deal size might be, the FDIC admitted that the size of each note trade has to “make economic sense”. The only guidance given thus far is that a deal might equate to $1B

c) each deal will have its own covenants and restrictions imposed by the FDIC, in other words, on performing notes, for example, the FDIC might look for special loan modification capabilities or targets. This implies that the FDIC will likely make deals homogenous in the types of defaulted mortgages that are being sold.

d) in addition to each note deal having its own characteristics that the FDIC will be looking for from each prospective bidder, the FDIC will also be taking a close look at the servicers that will be servicing each non-performing note pool.

e) both (c) and (d) are an operational challenge, meaning that in order to set restrictions and covenants, enforce them, and to have evaluation guidelines for servicers – and to execute against those evaluation requirements – is an enormous task. Part of my background is in project management – I used to manage 10-person teams at Chase when we were reviewing brokerage trades in response to regulatory inquiries – and I can tell you that overseeing / evaluating and reporting on each PPIF will be a nice little bit of work.

The difficulty of executing (e) above points to a limited number of PPIF’s that will be allowed or approved.

Note Buying and the PPIP

PPIF’s are the individual funds approved for participation in the “P” “Pip” as it’s nicknamed.

So what I’m seeing evolve out of this program is:

A much larger note buying-side to the equation than I originally thought, with minimum trade sizes similar to the legacy securities side, and with similarly deep-pocketed investor participants. The role of the small, minority, veteran-owned firms in the note buying business will be as some form of limited partner in these funds, in my opinion.

———————————————————- Note Buying – How Will it Be Affected? ———————————————————-

My real concern is on the re-trades…

In other words, the amount of loan re-trading that will happen after a $1B non performing note pool is bought, for example.

What’s cleared the loan markets historically has been the ease with which larger trades could be broken up into smaller ones, and where the big buyers could carve out bits of their note portfolio to sell and to generate a pop in their funds’ IRRs.

I don’t see how that will happen in this scenario, unless the FDIC debt has some unique way of attaching to individual loans

There was some talk this morning about structuring the FDIC debt as some form of seller-carryback note on the banks’ balance sheets.

I’m not yet clear on how that might impact the note buying side, though.

Talk to you soon,

Dean

Interested in learning more about the Note Buying Business? Watch Hours of FREE Training Videos here: Note Buying Real-life, Up-to-Date Information for You. Visit NoteBuyingProfits.com

I wanted to share with you a specific example of someone…

* * Buying Notes- The Process of Bidding as an Art * *

You see, if relationships didn’t count for anything, and if the principle of High-Bid-Wins always applied in every single real estate note transaction, I wouldn’t have worried about my friend on his way to bid this commercial loan pool on DebtX (an online bidding platform for bank notes).But because a high bid does NOT always win when you’re buying notes, then I do worry about my friend bidding on that DebtX note pool.

======> Why?

Because if he’s not talking to the Seller of the notes, and doesn’t know the Seller (or the rep at DebtX that manages his account), then he’s not dealing with a full deck – he’s not playing all his cards right.

======> Why does this matter to you?

Because you may be the equivalent of my friend bidding that non performing note pool.

And if you ever are in that situation, you’re going to want to:

* * When Buying Notes, Engage Your Seller* *

This will improve your chances of winning the bid.

Winning bids in any market, but especially in this market, is not just tied to the price that you’re willing to pay for a note or a pool of notes.It’s tied to your ability to demonstrate that you’re a trustworthy and credible counter-party (fancy name for a note buyer), who can deliver when and how you say you will.

As former GMAC traders Matt Kennedy and Mike Mand pointed out in a recent discussion I had with them in our Private Access Club:

* *Buying Notes -Highest Bid, Not Always the Winner* *

And their “BEST” relationship was actually a note broker who ended up calling them almost once a day with information and news about other trades and deals that were happening in the note buying industry.

No matter if you’re bidding on a single note or on a pool of notes, take the time to develop and build a relationship, and you will see your success rate improve.

Guaranteed.

If you haven’t already, check out 4-minute video that I prepared for you at the top of this post.

Talk to you soon,

Dean

P.S. If you enjoyed this info, check out my 16 hour course. We have a special right now where you can try the whole course for 30 days for exactly $1.

