Brian Lauchner (00:01):
Can create a financing really double your business without any additional marketing costs, stay tuned to find out.
Brian Lauchner (00:19):
That is the question that we're digging into in this three part series. So welcome back to NoteSchoolTV. My name is Brian I'm on the teaching team here at NoteSchool. If this is your first time watching NoteSchoolTV, man. Welcome. And thanks for jumping on board. I'd like to encourage you just to like this video, if there's value, you're getting out of it, like the video subscribe to the channel. And probably more importantly, specifically for this show is to click that bell notification so that you're getting the note notifications coming in. So when we go live, you know, that you can jump on and participate type into the chat box, add your comments on the platform that you're on and actually engage with us while you're here. If you're brand new and you're just like, I just still trying to figure this out.
Brian Lauchner (01:00):
What is NoteSchool? What are notes? Where are you guys talking about? And you just want to know what that next step is outside of this video, go to www.NoteSchool.com/TV, to learn a little bit more about notes and who we are at NoteSchool and kind of what we talk about. We've got some pretty exciting stuff coming up as we are live, like we are every single Wednesday at 11:00 AM central time. And so I'm going to bring on before we get too far down this, I want to go straight to the news with Joe Varnadore. You there, Joe?
Joe Varnadore (01:43):
All right. So we have the news today, guys. So a couple of news flashes here. So the first one is you see the screen there. This is from the a MReport and 40% fewer homes for sale since last year. So US homes for sale dipped below 700,000 for the first time ever in listed inventory. So nationally the number of homes was down actually it's 39.6% year over year with 449,000 fewer homes for sale compared to December of 2019. Realtor.com also reported the median listing price grew 13.4% year over year to $340,000 and home sold in 66 days on average last month, 13 days, faster than in 2019. The second flash here is that in the two week period ending January 1st, we're just, we haven't gotten all of December's numbers in this point.
Joe Varnadore (03:00):
But Applicant Mortgage Applications fell were decreased by 4.2%, according to the Mortgage Bankers Association. And guys that was, those results were adjusted for the holidays, right? So secondly, in addition, the holiday adjusted refinance index decreased 6% from two weeks ago and 34% lower than actually two weeks ago as well, 30 years. Let's talk about, we talk about these penalty box buyers, and we're going to talk about that with our guest here today in just a minute. So the average interest rate on a 30 year fixed was 510,000 on a, which was $510,400 for less, decreased to 2.86 from 2.90 with points increasing to 0.3, 5.31 and guys here's. The big kicker loan to value ratio was was 80% on these loans in order to get again, in order to get that 2.86 rate your debt to income ratio, your loan to value ratio had to be 80% or less.
Joe Varnadore (04:16):
And then one quick flash that I didn't have a chance to take a screenshot on here for you guys today. If you live in New York, right? If you live in New York state, the foreclosure moratorium has been extended. Now, nationally, it's been extended to the end of February. You live in New York, it's now been extended to May 31st, 2021. Guys, I can tell you that that takes into effect the the rental payments as well. So landlords are landlords are hurting guys. So we talk about you know, the burnout landlord capital, the heat is on baby. Alright. That is the news today, guys. It is some crazy exciting things going on out there in the world.
Brian Lauchner (05:09):
Man, I love it, Joe. So next up we've got our founder and friend let's bring on Mr. Eddie Speed and I'll let you guys take it away.
Eddie Speed (05:22):
Well. Hello guys, how are you?
Joe Varnadore (05:25):
I am doing great. Eddie. How are you, man?
Eddie Speed (05:29):
I'm good. I am charging through January. I have, I told her I had a town hall meeting with our staff last week. And Joe, you were on there. Of course.
Joe Varnadore (05:40):
Yes I was.
