Brian Lauchner (00:01):
Is it really possible to double or even triple your profits and your deal flow using creative financing, stay tuned to find out.
Brian Lauchner (00:22):
Well, welcome back to NoteSchoolTV. We are here yet again on a Wednesday 11:00 AM central time. Like we are every single Wednesday. I'm super glad you're joining us. Super glad you're ready to engage with us, right. Make sure you're typing in the comments and bring your questions to the table. If this is your first time to NoteSchool, make sure you're clicking the night, I'm sorry, the like button I have, these videos are a value to you. Subscribe to our channel, to learn some more content that we're publishing. And then I would probably say the bell notification. If you're wanting to engage with us on a regular basis and kind of bring your own, take to the conversation, bring your questions to the conversation, make sure you're clicking the bell notification to be notified when we go live so that every single time we go live, you know, you can jump on and participate and joining the conversation if you're brand new to NoteSchool. And you're just trying to figure out what a note is, what NoteSchool s all about. You can visit www.NoteSchoolcom/TV, to learn a little bit more about who we are, what we do, how you can get engaged and participate in the note business today. We've got a really a great lineup. We've got a special guests as we do always. And I we're going to start this whole thing off with our good friend Joe Varnadore, or who's going to talk about the news
Joe Varnadore (01:54):
Well, good morning everyone. Brian, thanks for bringing me on. And I appreciate it. So we have got some interesting things going on here in the in the marketplace, right? And so this is an article for this week's news from housing wire and it's from a couple of days ago. And so I just wanted to kind of talk about this for just a minute, and it is experts optimistic about the housing market in 2021. And there is absolutely no doubt, right. That the housing market is on fire. So it is going to be an interesting year for sure. So let's talk about a couple of things here. So what do all of these things mean that we go through when we have pending home sales dip for the fourth straight month ending December of 2020, and that's according to the national association of realtors.
Joe Varnadore (03:00):
And so, you know, here's the here and I'm going to do all three of these little pieces, and then we're going to kind of circle back around. Contract signings are up 21.4% year over year. So sales are down, contract signings are up, prices soared nine and a half percent, November, 2020, which is the nearest from the case Shiller index, which is the most recent and actually that was, should be 2020, yeah. To November of 2019 to 2021. Okay. Anyway, here's the bottom line folks. It's all about inventory. When there's very few of something, then the price is going to go up. So as we went through last week when we did the industry when Eddie did the state of the industry kind of thing we talked about what was going on in the marketplace.
Joe Varnadore (04:04):
So yes inventory is going down, prices are going up, contract signings are going up. Inventory is at its lowest level and all of those things. So what is it we're going to need? We're going to need inventory. And according to Housing Wire, what is going to take? It's going to take more people wanting to sell their properties. We'll see if that happens. And then the builders getting in and building more houses for people to buy. Okay. So that is the news for this week. It is there was a Chinese philosopher that said, may you live in interesting times? And these are certainly interesting times.
Brian Lauchner (04:50):
That's it. I love Joe. And so obviously there's some interesting things happening in the market. But at the same time, some people have added some things to their business to make them more competitive. And we've got a special guest. So tell us who do we got today?Joe.
Joe Varnadore (05:06):
Guys? We have Mr. Scott Bower from Phoenix, Arizona, and Scott is a, what was, let's bring Scott on? Good morning, Sir.
Scott Bower (05:18):
Hey, Good morning. How are you?
Joe Varnadore (05:20):
Very, very well, my friend, thanks so much for being on, Scott is he's pretty busy guy these days, right. Everything kind of just kind of started clicking, right. And all the pieces kind of fit together. Didn't they, Scott?
Scott Bower (05:38):
We definitely have a lot of stuff going on in a lot of good ways. Super busy, but also being very, very productive. That's probably most important.
Joe Varnadore (05:46):
Well, that's it. So actually, you know, just doing something doesn't mean you're going to be productive. Right. All right. So you have been with NoteSchool about a year, a half now. And you came in with the, why did you decide to learn the creative finance out of the business, Scott?
Scott Bower (06:05):
I've done a really good job of mastering, you know, the standard size side of investing in real estate, really understanding how to fix and flip properties, buy and hold properties as rentals to wholesale properties. You know, I know that side of the business pretty well, as well as the retail side. Right. That's, that's where I originally started. But what I found was that there is a lot of opportunity that's left on the table when you use the standard, you know, the standard investment model. And so I wanted to try to take a hold of those leads that I couldn't otherwise convert and actually turn them into money because of course in any business, every lead that you paid for is you had to pay for it. And if you can't get a return on that, then that's, you know, that's not what you're looking for.
