A Cheat Sheet To Doing Your Due Diligence

GDNI 22 | Due Diligence

 

We all know that before we take a property or sign an agreement, the most reasonable thing to do is do our due diligence. Whether you are new or not, it helps to clear yourself with the necessary steps when it comes to performing your due diligence before a deal. Gail and Chris sit us down as they give a little cheat sheet on the things that you need to focus on in the process. They present the go/no situation for you to evaluate better – from checking the status of the occupied property and the taxes to the borrower and loan information.

Listen to the podcast here:

A Cheat Sheet To Doing Your Due Diligence

One of the topics I wanted to talk about is due diligence. I’ve got about a dozen CFDs under an agreement that I don’t due diligence on. The O&E reports and BPOs are getting done. There’s a lot that you can still do and put together to get prepared or look at some of the collateral and some of the stuff online. We do have a question, “What service do I use to blast out your videos in various places like YouTube?” People haven’t seen my morning drive. I do a video every morning. You can record things right on the YouTube app and then upload it right to YouTube. From YouTube, you can share all my videos on Facebook, Instagram, Twitter.

For regular posts, I use Buffer. It’s what I use for my blog posts on Facebook and those other social sites. I put out a lot of content to the Notes and Bolts group and on Twitter and stuff. I do about three articles a day related to marketing or real estate investing. Those are done about a month in advance. On a Sunday, I sit down for about two hours. I use Feedly and that aggregates a lot of real estate investing and marketing articles that get put into a bucket there. Once a week I go through and I save articles that I find interesting. At the end of the month, I’ll put all those in Buffer to get sent out at periodic times throughout the month.

A lot of people ask how do I ever sleep or what do I do to get so much posting. A lot of that is done one day a month for about two hours where I put all of those in. For certain things, too, you can use a VA to log in and do some of that stuff for you as well. Hopefully, I answered the question. A few other programs that I use is Designrr. That’s great for creating ebooks. The other thing that I have as part of that subscription is it can take video and transcribe it to audio similar to Rev.com, but it’s cheaper than Rev.com. YouTube can also transcribe your audio as well. I don’t find it to be as good so some of the things that I do for my blog post is I do a video, then I have it transcribed into Designrr. From there, I use a software called StoryChief. What StoryChief does is that can post to my website to blogs.

What that does is it gives you SEO searches for what keywords to use and will put a picture and a video in. StoryChief helps with optimizing your SEO. Where I found that is on AppSumo. It’s software systems that go to AppSumo and they might be $1,000. They’ll sell it as a one-time charge for about $50. Those are my secrets. I do the video over to Designrr which gets it transcribed into text. I put it into StoryChief, which can also blast it to my blog and then also take some of that blog post and put it into Buffer to set it out to all the social networks.

I’ll do a video that’ll post at some point in time, just walking through that whole process of how it gets done so people can go ahead and go online and see that because it’s helpful. As people see Scott Carson’s Marketing Octagon, it follows that path with a few different systems that you use. Another cool website is called Wave by Animatron in which you can do videos and put it into words and stuff like that. It’s a little pricey, but if you’re doing marketing for different things or events, that can come in pretty handy as well. Another one I’ll just mention is Sniply. If anyone ever clicks on any of my links that I put on Twitter or Facebook or anything, you’ll notice at the bottom it says, “Remember to check out the Good Deeds Note Investing Podcast.” That is all done through Sniply. Buffer can automatically do it for you. Click on the little Sniply button if you have a Sniply account, which is free and you can add a little header at the bottom of the article that says, “Check out my Facebook page, check out my website.” You can have it whatever with a link to click. That’s some of the marketing things.

One of the things I want to talk about is due diligence. One of the things as part of due diligence that I want to bring up is how I go through my process of due diligence. What I have is what I call due diligence go/no go situation here. When I go through my due diligence, I put in my bid price, what the counter was, and then at the top of my sheet, I’ll go through what the property address is. I do this for every asset because when you’re doing three or four assets at a time, you’ll get confused like, “Is that a two storey house or one storey house? What did it look like?” What I like to do is put that information and then all the asset information at the top. Is it a note, a CFD, or an REO? What are the property statuses for occupied property type? Is it a condo or a single family? The year built, property condition, square footage, and most of the common stuff like beds and baths.