Eddie Speed (05:42):
But I had a town hall meeting with all of our companies, NoteSchool and our colonial companies that people that are in the note buying space and trading space and all that. And I said that I'm more excited about what I ahead of us in 2021 that I've ever seen literally in my 40 years of doing this in the past. I tell that to my internal team. So you can pretty much understand that there, yes, there's crazy stuff in the news, Joe. Entrepreneurs make money when we know how to solve problems in a market that nobody else solves. And our guest today is a problem solver. And we were able to help him add a big problem solving dimension to his business, but he's a good problem solving thinker. And I really enjoy this guy. And it's just a big deal that of how he's added this to his business. It's a big deal to him. Obviously. We appreciate him sharing with you guys and us some of his successes. So Joe, bring Dan on and let's just let's crack this code.
Joe Varnadore (06:53):
Hey, let's bring on Dan. Dan, this is guys, this is Dan Walters. Dan is one of our students from Boise, Idaho, and Dan, you and I talked about this the other day. It is it's an interesting market in Idaho. Is it not?
Dan Walters (07:15):
It sure is.
Joe Varnadore (07:15):
One of the most, one of those highest growth areas in the US dude who would have thought.
Dan Walters (07:21):
Yeah. Who would have thought, This is, you know, this is our little secret here for a little bit, but that secret's been out for awhile now. And I mean, Eddie is, you can probably attest and being in Texas, all the influx coming in from some Western States or Texas and Idaho seem to be the destinations to go. So it's been a wild ride and continues to be, so we're.
Eddie Speed (07:43):
That's what they call Austin, Texas, as Little California. And I think they call move to Idaho.
Dan Walters (07:47):
Yup, That's exactly what it is.
Eddie Speed (07:53):
So, Just a quick background. So, Dan and I have some mutual friends. And I participated in a Mastermind that Dan is in, I've done some training for them on a number of occasions far the last few years. This is one of these high volume real estate investor Masterminds. And Dan has done coaching. So he's helped other people do the business and he's a very active investor himself. So it's very, what I want you guys to hear today is. You can start this whether you have a significant background in real estate, or you don't have a significant background in real estate, what Dan would tell you is, is what we're teaching is like, it's not like all of these high volume guys have this figured out, did they Dan?.
Dan Walters (08:38):
No. Actually there was a very small percentage that are just starting to figure it out.
Eddie Speed (08:42):
So we talk about the idea of somebody coming in, like a note, school trained person and helping these high volume guys, because there's such a shortage of people that know how to do it. So Dan, we're going to throw a case study today of an asset that you bought. You told us you that you have four terms deals working right now.
Dan Walters (09:02):
Yeah. So it was actually, it was you know, for as hot as the market's been, it's been a little challenging to step in with some sellers that are wanting to sell for full retail price, but they know they can get it pretty quick. So when when we're bringing terms to the table, it's just, you know, like it's a long play. It's, it's a conversation we've got to continue to have. And it was 2020 was not ideal for that. However, we were always continuing to present that and study it. And then I think it's just been the activity and the opportunities to continue to offer that. And all of a sudden it's just kind of hit it. So it's just been the activity behind it.
Eddie Speed (09:37):
You know, here's what, here's how I say it. If you can buy a property and get the seller to carry terms for you in the hottest real estate market in the country, it shows you the power of it works when things are good and it works for things obviously for a market to come that may not be so good and we're not calling all markets the same. And we're not saying everything's going to have the exact same effect, but we do know that terms are why our originally started this idea a couple of years ago. It was a way to disguise the price, because you're, you're buying it on discounted terms and not a discounted price. So Joe pull your PowerPoint up.
Joe Varnadore (10:23):
We are ready to go, man. It is we are ready and get the case study up here and ready to go, man.
Eddie Speed (10:31):
Dan, can you see that?
Dan Walters (10:32):
I can't.
Eddie Speed (10:33):
All right. So, just kind of go down through it with us, if you will.