Joe Varnadore (06:53):
So Scott, what you're saying is, and kind of the average from a lot of the guys that, you know, that are doing like you do on a daily basis, we kind of figured out from input from you guys told us what you were, you know, your pain was, and you were getting really about one deal accepted wholesale deal accepted out of 20 deals. And we said, well, what if we could show you how to close two or three of those 20 instead of just one of those 20? And so that was when you said, Oh, okay, well, let's do that. So we're going to go in and I am going to go to a deal that you did here. Well, what was it September of last of 2020?
Scott Bower (07:39):
I want, yeah, it was September, I believe was exactly when we did it.
Joe Varnadore (07:42):
Right.
Scott Bower (07:42):
This deals a great deal, by the way. I love to talk about this deal.
Joe Varnadore (07:47):
Yeah, so this is, well, we'll unpack it, Scott. We don't want to give away the punch line just yet. So Scott, tell us a little bit about this, how this came across your desk and kind of what happened with this, right?
Scott Bower (08:02):
So this originally came across the desk as an online on a pay-per-click lead came in, just like any other lead out there you know, nothing special. You know, once we were kind of looking at the opportunity there it really made a lot of sense to structure it the way that we did. I don't know. How do you want me to, what else do you want to know?
Joe Varnadore (08:22):
Oh, here we go. So it's got, it looks like the seller said I want out, and this was a mobile home, but it had been built on tell us a little bit about the condition and all that. And, you know it was good condition and the seller just needed to move it quickly.
Scott Bower (08:39):
Correct? Yeah. So the condition was really, really good. You know, her and her team, she raised her two kids there. They were still living there currently and they just, they were wanting to move out or her family had had this property for quite a number of years and had actually added to it. And it changed, it looked a lot like actually a single family house instead of a mobile home. So they added value. The other big benefit to this property is that it's on a 10,000 square foot lot, which you know, is a good amount of space that was owned by the property. Right. And it wasn't a fixed mobile home, meaning that it is a fixed to the land, therefore making it real property that really made this attractive. Cause I knew that there were several different options I could make this deal really work.
Joe Varnadore (09:23):
Right. Well, you know, with the shortage of inventory in in, you know, in your area, like it is everywhere else. I mean, this certainly made sense and this would have not, that would have been bankable. Would you agree with that, Scott? I mean, literally you couldn't have gone to bank of America or Rocket mortgage and if somebody were looking to buy this right, because type of property that it was and the price,
Scott Bower (09:49):
Well, yeah, I mean, so this is a mobile home that technically was built in 1973, I believe. And because of the, of HUD rules, if they're built before August of 1976, you can't finance them through traditional bank. So this isn't a financial property period.
Joe Varnadore (10:08):
Right. So she said, look, I want $50,000 cash. And you went out and you found $50,000. Right. And if it wasn't, if you didn't have the money personally, you could certainly go out to a private lender and get low-cost funds to get that 50 grand. Right.
Scott Bower (10:24):
Absolutely matter of fact, I mean, we, I did just use my own cash for this because of it being 50 grand. But I have lenders that are on the side that are waiting for opportunities just like this to lend on.
Joe Varnadore (10:37):
And when you talk about lenders, you're not talking about, The Bank of America, you're talking about private lenders that have some funds and you can borrow it, you know, 6% or something like that. So, okay. So, you buy this thing, you write the check for 50,000 bucks, you own it. And really you didn't, I think you told me you didn't have to put anything in this or very little, right.
Scott Bower (11:00):
Well, I actually put a lot, all of a $0 into this problem.
Joe Varnadore (11:08):
$0 from man.
Speaker 4 (11:10):
Well, I, you know, it was a tough find really, but it was you know, I got, through it pretty easily, really.
Joe Varnadore (11:17):
Okay. So, so you buy it for 50, you pay her for the $50,000, you own the property. So you advertise this on Facebook Marketplace, right?
Scott Bower (11:30):
Correct. Yup.
Joe Varnadore (11:32):
So, and you kind of did an ad that basically said private loan available to a well-qualified buyer with a large down payment.