I also like to keep the property taxes and put on a nifty little form that I can click on a button to add the pictures. Within the collateral file, the next thing I move to is the borrower information. For that information, I put the name, the age, income, and social security number if the applications in the file. I like to keep that handy in case you have to send a demand letter. The attorney will be like, “Do you have no social?” I have that handy, the cell phone and home number if they’re living or deceased.

Check yourself and don't always trust ONE report. Click To Tweet

The big thing I look for, too, is if they own other property and how many bankruptcies they’ve been involved in. If somebody has been in a good amount of bankruptcies, that somebody a lot of times can maybe play the system. It’s something to be careful of. Next is the loan information. Start out with the asset, then the person, and then break it down into what’s the info on the loan. How much was the original loan? How much would they put down? How much skin do they have in the game? What’s the current UPB?

Other factors that I find important for note investors is when was the last payment date and how many payments have been making in the last twelve months? Somebody could have made a payment two months ago, but it may have been their first payment in a year. That tells you that they made a payment, but it doesn’t tell you that they’re still going to be a repeat payer in that sense. Also, you’ve got your next due date. A lot of people get confused about what the next due date is. I want to step back and explain that for some of the investors who are newer.

Let’s say if you’ve signed a loan up on January 1st, 2019 and the first payment was February. You made your February payment, you made you March payment, you made your April payment. You didn’t pay for six months, and you made a payment for September 1st. Your last payment date would be September 1st, but your next due date would be April 1st. It backs up to when was the next payment supposed to be due? You paid your February and March, but if you didn’t pay April and pay in September, up until that date you pay, the next payment date was on April date. I see that question asked a lot from note investors so I’m wanting to throw that out there to get people to see and understand what that is.

Demographics is loan information, which is very important to look at. One other thing on loan information is to look at the principal and interest payment. Even if you had a bid accepted, always double check the principal and interest payment and see if it does make sense. If you pay $20,000 for an asset and the principal and interest payment is only $200, it’s going to take ten years to get your money back out of that deal. That’s an awfully long time, which is about a 5% or 6% return. That’s something that happens in the bid phase, but also always start your due diligence and just check.

Another thing I want to check out is demographics. What’s the employment rate in the area, the income, crime, the nearest city? It’s just something I take into account. It’s not a deal killer for me. I invest in rural areas all the time. I’m looking at one right now. In a rural area, but it’s a nice house. It’s in an area where most of the homes are $50,000 and $150,000. If I can pick up an asset for $15,000 to $20,000, that’s worth $50,000. Even if it’s in an area with 1,000 people, I’m still feeling comfortable that I’ll be able to get my money back on that.

The next section is one of the most important sections when you’re doing your due diligence. I call it the due diligence checks. Check with the tax collector and what the taxes are. In one of these that I’m doing due diligence on, I went online. I clicked on the 2018 tax bill and it said taxes were $400. I’m like, “That’s great.” Just for giggles, I clicked onto 2017. In 2017, I had a payment of $2,000. In 2016, I had one of $1,800. I’m like, “They didn’t roll the payments from one month to the next forward in the tax bill.” I was expecting the 2018 tax bill which will show total payment due to all those past years, but it didn’t.

A lot of times that does get picked up on the O&E and I check taxes before my bid, but on this one, I want to bid and I went off to 2018. I’ll just have the conversation with the seller when we review everything and go through the final numbers. It’s one thing with the taxes. I tell people to always go back and check. Granted that you get O&E report that states a lot of this information but check it yourself and don’t always trust the O&E report. I know somebody that had a title report pulled that had a lot of costs on a note that was an asset that I was selling. That title report shows it has $6,000 in fines and everything else on this asset and I’m like, “That’s impossible.”

I know for a fact that I have a clean title, but they were looking at it and their title wasn’t going now, so I found that to be interesting. I always check then since. We have a question here, “Can it happen that the tax has been picked up by a taxing buyer and is now a tax certificate that has paid off before acquiring?” In this instance, it wasn’t, but that’s a good point you make about tax certificates. When you call a county to talk to them about taxes, they’ll say, “The balance due is $2,000.” That doesn’t mean that it includes some tax certificates. You always have to ask them were there any tax certificates or anything else outstanding.