Dan Walters (10:37):
Yeah. Just real quick background. This seller had actually owned this property for 30 plus years. He's kind of right in the middle of a, super grow, high growing area, a fast-growing area, he's on an acre of land here. So it's just a really high desired, highly desired piece of property. But he had a set amount in mind that he wanted, he'd had multiple conversations over the last year or two years with people coming in and with developers wanting to come in and develop it, but they were, but he knew it. He had a, he had a set price of mine that he needed to get, to make his transition, pay off some debts, all that kind of stuff. And the developers weren't even coming close to what he needed. So he was just, just been sitting on it. So,
Joe Varnadore (11:17):
So Dan, let me ask you too, the current market value is the 515, and let's show them before and after there's the, a before on top and the after on the bottom.
Dan Walters (11:27):
Correct.
Joe Varnadore (11:28):
Beautiful place. Again.
Eddie Speed (11:30):
There's a rehab on this right, Dan?
Dan Walters (11:33):
What's that?
Eddie Speed (11:33):
You did an extensive rehab.
Dan Walters (11:36):
Yeah. It was 30 years of deferred maintenance and a lot of DIY stuff. So
Joe Varnadore (11:42):
Yeah. So Dan, so the as is value on this, this is kind of a, I'm gonna kinda run through these three points here and then I'll kick it back to you, but, you know, you said the as-is value is 310?
Dan Walters (11:54):
That's, yeah. At the time.
Joe Varnadore (11:57):
Yeah, that was the as is. Your cash offer, Dan was 245, which was. Was it too low for the, it must have been too low for the seller, right?
Dan Walters (12:06):
Correct.
Joe Varnadore (12:07):
Okay. So Dan, this is the crazy part. So you come in and your cash offer was one, and your terms offer is $325,000, which you know, is a little bit over the as is value as you reported.
Dan Walters (12:21):
Yep. Just a tad bit, because that's exactly what the seller needed.
Joe Varnadore (12:25):
Right.
Eddie Speed (12:26):
That's the crazy thing, guys. There's two unbelievable things about this set of numbers up there. The, as is value is 310. Dan structured a deal where he could offer more than the as is value. And it had a big rehab budget in it. I mean, it is a big rehab budget.
Eddie Speed (12:47):
So. And by the way, that of the 90,000 rehab though, you didn't put 90,000 up, did you do? Dan.
Dan Walters (12:55):
No, it did not. No. I actually had part of that was funded by our private money that came in and helped us finance that.
Joe Varnadore (13:04):
And let's talk about that. So Dan you went out, so your total in this, by the way, you've got three and a quarter in the terms offer, then you've got a $90,000. So that's 415, right. So you structured the deal like this, you got a private first, like you said, from one of your private lenders for 281,000.
Dan Walters (13:26):
Yep.
Joe Varnadore (13:27):
And in the terms on that, they were not so creative, right? I mean, you got a 6.4% loan from a private investor for 30 years at 1756 P and I.
Joe Varnadore (13:36):
Correct.
Dan Walters (13:38):
Okay,
Eddie Speed (13:38):
Joe, let me make a point about that though. When Dan does that, that's a loan that can be paid off. So if he finds another private investor lender that wants to loan him money at 5%, he can move that 6.4% money out and 5% money in on the same deal.
Joe Varnadore (13:56):
There you go.
Eddie Speed (13:57):
Yep.
Joe Varnadore (13:58):
Now, Dan, here's where you get creative. Right. You've got a seller second for 90 and talk about each of these terms here that, you know, we're flashing up on the screen here kind of as they pop up. So payments for the first 12 months, right?
Dan Walters (14:17):
Yeah. So here's the thing. I mean, you had a seller who has been really wanting to sell for the last couple of years, but he knew he had a number. He was set on the number of where you wanted to sell it. And he had talked to many people who can come to that. So when we finally started having this conversation and there was a sense of joy and in the seller's eyes and in the hope that finally somebody is gonna come through for us. And I think he was able to realize that we could obtain this for him because he was retiring and moving out of state, he was willing to, he was happy to accommodate in some of these, in some of these other terms, because finally
Dan Walters (14:52):
There was somebody that could solve his problem. So, so yeah he was willing, like I said, he needed a certain amount of money to pay off some debts. And it also would help him transition to this new acquisition to his new home. He was going to out of state. So he told me what that number exactly was. And so that's associated our down payment. And then he was willing to carry the difference on that. And that was tickled him to death. So we knew that we were going to have some extensive rehab. So I'd just let him know that, Hey, look, you know, we're going to be in some time with this thing. So if you can give us a little bit of coaching here to before payments start, you know, wonder if you can give us, you know, at least a year to be able to kind of get this house where we need it to be, and then we can turn around and it makes money for us. And it also, at the same time, it makes money for you,
Joe Varnadore (15:37):
So, Eddie, you and Dan talked just a minute about this crazy thing, that's a step rate? What's a step rate guys?
