- December 20, 2019
- Posted by: august19
- Category: Podcast
Protecting your investments doesn’t have to be some labyrinthine process that’s a headache to navigate. You can make sure the notes and the properties that you pour your precious resources into is kept safe. Gail Anthony Greenberg and Chris Seveney discuss what you can do to make sure your investments will stay to see the future. There are as many variations to the process as there are places, but rest assured, the same core principles apply. Learn how to keep your investments safe today!
Listen to the podcast here:
How To Protect Your Investment
Gail, it’s been a while in the note world. What happened to you?
I have been trying to exit a bunch of notes and it’s been an interesting experience. Some of them I’ve had since the beginning of my note years. I foreclosed on someone in a sad situation. I was like the third person to give her more than one chance to get on track and stay there. At one point, she had over $60,000 in arrears put on the back of her loan by a sympathetic lender. She had $50,000 of her unpaid balance also put on the back of her loan so she could be current. She was doing well for a while. During that time that she was doing well, her note changed hands and the new lender forgave all of that, the $65,000 in arrears, $50,000. What a bonus but she faltered again and that’s when I bought the loan. I gave her another chance. In 28 months, she made fourteen payments. It’s basically been almost three years of me begging her to get back and stay back. It was sad. You don’t want to throw people out at all, but particularly at the holidays, but sometimes it happens. I’m feeling blue about the whole thing.
I’m sorry to hear that but I hope it ends up well. I’ve been struggling a lot with our vendors in many different aspects. I could go down the list. A few of the high points I’ll hit, a BPO came in at $120,000 on a vacant property. We get to go inside. It means work. Inside comes back and says, “I can get $20,000 for it.” It’s people with their BPOs. I had a preservation company go out and take photos of the property, but it’s the wrong property. It was supposed to be 103 XYZ. They took a picture of the sign and it’s 101, so I sent it back to them.
Does this mean they broke into somebody’s house?
This one is thankfully going because it was occupied. I’m struggling a lot with servicers trying to avoid some loans and get emails like, “We’re not servicing them anymore.” I’m getting emails from loans that are six months old that they’re auditing the files and be like, “I need this assignment. I need this allonge. I need this and that.” It’s like I have uploaded this 27 times. When you have 100-plus active loans and they want something for everyone, it’s going to take me a lot of time. It’s like, “Are you serious?”
If they audit, does that mean they will audit every single one of yours they pick?
I have no idea, but I have in my inbox, I created a separate folder, 76 emails from them saying they’re missing something or another in a file. Basically, I’ll go back to my collateral storage company who I’ve been struggling with because I’ve sent them files back in October. They’re still going through them. They still didn’t send deeds out for recording. They spent some transfers that have requested and documents have been shipped. I speak to someone else and this person also is basically going through the same exact process. I’m not sure what it is that’s going on but it’s been crazy.
Do you think they don’t have the staff to handle an influx like that?
I would think they would because at the end of the day, most of these companies deal with large funds. I consider myself a peanut in the grand scheme of things, but it seems like everything at once. It’s more probably people using their vacation time and stuff like that because it’s the end of the year and most companies have to use it or lose it. People will take around Thanksgiving off so you’re starting to see it taper off. To me, it goes back to the communication aspect of it and trying to stay on top of things. It’s been extremely challenging from that standpoint.
Didn’t we have someone that we sold some loans to in frustration record them himself?
I’m getting three emails a day from this person, basically like, “Where’s this?” I sent him a message saying, “I’ve got messages and emails into, but when I hear something, I’ll let you know.” Emailing me three times a day isn’t going to make it go back money faster. That’s some of the struggles that I’ve been going through. As part of that, I found a pretty new way to find real estate agents in the process. I’ve got nine REOs on the market including a house for $300 in West Virginia. I put it on Facebook but mine is a little different. I said, “You could either buy an iPhone for $1,100. You could buy a Santa snorting cocaine sweater at Walmart for $500.” I don’t know if you’ve heard about the sweater where there are three lines of cocaine on the table.