Scott Bower (11:40):
Correct.
Joe Varnadore (11:41):
Right.
Scott Bower (11:41):
Yep.
Joe Varnadore (11:42):
So how long did, this is kind of funny because when you told me this, you said you posted that thing one afternoon, you know, that you were looking for a buyer for this property and you were going to finance it and you really, you only had one or two right now the joke is you had several people contact you immediately, right?
Scott Bower (12:02):
Yeah. I mean, we had a ton of people that reached out right away. So I don't know. Do you want me to dig into what you're going to get out of Facebook marketplace and another key point that you want to make sure that you do, if you're gonna market there.
Joe Varnadore (12:15):
Quickly? Let's just talk about it real quick. Yeah.
Scott Bower (12:17):
Okay. So the marketplace is a phenomenal place to advertise properties because you get a lot of lookers there. The negative side of it is that you get a lot of lookers, right? So not everybody that's going to inquire about your property is going to be qualified to buy it qualified, to have the down payment, et cetera. So you are going to have to sift through some people that way. One of the most important things that I actually did not have to do on this specific property, but I have since had to do this, is you need to boost your property when you put it out there. Because if you just try for organic searches or organic people to look at it, you're not going to get nearly the viewers that you're going to get. If you, you know, boost it for a hundred bucks or $200, cause you'll get a great, you know, a larger amount of people that are looking.
Joe Varnadore (13:06):
Got it. So, so, but Scott, here's the thing. It is a whole lot better to have some people to sift through the nobody to sift through. Yes and,
Joe Varnadore (13:15):
So, Go ahead.
Scott Bower (13:18):
You'll know pretty quickly. So let's say that you put a property out there and you get nothing. You get, you get crickets and get people that are just, you know, nobody's responding, nobody's commenting, nobody's doing anything that way. You've got one or two things that have really happened. Most likely, number one, your price is too high and unrealistic and unreasonable, nobody's looking at it, or two, maybe just have one ugly property that is just terrible and you're asking too much money for it, I don't know.
Joe Varnadore (13:45):
Well, and so some people may be thinking, Scott, that, well, you bought it for 50 and you sold it for 125 and you go, wow! that's a pretty good lift between the buy price and the sale price. But again, this person that's oldest thing. She was ready to sell it. And you had the cash and you know, you just made the deal. Right?
Scott Bower (14:07):
Absolutely. And you know, this for this model, this really makes sense. And this is why, like, I want to make sure if I'm going to do a deal like this, I'm going to put a creative finance deal together. I want them to be making a 20% return on my money or better. Now this specific property is absolutely phenomenal because it's a 36% return on my money per year, but it doesn't have to be that way. You know, it could, it could go down to 20. Now, a good rule of thumb for that, that I've found is that if you double basically double your acquisition price for the sale, you're going to achieve that number. Right. That's kind of what we've, that's, that's kind of what I returned.
Joe Varnadore (14:48):
Figure it out and your model there, right?
Scott Bower (14:50):
Yep.
Joe Varnadore (14:50):
It was and a lot of folks would have not even, you know, would've thought, no, I can't do this deal, but this is what was the perfect deal to do. So Scott, you advertised it on Facebook marketplace on marketplace and you had some buyers come in, you pick the one that probably had the most down payment. You sent them over to an RMLO Residential Mortgage Loan Originator so that they were so that this was the loan was safe act compliant.
Scott Bower (15:16):
Yep.
Joe Varnadore (15:16):
They have 20,000 to put down. So now you've got $185,000 note at 9.9% and some folks would go, Oh my goodness, that's kind of a high note. It's this is, this rate fits the type of property and the price band of the property, right. 9.9. And so what you done then, is you created a cashflow of $914 a month, principal and interest for the next 30 years. So, my question, say it.
Scott Bower (15:54):
I was going to say everybody, that's listening to this, let that sink in just a little bit. And here there's another very, very, very, very important part about that, that I really want to make sure that everybody understands. And what that point is is that I'm not paying the taxes, I'm not paying the insurance, I don't pay for maintenance, I don't pay for repairs, they're not calling me when the dishwasher breaks, they're not calling me if there's a AC leak, nothing like that. It's just strictly passive flow per month, every month.
Joe Varnadore (16:29):
So Scott, when you get that $914 check, right, you don't have to take anything out of it. That is your cashflow now little rule of thumb, what would this place rent for if you rented it out?