Eddie Speed (15:47):
Well, this is a concept that we, the more of these deals we cut up, we started figuring this out that, that people would agree to an extraordinarily low rate or no rate to start the loan and down the road, then to get them to carry it. They wanted more interest. But the smart thing that Dan did here is by caring at such a low rate, he is accelerating the principal payoff of the loan, right? Dan?
Dan Walters (16:15):
Yeah.
Eddie Speed (16:15):
So, all of a sudden people think, well, 4% interest, isn't a bargain, but for five years, really six years, cause the first year was nothing for five years. He is sawing off the additional principal at an accelerated rate, which means he is paying 4% interest, but 4% interest on what? Less principal, less money. So the math is really good. Another clever thing that Dan you'd now do just as an automatic, as you set up annual payments, right?
Dan Walters (16:49):
Yeah. And that was something that through just through the education and just being a part of on some of these calls with you guys. Realizing that, Hey, we give these annual payments and really separate note care of the seller from their payments over a period of time, they realized that, Hey, that money isn't coming in every single month, like clockwork, it's just one lump sum. And as we know, most people don't you know, when we're going to get their money, the majority of people, they burn it pretty quick. And so they're always looking for more money later. So that's.
Eddie Speed (17:21):
Play down the road is, you're pretty sure he'll call you wanting to sell that, wanting a pay off of his note at less than the full principle amount owed that you'll buy your own note at a discount.
Dan Walters (17:32):
Yeah. And that's what we're anticipating. I mean, he's on a fixed income. So we know that at some point in time, that phone call is going to come. Yeah.
Joe Varnadore (17:42):
So guys now we've bought it. We've papered up our buy let's talk about Dan, how sold this to a penalty box buyer and guys remember a penalty box buyer. Just somebody that's missed, just missed right? They've got a good down payment. They're strong. There's just, maybe they're, self-employed, maybe they're a gig worker, whatever it looks like they're just missed. And they're really part of that 35% of folks that could get alone back in January of last year that starting in March of last year, they just couldn't. So, let's talk about the sale, right. So you've got a total of 415 in this thing, right. So you sell it for 515.
Dan Walters (18:25):
Correct.
Joe Varnadore (18:27):
Low down payment, $45,000.
Dan Walters (18:30):
Yep.
Joe Varnadore (18:30):
Okay. So we've got a $45,000 down payment. We've got a $470,000 wrap lien on the loan. So we've got 470 at 5.75, and you're doing this for 30 years, 360 months. So you've created yourself some cash now. And we'll talk about that a little bit more in a second. And then you've got a monthly payment of 2742 coming in to your little bank, right? Your Dan's National Bank for the next 30 years.
Dan Walters (19:08):
Correct.
Joe Varnadore (19:10):
I just have to laugh. I mean, that's some crazy numbers, right?
Eddie Speed (19:15):
It is crazy. And the thing of it is, is when, you know, I was being on enough of these case studies and these calls and news, and just watching, you know, call after call a case study after case study was okay, I know this works, but you know, the question is, is there gonna be somebody out there that's going to have that amount down? Is there going to be somebody that's going to be able to make that monthly payment, you know, and that's gonna be able to truly qualify for it. And the fact of the matter is once we started advertising it, I mean, they come out like the woodwork and there's what we found. There's point, like you said, the penalty box buy there's plenty of people that do have that cash and reserves they're business owners. They just don't fit in the box that the traditional lending criteria just don't allow. And it was amazing to see the amount of people really came out and really just solidified everything because it wasn't so much for me, it was more of the higher price point because we were kind of pushing the limits here. I think a little bit on this particular one, I mean, I felt comfortable at like a 200, you know, 150 250 $300,000. But to get to that 515, it was kind of questioned, like, you know, how's that going to work? But man, it was.