I just got off the phone with the Sr. Vice President
of a California bank in charge of note sales, and a note broker friend of mine who
set up the call.

The SVP has 3 non-performing loans – they’re
commercial loans in the LA area – but ignore the fact
that they’re commercial right now.

———————————————-
* * * A Buy Notes Lesson about Golf Clubs and why to
Communicate with Your Borrower * * *
———————————————-

Stay with me here

So the SVP told me that one of the loans has a
foreclosure sale scheduled 2 weeks from now.

And that she hasn’t spoken to the borrower (a
builder/developer) in several months.

I asked her if she was concerned about the loans or
not, and if she was worried about whether she would
have any problems taking over the properties through
the foreclosure.

She answered: “No, because we feel the value of the
properties is sufficient to pay off our loan.”

====> I was concerned about this buy notes situation.

Why?

Because if there’s one thing I’ve learned in this buying notes
business:

—————————————-
* * * Buying Notes: Managing the Relationship with Your Borrower is
KEY in 60% of all Cases * * *
—————————————-

And if you don’t work with your borrower, then you’re
really hurting your chances of getting out of a note deal.

Let me explain the 60% of all cases claim.

There are essentially 5 Buying Notes Exit Strategies for all Loans:

* Reperformance

* Refinance

* Short sale or deed-in-lieu

* Note sale

* Foreclosure

=> Only 2 of those plays, foreclosure and note sale,
can succeed without any communication at all with the
borrower.

But the risk that the foreclosure runs – and
foreclosure is the path that the banker is taking in
this example – is that the borrower may file for
bankruptcy and postpone the time when you recover the
property.

Take this buying notes advice from me:

—————————————-
Make Fantastic Returns when Buying Notes
without having to foreclose or
to sell the note on to someone else
—————————————–

If that’s true, then losing contact with your
borrower essentially kills 60% of your note buying exits (3 of the
5).

Would a professional golfer get onto a course with
only 5 of 12 clubs?

Would that be somewhat limiting to their game?

Probably.

But boy would it look funny hitting a putt with a 9-
iron.

So my note buying advice to you is:

————————————-
* * * Note Buying Exit Strategies: Don’t ever limit yourself if
you can avoid it * * *
————————————-

Much as it can be painful or unappealing to some of
you – working WITH your borrower is essential when you buy notes.

That was the advice I gave to the SVP at the LA bank
today.

We’ll see if she takes my advice – we’ll be tracking
her nonperforming notes to see if any of them end up in bankruptcy.

And if those notes do – there’s a good chance that she’ll
regret not having kept in touch with her borrower.

Dean

PS: Did you enjoy this information? If so, my note
buying course is full of no-fluff info like it.
16 hours to be exact.

And 4 hours just on the 5 Exit Strategies alone.

(Already own the course? Did you really extract all
the info you could out of it yet?
I am confident that, if you didn’t go through it at least
TWICE, you are not getting all your value out of it…

Hope you enjoyed this post on how to buy notes.

Here is a question I got asked recently:

“My understanding is the federal government is going
to be offering financing to private equity and hedge
funds to buy up the bad debt.

If anything it would seem this would at the very
least invite a whole heck of a lot of competition.

What are your thoughts on this?”

Well, here are my thoughts:

I’ll address your concern in detail on 3/25 in
our Private Access Club live webinar.

* * * The “Competition” merely adds to the
Deal Source for buying mortgages from banks * * *

====> There are 4 “buckets” in the note industry:

a) Big boys – buying $100M and above

b) Mid boys – buying $20-100M

c) Small boys – buying $1-20M

d) Mom and pops – buying <$1M

The majority of the shuffling is happening, in my
opinion, at the big and mid-boy stage, in terms of raw
dollars.

Now, think about their financials for a sec: these
are investors, not originators.

=> They’re hungry for yield.

If you’re a Mom and Pop or a Small boy, the Mid and
Big boys are now Deal Sources to buy Notes for You!

They’re looking for a big IRR (e.g. quick flip) and
they’re buying more competitively than the Small boys
and the mom and pops.

VIEW THEM AS NOTE BUYING DEAL SOURCES, partner up with
them, come up with some transparent “Cost plus 5″ type of
approach where you give them 5 points in exchange for
cherry-picking their portfolio and piggy-backing off
their due diligence, and why wouldn’t they be
interested in selling notes to you?