GDNI 22 | Due Diligence
Due Diligence: Even if you had a bid accepted, always double check principal and interest payment and see if it makes sense.

 

In most instances, they’ll give you the total tax certificates. Florida is a quirky state where if you look it up online, sometimes it’s only at the very bottom of the screen so I go, “Tax certificate.” Otherwise, it will make it look like it’s showing it’s paid. Another big thing to look at is to call whoever is in charge of inspections for code violations. Code violations can rack up pretty quickly. I had one that they were going to start charging you $300 a day because there was an above ground pool in the yard that is falling apart and stuff. The inspector called me because they had my information and I said, “Give me until the weekend and I’ll get it taken care of.”

Code violations can be anything from trash in the yard and high grass, which is common. Indianapolis is famous for charging a fortune to go cut grass. Other code violations can be just the look of a house. I’m doing due diligence on one right now that has some code violations because it’s an antique house that has a front porch that looks like it’s ready to fall down from that perspective. I’d say it’s not shying me away from buying the asset, it’s just something you need to know.

We have a question, “Do I do this as my preliminary DD on each asset?” Yes, this is what I use for preliminary and post. I use this for both. This is what I do throughout my due diligence when I start bidding and looking at assets and stuff. What I do is I don’t show everything. I print this out and I handwrite everything in when I’m doing my bidding. If an asset ends up being outbid or I don’t get the award or something, I’m not going to spend the time to type everything else in here. What I do is I print this out and keep it for myself. I handwrite everything in and then put it in a file. The other thing I do is I use DataTree. I’ll run DataTree reports that pop up on the screen to show you what those do. I’ll print those out and I’ll put everything in a file waiting for the O&E and to get a BPO. If there’s an HOA, it’s something to check with the HOA.

I’m interested in one right now where I have a contract for deed on your agreement that’s a condo. I started thinking, “I need to check and make sure they’re paying HOA fees.” It’s like a note. If there’s an exorbitant amount and you’re not paying, you just foreclose. In most instances, those HOA fees go away on a contract for deed or land contract or wherever you call it. You’re buying the property and you’re buying quitclaim, so you’re buying it with HOA fees that could be on that property and you’re going to be responsible for them. Just a little insight there, if you’re buying a contract for deed that’s in an HOA, make sure you’re not getting stuck. The water, sewer, gas, and electric utilities, see if they are on or not on. Property values are the next section that I talk about between Zillow, Trulia, Realtor, DataTree and sometimes the seller will put in the BPO values as well. That’s another item that I’ll look at.

We have a question, “Other than population, can you think of any other metrics that you found aren’t deal breakers that traditionally work?” Everyone is different in regards to what is a deal breaker or what’s not. I know some people that just won’t buy in rural areas. I grew up in a small town. Growing up in a small town, one thing I learned is 90% of the people never leave that town. If you are in that town, if you were going to lose your house, you would be in everybody’s Facebook messenger that would be, “Did you hear that this person may be losing their house?”

In these small towns, everybody talks. You’d be in the gossip mill either at the coffee store or wherever it is. Most instances, people in these small towns want to stay because where else are they are going to go? It’s more of an embarrassment sometimes that they don’t want to lose their house. For metrics, it’s all depending on your level of risk. You have to factor in risks. I target my deals in a specific return. If I’m going to try and take on additional risk, I’m going to look for a higher return. If their note has less risk on it, then maybe I might look for a lower return. A big thing for investing that I’ve learned a lot through work as well as schooling is you can’t just look at the return. You have to look at the return and the risk that’s associated with it. Those two definitely go hand in hand from one versus the other. I hope that answered your question.