Eddie Speed (20:20):
Can I make a point about that? People tell me, well, seller financing works on little cheap houses, right? You know, 125,000 or less and networks in San Antonio and out in the country, but nobody would buy a 500,000 on a house with seller financing. But here's the reality, Dan, let's lat where the market is. And if a home buyer today, if there a thousand people that could qualify a conventional mortgage last February, a thousand people today there's 650 of those people that can qualify in 350 of them that no longer can get a mortgage. Right. So there's a big market gap. No, we agree. Real estate is on fire. There's a shortage of listings, but there's also a shortage of financing, just people aren't talking about it as much.
Dan Walters (21:10):
Yeah. And the other thing that we're seeing too is we have a, you know, there's a lot more people that are, starting businesses. I mean, especially with the things that have gone on this year, people have, you know, they've had an opportunity to step off into their own, do their own thing on the side. And so they've realized that either I'm a success and then maybe they're able to step away from the job in the last year and a half, two years, three years, whatever it is, and their financials aren't super strong or they're not a W2 employee. So banks just kind of go, Nope, sorry, but they've got solid tax returns. They've got great reserves. They've got great P and L and it's in their credits, you know, solid. It's a no brainer.
Joe Varnadore (21:47):
Yeah.
Eddie Speed (21:50):
Go ahead. Go Joe, let's look at the cashflow here.
Joe Varnadore (21:53):
Let's look at the cashflow. So here's the total income on this thing, guys. So you sold,
Eddie Speed (21:59):
You ended up with not $45,000 profit in your pocket, right, Dan?
Dan Walters (22:05):
Correct.
Eddie Speed (22:06):
And then this thing after you pay, you have two mortgages, you have to pay every year. Right?
Dan Walters (22:12):
Right.
Eddie Speed (22:13):
You have the private first and the seller second.
Dan Walters (22:15):
Correct.
Eddie Speed (22:16):
And then you're receiving a bigger payment. So you have a wrap mortgage, you're receiving a payment with the obligation of making two payments.
Dan Walters (22:23):
Correct.
Eddie Speed (22:24):
But you're netting like 8,300 bucks a year, 8,200 bucks a year. I'm sorry. 8,200 bucks a year net income after you pay those mortgages.
Dan Walters (22:35):
Yes.
Eddie Speed (22:39):
For a long time.
Dan Walters (22:41):
It's awesome.
Joe Varnadore (22:42):
Yeah. The National Bank of Dan is is doing well. And guys, I mean, that's almost a mic drop. Right. So you took something that, you know, you would have, you could flipped it and made a little money, but, but again.
Dan Walters (22:56):
And yeah, just to drive this point home, like I have, like, I have a rental portfolio as well. That's net income, we're talking about right here. That's not my, all my rentals. I see. You know, I see the gross income come in and I got to take about 45% out for taxes, insurance, maintenance to, for all that kind of stuff. This, when this comes in, it's just straight bottom line.
Joe Varnadore (23:20):
And guys, I want to 0.1 other thing out to you real quick here that you've got we've got a link on there for the the Moneyball book, right? So that is the Eddie's book it's called Moneyball two creative real estate financing, the cure for thriving during post. COVID-19. So there's a link there. This specifically is what we're about the day Is in chapters three and four of that book. So make sure that you download that when you get a minute and read it, and we're going to finish up the book next week on next week's episode, by the way.
Eddie Speed (23:58):
Yeah. There's a lot of different strategies. And people think that seller financing is always, has to be the seller, has to carry all of his equity. And in this case, the seller walked away with a lot of cash because then you went and found a private lender.
Dan Walters (24:11):
Yep.