Trickle-down. (I will talk much more in detail on that on
tomorrow’s Private Access Club webinar.)

So if you’re worried about the drip from the water
fountain (or the firehose!) being intercepted in some
way, just shift yourself a little so that you catch
the drips from the guy who just got in front of you.

And you can always go look for another water fountain
to buy mortgages aka nonperforming notes.

I assure you that the Mid and Big boys are NOT out
there building relationships with the 8,000+ FDIC
insured banks.

And last time I checked, those 8,000 have a few non-
performing notes in their portfolios!

Hope this was useful (and inspirational) information for you.

Talk to you on the Private Access Club webinar?

It’s time to TAKE MASSIVE ACTION.

It’s all out there, for those that choose to see the buying notes
opportunity (and ignore the naysayers &’recession whiners’).

Dean

PS: BTW, this was originally a post in our forum.
To see some responses by some of your peers,
check out the original thread here.

Or, you know what…

Some of the other comments were so valuable, I want to
make sure you read them.

See what Will had to add to this:

“Yes, there is pretty healthy window, an “area” where
the mom and pop and small operations can work with the
mid boys and Big boys.

Where you can either profit by
purchasing directly from these big boy investors, or
develop the right relationships by getting the word
out there that you are a direct source for obtaining
defaulted assets.

If one of these mid size to big boys
know you can bring them pools of 10-50M (residential
or commercial) and they don’t have to go take the time
to find and form those relationships with the right
people themselves …then you become VERY valuable.

At that level, the big boys are looking for convenience
and efficiency in order to simply “stay on course” of
investing and exiting.

I believe the more well rounded
you become, the more you master this industry, whether
that is by brokering or being a principal bidder, the
more opportunities will be presented to you.

All I have seen in the few months since I’ve been involved
has been an enormous need and really, a desire for
people to connect with others…to work with each
other.

There are so many more bridges to be formed.

“I assure you that the Mid and Big boys are NOT out
there building relationships with the 8,000+ FDIC
insured banks.”

In that one statement, if truly recognized, lies HUGE
opportunity.

Here’s an email I received recently:

Hi Dean….the PAC webinar was excellent last night.
I listened in via cell phone. Thanks much. Can’t wait
to review via archive.

I’ve been busy cold calling banks and looking for
real estate notes.

Several bank contacts have told me that either the
“bank does not sell notes” or ” the bank does not
have any non-performing notes”.

When one hears these objections, should we accept
them as the truth or just blow by them and try other
contacts?

Thanks

John M.

[From Dean again:]

So, I’ve received a number of emails recently from
investors telling me that they’re getting the
following response from banks:

“Sorry, we don’t sell real estate notes.”

Or even better:

“We don’t have any non-performing notes.”

The former, I can believe.

The latter, I can’t.

If you get someone telling you: “sorry, we don’t sell
notes” there’s probably a 25% chance that what they’re
saying is right.

The best follow-up is …

Find someone else to call at the same bank!

If you got in via Loss Mitigation, try getting in
through the corporate HQ number and asking for the
head of secondary marketing.

Or try asking for the CFO of the bank directly.

If you get someone telling you: “we don’t have any
non-performing notes” you know there’s a 99.99%
likelihood that they’re either misleading you, or
clueless.

Most likely the former.

In this case, definitely reach out to someone else at
the same bank.

Try Will’s useful tip for finding bank contacts to buy notes.

And in terms of *WHAT* to say to the banker:

We have HOURS of amazing calls with various veteran
bank reps in the PAC membership area (30-day F.ree trial…)
and more live ones to come.

(May I say: it’s PR.ICELESS being able to listen to veteran
bank reps (in charge of note sales) giving *detailed* coaching
and feedback on EXACTLY what to say – what NOT to say.)

Plus there’s lots of detailed information
on that in the A-Z Note Buying Course.

Hope that clarified this a bit.

Nothing ventured, nothing gained.

Dean

PS: I am very happy to see that it is
getting busier & busier in the NBP Note Buying Forum

There are lots of smart folks chiming in already with great
info. Make sure you participate!