You can't just look at the return. You also have to look at the risk that's associated with it. Click To Tweet

Right now I can’t think of too many. Crime is the biggest deal breaker for me. I had bid on and had an agreement where the borrower’s son was playing video games with another friend and they got in a fight. The friend pulled a gun and shot him in the head and killed him. In that instance, I’m not going to deal with that. The high crime is one of the areas that 99% of the time I shy away from. Collateral review, attorney review, BPO, I’m getting those all done and out. I use an attorney for my collateral review that’s in the state that I would use for the forfeiture of foreclosure. A lot of people may use Daniel Singer and I’ve used Joel a few times. They’re great and so forth and so on. A lot of times I’ve built the relationships already with other local attorneys as well.

I am in the process of evicting someone. I offered them Cash for Keys and it wasn’t clear whether they were going to take it or not. Their deadline was earlier and they didn’t show up. A friend went to the house and found a guy building a fire in the backyard and he thought he was setting the house on fire. We just had this whole thing where we were trying to get back in the yard without getting shot to see what was going on. We’re trying to decide whether to call the fire department. We think everything’s okay.

Is that the house that they were supposed to be out by now?

Yeah. They’re not the kind of people who worry a lot about exact deadlines. They had an exact time they were supposed to be gone and they were still puttering. The idea was my friend was going over to see if it was in broom-swept condition and everything. Instead, he comes to this giant bonfire. He called me hysterically and it was funny. It’s funny because it’s okay, but we’ll know in dawn’s early light whether something bad has happened or not.

I’m so glad you could join us, Gail. What I was just going through with everybody was some due diligence, a little cheat sheet that I have, and some of the little things to focus on. Some of the questions that have come out have been what are some of the deal breakers for you? The big thing we were talking about was in rural areas and smaller towns. As you and I have had many conversations in the past, you know that I enjoy working or buying assets in some rural areas as long as the pricing is decent within those areas. I mentioned crime in the asset we had where the person’s child was shot in the head. Is there anything else you can think of that are deal breakers?

If you’re a realtor, you already know some of the stomach-churning aspects of a house that you might not want to take on for reasons other than strictly financial. We were discussing this on our daily phone calls. I don’t think everyone realizes that the reason there’s no Chris video on the way home from work is that we get on the phone and complain mostly about what just happened.

That’s of the funny things about podcasts. One of the ways to get started was we’re having these conversations in the car and whatnot, and we’re like, “We should record this because you can’t make this stuff up sometimes.” This was when I was going to this asset in Ohio. I was like, “I just want to drive off the road sometimes when I was dealing with this.” Another thing that just popped in my head about that is always ask for the servicing notes and servicing comments because those can be a telling tale as well sometimes. I got some servicing comments back when I was going through them, I noticed one asset. There was an email from an attorney that was noting that there are more title issues on this asset than you can shake a stick at. I was reading through it and stuff, and I wasn’t going to bother ordering a BPO and O&E. I was just going to already toss it aside because certain titles issues aren’t the end of the world. You’re like, “They didn’t record this or didn’t record another thing.” That’s just something you can ask them to do or negotiate it.

These were catastrophic in the sense of the borrower. They sign the CFD but the person who signed it with didn’t own the property, so it’s completely invalid CFD or it was never foreclosed upon. It was a deed in lieu that they sold back to the person. There’s a contract for deed, but there was all these different fines and penalties that still stuck with the property that they’re like, “What do you want to do with this?” From those instances, over the years, those can accrue and get very expensive. On those assets, instead of ordering an O&E and try and negotiate that price down, a lot of times I’ll just pass on it.

People are telling me when they want to discuss a note deal with me that they got the servicing notes. I feel that we’re having a little impact here because I never thought to do that before we started talking about doing it. When people say they do it, I feel proud. One of the things I wanted to warn about with servicing notes is you can’t take them as gospel. Somebody just told me that they had servicing notes that said that the people want to sell the house or they want to give the house back. We just bought a fairly rural property in New Hampshire because the servicing notes said the guy wanted to give it back. We knew from the person who went and photographed the property for us that the neighbor came over and said he wanted to buy it. We’re like, “This is a perfect match.” The borrower doesn’t want the house and the neighbor wants it. It turned out to be much more of a decision even though I’ve been talking for months about how he didn’t want it, but it came time to not make it formal that he was getting it back. It was a hard decision for him. It seems that maybe that was just chatter about wanting to buy the house. We haven’t even gotten him to look at it yet.