Scott Bower (16:44):
So a similar type property like this is going to rent for about $1,300 a month. So I am dramatically, you know, $913 P and I to them or $14, whatever it is per month is a great deal. You know, all in taxes and insurance it's just over a thousand dollars for them a month.
Joe Varnadore (17:04):
Right? So they can own this 250, let's call it 200 bucks a month, less than they can rent it.
Scott Bower (17:12):
Yep.
Joe Varnadore (17:12):
So some of the folks are saying, well, gosh, but Scottie only got 20,000 of his $30,000 back, but you know, you wait 36 months, 32 months, whatever it is. And you've got every dime back. So then you've got another 27 years of cashflow on this, but,
Scott Bower (17:34):
Yep.
Joe Varnadore (17:34):
The other side let's just unpack this so everybody can see it here, right. There is 105, 125, 20 down, you know, 9.9 30 year cashflow. So Scott, you could do something else with this. You could after you seasoned it a few months, which you've already done, you did this in September I think the first payment may have been due October.
Scott Bower (17:56):
Uh huh.
Joe Varnadore (17:56):
You could sell what we call in the note business, a partial on this and get the rest of your money back actually more than the rest of the down payment back.
Scott Bower (18:07):
Yeah. You know, if I had a need for, you know, if I wanted some cash, but I wanted to get that 30,000 back. And like you said, I could actually get quite a bit more than that back. If I sold a parcel of this note, you know, I'd get all my money plus more. I could then turn around and use that money and get back to go buy another one of these. And then therefore, and I guess the other part is the partial only sold a parcel of the payments. So let's say I'm going to send, this is a 30 year note. If I'm going to sell 10 years of the note, that means that for 10 years, I won't receive any of these $914 payments per month. But after that, period's over for the next 20 years. All of that money goes back to me. So not only do I get my money, but I also get to use it later too. So I get my cake and I get to eat it too. It's great.
Joe Varnadore (18:58):
I liked that. I liked the cake and I liked to eat it too. So that's exactly right. And there are many, many other strategies, Scott, we could borrow, we could pledge this loan as collateral, borrow money against it and make a cashflow every month. If you know, make a difference between the, what our loan would be and what this payment is. So there are many different things we can do with this. So here's the big deal. Scott, here's what we're talking about, right? When we're talking about this. So over 30 years, the cashflow on this thing is $349,040. Now, let's look at what you're really, you know, cause you got some money in this, right? So you bought it for 50, you got a $20,000 down payment, you receive 360 payments of 914, which is $329,000. So when you look at all that your real profit is let's just call it $300,000. So you've got 50, you really only have $30,000 in this. And over time it pays you $300,000,
Scott Bower (20:08):
You know? I believe they call that 10X, but you know, there is, it's a phenomenal thing because if you look at this, if I was to take this hat off, right. If I didn't know the knowledge that I know now, I would have passed on this deal, maybe. Right. I would have said, no, that's the mobile home, it's not, financeable not a deal. No go. And I would've, just let it go. But instead we looked at the opportunity using, you know, the strategies we use through that I've learned through NoteSchool to be able to realize the opportunity here to make $300,000 on a $30,000 investment.
Joe Varnadore (20:47):
Right, and so, The, we'll pull the slideshow down. But here's the thing you're exactly right. Again, a lot of people would say, Oh, but it's an older mobile home, but look, it's a house. And here's the bottom line, That is affordable housing. And somebody might say, well, I wouldn't want to live in that kind of housing, guys, that is someone's castle. Would you agree? Scott?
Scott Bower (21:18):
Yes.
Joe Varnadore (21:18):
Giving someone home ownership that would have never had it.
Scott Bower (21:25):
Yep, no, and good. If somebody doesn't want to live there, great, then this isn't the property for them, but somebody does. And especially in a low inventory environment, like we're in now, they won't be here forever. Let me make sure to make sure everybody understands that. This low inventory environment is great because now I can not only provide financing to somebody that may not qualify for it in any other way, but now I give them a chance for home ownership, which is, you know, some people's ultimate dream. So.
Joe Varnadore (21:52):
Right. I mean, that's still the, that's still the American dream. Hey Brian, why don't you jump on with us? And if you've got the couple of things you want to add to this and you'll you know, take us out here in a sec.