Eddie Speed (24:11):
That loans you, the money essentially went, that money went partly for the rehab and mainly to the seller. Right. And then all of a sudden you were in a good position with him because he didn't have to carry. He didn't have to wait for all of his money. He had to just wait for part of his money.
Dan Walters (24:32):
Right.
Eddie Speed (24:32):
And I believe particularly in really competitive markets, I think this is a seriously underused strategy. And that's why I wrote about it in that book is I'm like, guys, this is a deal that you, that the house needed 90,000 and repairs. What was he going to do when he called a realtor? Right.
Dan Walters (24:50):
Yeah.
Eddie Speed (24:50):
The realtor couldn't solve the problem.
Dan Walters (24:53):
Right.Yep
Eddie Speed (24:55):
So, all right. So Dan, I just want to know, I want to kind of unwind this right here at the end. What do you know now that you did not know a year and a half ago?
Dan Walters (25:10):
Well, let's see. Well, the biggest thing, you know, stepping into to NoteSchool it opened up the possibilities of where the traditional cash offer model from a wholesaling standpoint or anything else is you know If we can't get it, you know, 65 or 70% or whatever it is, then it's just not a deal. Here, very lead that comes in is a potential opportunity, you know, because in our, in the traditional wholesale business model, it's maybe 1 in 20, 1 in 30 leads turn into a deal. Here, every lead that comes in is a potential for if it's not for the cash offers, if not the cash offer realm, there's all of those can have a potential to fall under the terms around. So there's excitement when a lead comes in, because every single one of those could be a possibility to convert. That's absolutely right.
Eddie Speed (26:03):
You, your field of vision, it goes from this to this.
Dan Walters (26:07):
Yes, Exactly.
Eddie Speed (26:09):
Dan, your awesome dude.
Joe Varnadore (26:11):
Stick around, we're going to have an after party for a few minutes after, so hang in there with us. And Brian's going to take us out here today.
Dan Walters (26:17):
Appreciate you guys. Thank you.
Brian Lauchner (26:19):
Yeah. Thanks guys. Thanks Dan, man. This was a perfect example of someone closing way more deals, creating very profitable notes that are going to pay him for a very long time. And speaking of notes, this wouldn't be complete if we didn't mention our sponsors NotesDirect and Feeding Frenzy Friday.
Brian Lauchner (26:52):
That's right. Each week, we have a playlist called Feeding Frenzy Friday., where we take a note off of notes direct, and we break it down to help you really better understand what are some attributes of a note that I should be looking at to qualified or disqualify it what lowers my risk, what increases my returns, all those kinds of things. And this week was a very interesting one. We actually are breaking down a note from New York. You know, you heard Joe's talk about the moratorium being expanded to the end of may in the state of New York. And what's interesting about the note this week is first of all, there is a 15 year track record already. They've lived in the house since 2005. And so who do you think is going to pay, a renter? Who's lived there for a couple of days, maybe months, right?
Brian Lauchner (27:36):
Or somebody who has 15 years of you know, history there and a track record of paying. And so that's one piece. And the other piece is this, that the payments around 500 something dollars, right? Whereas the rents in that area are 950. And so with all this craziness that's going on with the moratoriums, this person is very incentivized to make this payment, because if they don't, they have to come up with $950 to leave that house and go rent somewhere else if that makes sense. So check out those videos as always, we'd love for you just like these videos, like the Feeding Frenzy videos as well. I'm definitely subscribed to the channel so you can check out all the playlist and to make sure you're clicking that notification so that you can engage with us here as well as stick around for the after party that we're going to go into, make sure you get your questions answered and stuff like that.
Brian Lauchner (28:23):
I mentioned at the beginning, if you're brand new and you're just trying to figure out what is that next step? What is node school? How do I get involved? Go to www.NoteSchool.com/TV to learn a little bit more next week, join us on Wednesday at 11:00 AM Central. We're going to go through part three of this really unique creative financing story and kind of dig into it a little bit deeper as always thank you for your time. Thanks for joining us. Stick around for the after party. Otherwise we will see you on the other side.
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