GDNI 22 | Due Diligence
Due Diligence: Everyone is different in regards to what is a deal breaker or what’s not.

 

I had a contract for the deed I bought in the great State of Ohio that the borrower had it on the market trying to sell it, and then the notes are like, “I don’t want it. I’m just going to sell it.” I acquire it. The best way to explain is if you have kids. I’ve been watching my kids all day long when my wife was out doing something and so forth. I’ve been with them for a while and stuff and they’re doing whatever it is. If I go somewhere and then mommy comes, it’s completely different. Whatever happened to me, it never existed. It’s like, “I didn’t have an Oreo cookie or whatever it is.”

It’s the same way in the servicer. It’s like, “I had an agreement with the prior servicer where they told me I didn’t have to pay for six months. They did this. They told me that.” You have all the servicing notes and so forth, and they’re like, “We know we had a conversation on this date. It’s written down.” They’ll try and play that game. A lot of times, when they say they try and sell it, they will. Then once it gets transferred to the new owner, they’re going to play dumb and say, “No, I don’t want to sell it. I want to keep it.” They’ll try to play to either keep it or make it a little more painful for you to sell it.

The other thing, too, is if you have assets that are listed for sale that you’re acquiring, make sure you still get a BPO on it. I had an asset that I bought that was listed for sale. I just sat and sat and I ended up getting a BPO done on it just to double check and stuff. The reason why I was sitting is that it was overpriced. The seller was like, “You can see the properties on the market and we’re getting this much for it.” I’m like, “If that’s what they’re going to list it for, it doesn’t mean that that’s what they’re going to get for.”

We have a question, “In CFDs, how often are you coming across NPNs with older notes if they don’t pay you after they go through foreclosure instead of eviction?” In certain states like Ohio, and even Michigan and Indiana, too, if they have made substantial payments in Indiana on a contract for deed, it can turn into a note in a sense where it’s treated that it’s a foreclosure and you don’t get the upside of it. You are getting the property back. I had a contract for deed in Indiana that the borrower defaulted and I was in this thing for not a lot of money. They hadn’t made a ton of payments and they defaulted so I got the property back. If you’re buying a contract for deed in Ohio that’s from 2011, that’s treated as a note. A lot of people look at it and saying, “It was bought in 2011 when properties were low so the $30,000 property is now worth $50,000 and the person know it was $25,000. I’m picking it up for $15,000 or whatever and if they default, I get a $50,000 property.” No, you don’t.

You have to be careful because Ohio was one of those areas that got hit hard in the crash 2008. There are tons and tons of those older CFDs in Ohio. You have to be careful. Make sure get them cheap enough that you can even afford the foreclosure at all and that there’s enough money enough that it’s worth going through.

You can't take servicing notes as gospel. Click To Tweet

If people didn’t see one of our prior episodes, what we talked about is if you do have a CFD in Ohio, one of the first things I always try and get the person is, “You want a mod?” It’s not a mod. It’s like, “Do you want to redo the deal? Let’s redo it right now and pay $500.” Even though they may fail, but at least you’re giving them some hope that you’re re-ante them up. If they fail, those are brand new land contracts. Then you can get the asset and the property.

You’ve reset the five-year clock back to zero. I forgot to ask you that, Chris, because I haven’t done that in Ohio. Do you have to re-qualify them with the MLO during new contract?

One thing that you have to do is you do have to record the cancellation and record the new.

In Ohio, they record land contracts. You must record them. You must cancel them formally. We just had a closing where not only did we have to give the title company the cancellation, I had to send them the original. I was just thinking, “Please, FedEx, don’t have a fire with that pile of envelopes.”

Here’s the other cool thing you can do. When you cancel that land contract, the new terms can be anything that you want. For example, I had a borrower who had a 0% contract for deed and they stopped paying and would pay when they wanted to. When I did the new land contract, I’m like, “You’re not at 0% anymore. You’re at 9.9% now.” The person got upset and I’m like, “Come up with $5,000 you owe me.” It’s one or the other. You can change the value if you wanted to. You could make it higher or lower. You just got to be cognizant that you’re not making it much greater than what the property is worth. You can’t now make it $75,000 when the property’s worth $50,000. You also want to be fair with the borrower at the end of the day. As you do that, it’s a completely brand new game. 99.9% of the time you’re just going to keep it pretty much the same terms, same payment, the same interest rate, but the number of months might get extended. By getting them on that new land contract, you’re restarting that clock.

