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Eddie Speed - NoteSchool
Presented by Eddie Speed
Ten Thousand Dollars
This is packet of one hundred $100 bills, it is less than 1/2" thick and contains $10,000.
One Million Dollars
This little pile is $1 million dollars,100 packets of $10,000. You could still carry it.
One Hundred Million Dollars
$100,000,000 is a little more respectable. It fits neatly on a standard pallet.
One Billion Dollars
$1,000,000,000 fits on 10 pallets.
One Trillion Dollars
$1,000,000,000,000 – notice those pallets are double stacked…
We Are in an Unprecedented Time in our Financial History• The perfect financial storm
• Banks and lending institutions are selling off real estate notes at HUGE discounts
• Opportunity for an individual to buy these notes and use them to create a full time income, very fast
• There is a huge availability of money in the marketplace that can be used to purchase these loans
What This Presentation is All About
• Taking advantage of this opportunity and buy real estate notes at huge discounts
• Creating a passive income with real estate notes
• For land lords who are tired of dealing with their properties (“tenants and toilets”)
• For anyone who is looking for a better investment with their money than the stock market or bank CDs
• Those looking to build a long lasting successful business
Who This Is Not For
• Not the “opportunity seeker”
• Not someone who wants to “get rich quick”
• Not for anyone who is looking to take advantage of anyone else
• Not for anyone looking for“business opportunity” (biz-op)
The Good News
• Following these methods, you CAN build a passive, full-time income in your spare time
• No need to be a financial genius or have any special education
• Only comes down to 4 simple steps
• No need to have lots of money to be successful
• If you do have money, I can show you how to really ramp up your business
Before We Go Any FurtherRegulation dictates that I need to
address a few things, and I’m happy to comply
• My results are NOT typical
• I am not implying that you or anyone will make money with this information – I don’t know your situation, so it would be impossible for me to really know what is possible for you
Before We Go Any Further
• - My Students’ results are not typical
• Unfortunately, most people that try any “how-to” information, never make any money…. sad, but true.
• All businesses entail risk
• I am merely showing you what is possible in this business and what is working TODAY for me and my students.
By the End, You Will…
• Know what a note is, and understand why you can get them at such deep discounts
• Know how to build a large passive income investing in notes
• See why owning a note is MUCH easier than owning a property
• Know where to find these notes and how to close on them• Know what your next steps will be• Know how you can get my help to close your next deal
History…Bank Early 2000’s vs.
Bank Lending Dept
Loss Mitigation
Dept
With Today’s Mortgage Environment
Mortgage Lenders
$ Trillions in under-performing status
HistoryTODAY
Loss Mitigation Dept
Bank Lending Dept
Note
Note
Note Note
Note Note
Inventory
Toxic Assets
The State of the Market
• The Government’s “big check” came in to try and fix the problem
• Banks have an overwhelming amount of bad loans on their books
We Didn’t Cause This problem, but We Can Help Fix it!
• Wall Street’s terrible lending practices got us in trouble
The State of the Market
• “Bank of America, the country’s number 1 mortgage lender, battling to fix or get out of more than 1 MILLION past due home loans, put at least $1 BILLION of toxic paper on the block” Source: New York Post
• U.S. Treasury Secretary Timothy Geithner said that the help of the private sector was critical to get toxic assets off banks balance sheets and help resolve a credit crisis.
That’s Where You Come In!!
Buying Notes and “Becoming the Bank” May Sound Complicated…But it’s Not
• If you’ve ever bought a Certificate of Deposit from a bank, you became a lender
• If you’ve ever purchased municipal bonds, you were a lender then too
• If you’ve ever made a deposit in a bank – You became a lender
• When you “Become the Bank”, it isn’t complicated. You don’t necessarily need to manage the loan, you just sit back and collect checks
• It’s very simple and VERY passive!
Why the Opportunity? Traditional Lenders
Toxic AssetsAnxious Money
2011: 38%2010: 34%
2010 2011
4.19MM Homes Sold
34% CASH
Approx. 1.4MM
4.26MM Homes Sold
38% CASH
Approx. 1.6MM
In 2 years….
3 Million Homes!
Perfect Financial Storm
This Unique Condition of Supply (Toxic Assets) and Demand (Anxious $) has created the Perfect Financial Storm!
This is the best opportunity I’ve seen in my 32+ years in this business!
If We Haven’t Met Before…• My name is Eddie Speed, I’m the
founder of NoteSchool• I originally got started in the note
business in 1980• When I started I was just a young kid• I had no money or no special education
(just a degree in Ranch Management)• I had a mentor that was a pioneer in the
industry
Fast Forward 32 Years
• I am honored to say I am one of the leaders in this great industry
• I was the 2006 recipient of the Note Industry Achievement Award
• I am a husband and father of three great children
• I’ve closed well over 30,000 note deals
Buyer
Ownership Deed
Seller
Mortgage NOTE
Mortgage Lender
What’s a Note ?
Mortgage Note Debt Instrument:• Interest Rate• Monthly Pmt• Pays over time
Note Owner gets
Jan 2012 Dec 2042
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
$Pmt
3O yrs of Pmts
CASH FLOW
Buyer’s Equity
Mgt Co
Down Payment $10,000
Mtg Lender Extends
Note
$90,000
Sells for $100,000
Down Payment $10,000
Mtg Lender Extends
Note
$90,000
Sale Price $100,000
Mortgage
Note
Buyer’s Equity
90,000 @ 10% Pmt / $790 30 yr amortized
Straight Amortized
Jan 2012 Dec 2042
$790
$790
$790
$790
$790
$790
$790
$790
$790
$790
$790
$790
360 pmts
TIMELINE
Buyer
Mortgage Lender
Buyer Stops Paying!