Brian Lauchner (22:05):
Yeah, you bet. So first of all, one of the things, and thanks, Scott so much for jumping on and sharing with us, it's always, I think very valuable for just other investors to kind of hear like this is working in your business. And, you know, I started this whole thing talking about how can, can you double your deal flow? Can you double your profits? And I think it's not only is Scott obviously doing more deals, as he said, in his own words, he monetized the deal that he typically wouldn't do. But the interesting thing to me was the doubling your profits or tripling your profits. It doesn't even matter which way you look at it. A lot of people want to get double digit returns on their rental properties. And then they just act like the expenses and the overhead and that kind of stuff never happens. Right? So even if you want to get double digits, you can double a he's tripling his just return on investment, right? Not to mention, obviously from a revenue standpoint, he's creating, like he said, 10X, the amount of revenue on his investment. So it's really, I think it's such a great example of looking at a deal from so many different angles and allowing lots of different investors to look at it through the lens and say, I see how I can do more deals and I can do more profitable deals as well. So.
Joe Varnadore (23:16):
What is the name of your company? So everybody knows if they want to check you out on.
Scott Bower (23:20):
Yeah, please do. My company's name is www.HBSBholdings.com. Make sure to check it out, it's here in sunny Phoenix, Arizona, for those of you that are curious, what does HBSB holdings stand for? stands for Homes By Scott Bower, That could be an easy way for you to remember it.
Joe Varnadore (23:38):
Homes By Scott Bower. Well, you know, there's a big bank and it's the HSBC, right?
Scott Bower (23:44):
Yep.
Brian Lauchner (23:46):
Yeah. It's kind of soon going to own that too.
Scott Bower (23:50):
I don't think I'd be able to.
Joe Varnadore (23:52):
Has your deal flow just kind of, we were talking the other day and you were telling me that, you know, it just, the deal flow just keeps going up and whether it's seller, you know, whether it's creative finance deals or cash deals, you still do both. Right. You don't just do one, but you've got a bigger playbook now.
Scott Bower (24:09):
Oh yeah, no. We're definitely doing a lot of it. Matter of fact, I just had a property and this is what'll happen in this environment. I just had a property that was out on the MLS. And we had it on the MLS on Facebook marketplace. It's a seller finance property. We beef the price of it up because when you're selling an owner finance property, typically you can increase the sales price because you're offering that financing and, you know, giving people an opportunity that way.
Scott Bower (24:35):
So on this specific deal, we upped the purchase price of the house quite a bit. And what happened was I actually got a full price offer where somebody just wants to pay cash for it. And it's like, well, okay, you know, it's going to take another, you know, I got a very big cut-off that thing and you know, it's gonna make sense, but we're doing all of it, you know, between seller financing, creative deals trying to buy on terms as well as wrap the notes, sell on terms as well as wholesale fix and flip. And I do have a rental portfolio. So, you know, we're, we're trying to do it all.
Brian Lauchner (25:06):
That is awesome, Well, again, thank you, Scott. Yeah. NoteSchoolTV is made possible because of our sponsors which is NotesDirect and the Feeding Frenzy Friday.
Brian Lauchner (25:34):
That's right. Jaws themed music there for the feeding frenzy Friday where each week we break down a note from NotesDirect to kind of get into the due diligence to help you master your note buying game. So if that's something you're interested in, go check out the playlist on the NoteSchool YouTube channel, and you can go through a lot of the Feeding Frenzy videos. Hopefully today was something that added value to your business. Maybe even added value to your life. If it did, please like these videos, it means a lot to us. I love to see the engagement that better. That's coming in. I love to see Shelly, how you doing saying hi and Mike, I'm glad you're getting some stuff out of this. If you guys have not subscribed to the NoteSchool channel, please do, and make sure you're clicking the notification bell so that you can interact with us live.
Brian Lauchner (26:22):
Every time we go live, which is going to be Wednesdays at 11:00 AM central time. It's just a great way to kind of get plugged in engage with us and maybe even solve some of your your business problems, right? If you're brand new and you're still trying to figure out really what this could look like in your business, go check us out at www.NoteSchool.com/TV. That's going to help you kind of figure out what that next step is. What a note is, what note school's about, what we teach and how you can take that next step on your journey as always it's been a blast we'll plan on seeing you next Wednesday for NoteSchoolTV, go out there and make some offers, do some deals, and we'll see you on the other side.
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