Sometimes people are in better financial circumstances and can do a shorter term with somewhat higher payments so that can be exciting. That happens. I just had someone call and ask me. She’s got a contract for deed in North Carolina. It’s a married couple, but only the wife is on the land contract. They are getting divorced and the husband wants to keep the house. I have added people to land contracts in the past and I have also removed people where there’s dual ownership and one person wants out. When I think about it, it seems perfectly reasonable to add someone. You don’t have to qualify that person because the original personality qualified financially to have the loan. If you’re removing someone from a land contract, you need to re-evaluate whether the remaining person can afford the terms. You might have to redo it. We were also thinking that if we added the husbands and let them both be on it for a while and then removed her, would that be a way to avoid having to qualify him through Dodd-Frank MLO process?

In the near future, we’re going to start having people come on in the interview and have guest interviews. We’re trying to find individuals who aren’t the same people just on every other podcast. Those individuals are great. You can listen to them on five other podcasts. MLO is a mortgage loan originator. That’s somebody who is an underwriter for mortgage companies or banks. It’s what they do.

For us, too, if we’re creating a land contract. If you end up with a house and you want to sell it with seller financing and create a land contract, if it’s going to be an owner occupant, you have to have their financials reviewed by a mortgage loan originator. If you are selling to an investor, you do not have to have their financials reviewed by a mortgage loan originator. Chris, I asked this just before you went live. What should I be looking at if I’m evaluating an investor and they don’t have to be reviewed? I assume I still want to look at their financials. What will I be asking them for or what should I do when they give it to me?

GDNI 22 | Due Diligence
Due Diligence: Make sure you get the property cheap enough that you can afford the foreclosure.

 

First, put it into an LLC or their name. That’s the first thing to look at, and then have them provide you with the same thing almost like an individual. You want to see what assets they have and what expenses they have. You don’t want to make sure that they may have ten properties, but you want to make sure they’re not all leveraged to tilt or aid apartments that are vacant right now. Make sure that the company is registered in that state, whether it’s a foreign entity or within that state. It’s something I would look at. If it’s an LLC, I’d say, “Let me see your P&L statement for the last year.”

Our security is having the first lien on the property. They obviously want people who can pay and we tried to find people who can pay and make the best guess about who’s going to pay.

How much are you putting down?

I want them to put $3,000.

If I’ve got a property that’s a $20,000 to $50,000 property and they’re putting $3,000 to $5,000 down in LLC or an entity, I’d be fine with that because if they defaulted, I already got $3,000 to $5,000 of their money. Jordan asks, “I have a borrower who’s a few months behind and make double payments every three months. We haven’t been getting in contact with them. If you have sub performance fees when he speaks with you, is it worth starting legal?”

With double payments every three months, you’re falling behind the rate of 33%.

To reinstate the question, I have a CFD in Dayton, Ohio and this borrower makes double payments every three months. After a year he’ll be four months behind. For the life of us, we’ve been trying to get in contact with him and we’re just not having any luck. We’re wondering, is it worth starting legal? I know he’s not paying at all and still underperforming.

Are you managing the outreach and not your servicer to this person?

I enlisted Polaris.

Have they been able to find the people?

They’ve been checking out various phone numbers and whatnot and not much luck.

I’ll just say that this is an element of this business that I enjoy like finding the unfindable people.

Is he living in the property?

Yes, I believe so. Is it just sending a door knocker or sending a demand letter? We just want to speak. We don’t want him out of the home. We’re just curious what the situation is.

When you cancel the land contract, the new terms can be anything that you want. Click To Tweet

In my experience, a lawyer letter tends to do that particularly with somebody who wants to stay. It’s amazing how quickly you hear from people.

I have heard that before, but it’d be my first time.

Who’s your solicitor?

Madison.