#1 Industry Myth:Note Investing Too Complicated & For Big Companies Only
• It’s true that huge companies and Billionaires like Warren Buffet are actively buying up discounted loans right now because they understand the opportunity, but that doesn’t mean that there isn’t room for the solo-investor to buy up some deals
• Pretty soon, I’m going to show you how simple this industry can be, but for now, let me introduce you to one of my extraordinary students named Justin who is closing deals all over the country from his home in Ohio…by himself
JustinLives in Ohio
Case Study
Why Quick and Easy?
Nice Little Property• Loan was a charged off• Last Pmt made over 2 yrs ago
Non-Performing Note Case Study
Property: Near Columbus, OH
Non-Performing Note Case Study
Quick Sale BPO
Price Paid for Note
Delq Taxes
After Repaired Value
$29,000 $7,500.00 $2,161 $60,000 to $80,000
Loan Details – 1st Mortgage
Seller’s Story: •Hedge Fund buys large pools – then they re-sell them•Willing to sale for non-paying Notes a huge discount of ‘quick sale’ BPO value
Reta
il Val
ue $
60,0
00
$12,000 Price for Note
Cost: Note + Expenses
Investment = 20% Investment to Value ratio
Case Study Profit
Cost of Note + Expenses after . . . : $12,000
“Quick Sale” Profit: $17,000
$7,500 / Note + back taxes & foreclosure $4,500 = $12,000
The Simple 4-Step Process to Closing any Note Deal
Find Deals$
Who Sells “Toxic” Loans? Lenders
Banks Credit Unions Mortgage Originators
Mortgage Service Companies Auctions On-line listings Hedge Funds
Who Sells Loans?
Who Sells Loans?
Set UpLinkedInAccount
Who Sells Loans?
Join LinkedInGroups
The Go-To Person! What’s important? Who you know What you know Timing Credibility
Must have . . . zero percent chance of embarrassment
Setting Up Your BusinessSound like a 10 story company
Have a “Store Front” name Colonial Funding Group LLC
Look like you’re in Business Email 800 #s Business Bio / Resume
Presenting Yourself
Business Bio• Similar to a resume but . . .
•Relevant to finance or real estate• 3 business references or
testimonials
Sell yourself: only in the dictionary does business come before marketing!
$Price Deals
What Determines Note’s Value?
Other factors :
#3 Buyer’s Equity
#1 Buyer
#6 Paperwork#4 Terms of the Note (interest rate, term/time)
#5 Seasoning
#2 Collateral
What Determines Note’s Value?
Buyer
Credit score• Sub 625• 675 ++
Loan ApplicationVerifications• Income• Employment • Down Payment
What Determines Note’s Value?
“Unique” Property• Rehabber Houses• Mobile Home & Land• Land Only
What Determines Note’s Value?
Mainstream real estate vs just unique
What Determines Note’s Value?
Commercial / Industrial
What Determines Note’s Value?
• Down PaymentLTV and CLTV• Max LTV = 80% - 85%
• Cash down = buyers credit• 625++ = 5%• sub 625 = 15% - 25%
$100
,000
Sal
eTerms of Sale
$100,000 Sales Price $5,000 Down Pmt $95,000 Seller 1st
5% down pmt
95% 1st lien Note
Buyer’s Equity
Buyer’s Debt
What Determines Note’s Value?
Interest rate• rate less 7.5% . . . discount
Term • Max 360 amortization• Balloon = 5 yrs
• Terms of the Note• Interest rate• Term / time
What Determines Note’s Value?
1 to 12 months• 625 credit • Rehabbers ??
12 months or more• sub 625• Rehabbers
• Seasoning
Esta
blish
As-
IS V
alue
Discount
Price NoteCost of Note
Potential Profit
Cost of Foreclosure What Expense ?
What % ?
$100
,000
Val
ueProperty Value = $100,000 - - Pay for Note = $30,000
Discount Equals Equity
Price Paid for Delinquent Note
Buying Non-performing Notes
Cost of Note
Potential Profit
Source Money$
Close Deals &
Profit$
Four Ways to Build Wealth
• Property Flipping ($ Today)
• Buy and Hold / Landlord ($ Flow)
• Note Flipping ($ Today)
• Own the Note ($ Flow)
Workout Options The payor’s story Sell delinquent loan Modify loan with customer Short sell
Tom and DebbyLive in Wisconsin
Re-Performing Case Study
Very Nice Property
Comments: Husband lost income but reinstated
Property: Near Houston Tx
Loan was behind but payor started paying again
Re-Performing Case Study
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec2008 NA NA 0% 200
%100% 100% 100% 0% 100% 100% 0% 100%
2009 100% 0% 0% 0% 0% 0% 200% 117% 0% 140% 140% 100
2010 100% 100% 100%
Payment History of Borrower
Payment History: Owner had gotten behind due loss of job.
Story…
Hedge Fund bought huge group of loans – modified this loan & they started paying again
Case Study
Student bought Note $247,000Flipped to Investor $265,000Student Made Profit: $18,000
Hedge Fund buys pools of 100’s millions in
“Toxic Notes” then re-sells