Let’s leverage the power of this group!

Hope you enjoyed this post on how to buy real estate notes!

Here’s a little primer on what to expect once
you’ve bought your first nonperforming note.

Take a look at the video below and you’ll get a brief
overview of the documents that can be included when
you buy a note. And even if you don’t get everything
that you’d expect to see from the bank, I’ll share a
story with you about the missing Florida note we
bought and what happened with that deal.

Why does this matter to you when you are buying Real Estate Notes?

Because the better prepared you are for what to
expect when you buy a note, the better a negotiator
you’ll be when you’re first talking to the bank. And
the better you are at negotiating, the more
professional you’ll come across, and the better deal
you’ll get.

Each and every time.

So go out there and hit 2009 running – and take a
look at the video below to see what I expect you’ll be
doing a lot of this coming year.

To your note buying success in 2009!

A story about a stalking horse…

I recently learned what it means to be a “stalking horse bidder”.

It’s like being both in pole position in the Indy 500, as well as in the rear of pack, at the same time.

If you were to be a stalking horse bidder, you’d be asked to bid on a bankrupt lender’s assets BEFORE everyone else does, in order to set a reserve … to learn more, check out the Finding Notes Video below.

This may be a really good source for finding notes in 2009.

$2,000 for a $297 per month cash flow.

[Who said you can only buy POOLS of notes?
Who said you need a lot of m.oney to do this?]

Now that’s what I like to hear.

This is what Rick, a www.NoteBuyingProfits.com Student,
is receiving on the very first non performing
note he recently purchased.

Here are more of the details: Rick bought a 2nd
mortgage of $20,000 (so he paid 10 cents on the
dollar), behind a 1st worth $65,000, on a house that
he estimates is worth $130,000. So he’s at
approximately a 50% CLTV ($65,000 1st plus $2,000 he
paid for the 2nd, divided by the value of $130,000).

From Rick’s perspective, this is an amazing return on
his nonperforming note investment.

From the borrower’s perspective, Rick is a … well
actually Rick’s a saint from heaven.

Here’s the way Rick explains it: “The borrower was
actually getting foreclosed on [he had lost his job
and then found employment again, but fell behind]. So
he’s about $2,000 in arrears plus he was paying an
extra $50 a month due to a bankruptcy a couple of
years ago. ” Arrears mean how much he would owe to
bring the loan current.

So his borrower was behind on his mortgage, owing
over $2,000 on a $20,000 note. And he was also paying
$50 more than the original note payment due to a
bankruptcy filing that added an extra $50 each month.
So what did Rick do with this “deadbeat” of a borrower?

He cut him some slack.

” I said to the borrower, “Listen, I’m going to eat
the arrearage, I’m going to eat the extra $50 a month,
and you just pay me $297 a month and we’re going to go
back to the original note and I’m not going to
foreclose on you. “

The result?

The borrower made the first payment and Rick expects
to have little trouble with his remaining payments.

But how did Rick get there?

How did he get started in how to find notes?

Was it tough? Did it take a lot of time? Did he know
what he was doing? Are there more of these that Rick
can do?

===> Listen in this Wednesday, December 10, 2008 at
6pm PT/9pm ET.
Dial: 419-400-0202
Access Code: 468636#

I’ve invited Rick to share his experience
with you so that you can hear how a fellow student
went from the brink of bankruptcy (it’s true, Rick
almost filed bankruptcy himself), to receiving notes
unsolicited from 4 different people at a bank, and a
million dollar investment from a fellow investor. All
within a few short months.

And where does Rick go from here with his buying notes business?

“I’m really trying
to just get one or two a month now. My plan as I build
up is to just get one every other month and then build
up to one a month, one or two a month, like next year,
and start getting into larger pools.”

Step by step, Rick is building his note buying
business. And he’s starting with nothing.

Join us for this f.ree Teleconference this Wednesday.

We have room for 100
on the call, so be sure to be on it.

Again, it’s this Wednesday, 6pm PST/9pm EST.
Dial: 773-945-1010
Panelist Access Code: 260-435-355

You will learn about/from a Student who took * MASSIVE ACTION *
on the course materials of the A-Z Note Buying Course.

Plus you can ask ANY questions of yours.

Be your success.

Dean