One thing that I’ve also done is let Madison know to not accept payment unless it’s full reinstatement. When you send the demand letter and then go, “I’ll just pay a month,” suddenly they’ll realize you have to pay the full and that’s when they started getting serious.

This could be your opportunity to rewrite that land contract.

Are taxes paid?

Taxes are paid. I just got the new tax bill because they just make $500 payments. Some of that goes to escrow and we just paid the first half of 2019. It’s just a unique situation and we’re just trying to find the best way to tackle it.

These are the most frustrating people. You can know how to deal with people who make it very clear that they’re not going to play ball or people that move heaven and earth to get back on track. These people are in this pattern of skipping every third payment. The most frustrating ones are the ones where you get them consistent again and then they pay for five months then they stop again. I didn’t get into this business to throw everybody out of their house, but I don’t know what you do. You don’t have a choice once you’ve given them their second chance and they blow it.

I have a borrower right now who I spoke with in September 2018. He made a payment in September and I gave him free before one month and reset back a month and he didn’t have to pay in October. I don’t know if he misinterpreted me because he did make a payment in October, but he didn’t pay in November. He didn’t pay in December. It’s January 29th, 2019 and he hasn’t paid in January either.

GDNI 22 | Due Diligence
Due Diligence: With double payments every three months, you’re falling behind the rate of 33%.

 

I should just say for the inspiration of all, Jordan is a young lad who jumped in with both feet for CFDs. How are the other ones going?

They’re going well. Two of them are consistent.

Did you have to rehabilitate those borrowers?

One was performing already. We didn’t even enlist Polaris. It was just back and forth with the loan officer or the asset manager at Madison and yet both of them are great. I initially bought four. Two of them are great and two of them are taking a little bit more work, which is exactly what I wanted. I wanted to go through the process and gain that experience. In moving forward I’d have valuable experience under my belt.

The one that re-performed immediately, did you buy that as a nonperformer?

They were all bought at about $0.20 on the dollar. It’s the right place right time. The hedge fund was closing its fund and trying to liquidate all the assets.

When did you buy it?

October.

The most frustrating people are those who are consistent for months and then suddenly stop again. Click To Tweet

You hear a lot of people are still talking about, “I can’t find deals. I can’t find things.” Jordan, these were the first four you bought.

It just came from a phone call to the servicer and the servicer connected me with the seller. It all happened because of a June phone call with Gail Greenberg so thank you so much.

We talked a lot about some CFDs and some due diligence and things of that nature. I’m trying to just give some people a little bit of insight or tidbits on some of the due diligence process. Make sure that while you’re waiting for information or document you can still always keep reviewing things. That’s all the questions. Before we go, I do want to share this interesting story about a house I foreclosed in Michigan in the lovely area of flint. We waited six months and took the property back. I was following the Gail Greenberg method of how to sell a property between putting it on Zillow and Craigslist and all these other avenues in using a local person to show it. I get a phone call and a text message from a woman who was interested in the property. I called the woman back and the woman was ready to move into the property to rent it. At the last minute, the weekend before she going to move in, the borrower said, “You can’t move in because I’m losing the property so I can’t rent it to you.”

This woman reached out to me and at first, she was like, “I wanted to rent the property.” I said, “Would you be interested in buying it?” She’s like, “Maybe. Why?” I’m like, “Because your mortgage payment is going to be less than the rent payment on it.” She’s like, “Are you on crack? What’s going on here?” I said, “Here are the mortgage terms and once you include escrow and taxes, you’re going to be at the same payment but you’re going to own the house versus renting it and stuff.” That woman is very young. She was like, “Are you telling me that you don’t want to rent it to me, you want to sell it to me?” I’m like, “Yes.” She goes, “Do you mind me asking why?” I said, “Because I don’t want to be a tenant and a landlord. It’s your house. You take care of it.” Wells Fargo sent me a check every month. I’m in the process now of getting this woman approved for the loan.

Didn’t she accuse you of being a massive con artist?

She asked if it was a scam. She’s like, “Is this a scam?” I’m like, “No.” It’s just interesting as you’re involved in this business. Thank you for joining us. Continue listening to the past episodes of our podcast. Thank you for listening.

Thanks for coming.

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