Is it real cocaine that’s why it’s expensive?
No, it’s because they took it off and people are selling it on eBay for $500. Everyone wants to knock off. On eBay, they’re like $500, it’s Santa’s at a table with three lines of snow, but it’s cocaine for $500 or this house in West Virginia for $300. Possibly like in Tennessee or St. Louis?
It’s active drug trading going on. Why can’t they pay their mortgage? They have cash.
Gail and I are foreclosing on a property somewhere and it’s not any gray area, but in front of the house, it’s a Range Rover and a Mercedes. What I did to get realtors was Zillow. If you went and put in the city, click on the listings and when the agents come up, you click on your name, it will show their website or Facebook links as well. What I’ve been doing is instead of you contact them through Zillow, you get some random guy who’s screening, call you up and ask you 1,000 questions. Don’t do that. You find the people who have a Facebook page, you go on Facebook and send them a message. I basically say, “I’m a lender. I took back a property. It’s vacant. It’s not a great property, but I’m looking to move it. Are you interested?” I literally reached out to four agents in four different locations on Tuesday and by Wednesday morning, I had three properties listed.
That reminded me that the agent who was so eager to help us in Richmond, Missouri, I realized I never heard back from her while I was away.
It’s already listed.
She didn’t get to enlist our $15,000 house. What is it listed for?
That one is $20,000. It’s the one in Macon. I got that one owner financed. The neighbor who rents next door met the preservation company, went over and got my contact information, picked up the phone and called me and was like, “I’ll buy the house if you can finance it.” I’m like, “Okay.”
That’s cool that the person did that. That shows they have some get-up and go. Did you find anyone in Lancaster?It's important to get the servicing notes to see the history because there are some borrowers out there who game the system well. Click To Tweet
Lancaster is only 45 minutes from Richmond.
It’s probably that people consider that far.
You’ve got the same agent. Her name is Toni, who works in both of them.
I ask if I needed to find people.
One of the things too, Gail, I was going to discuss was as we hit the end of the year, a lot of times people will be looking at assets and stuff. For me, I haven’t seen a large surplus of assets.
We saw it more in August, September, Christmas keeps creeping back. The end of year rush is starting in September.
The fourth quarter starts. You start to see a lot of the better stuff at that time frame. Once you get to Thanksgiving, December, it’s junk. I haven’t seen a lot. Direct Source put out a tape which somebody has taken down that whole tape and closing on Friday because I received a call asking if I wanted to take it down. I looked at it and half were performing and half were nonperforming. Some of them I’ve seen in the past where they had BPO values on there, like 80 to 100. I was like, “That’s a $9,000 house. I’ll pass on it.”
I’m going to mention the address of Moon Street in Talladega, Alabama. How long have we seen that asset? Since men landed on the moon is when it started to circulate.
There’s one in Virginia that it’s on Schloss. The story is the mother lives next door and she bought it for the son. The son has some disability. What they did is they got rid of the driveway to that house and fenced the entire yard to make it like a complex. You can’t even access the property and the house without going through the first one. They have dogs running around the yard and stuff. You can’t even get to this property and have it listed. When I send someone to buy, they’re like, “You’re going to spend $20,000 trying to get back access and a little bright so the person put the fence up.”
They probably didn’t formalize it with an easement.
No, because the woman is delinquent on her mortgage too. She’s in foreclosure and has been fighting it for a few years. She knows how to game the system.
This is an important point. When you have someone who’s been gaming the system for multiple years declaring bankruptcy, anything that shows a sophistication in the ways of confounding a lender like I don’t care how great the house is, how good the deal is run unless it’s $300 for a $100,000 house.
It’s important to get the servicing notes to see the history of what’s going on because there are borrowers out there who are professional like professional renters. They know how to game that system well.
That whole element of time is the one that’s so hard. We talk about the velocity of money and how if you can do deals faster, your return is that much greater. We don’t often talk about the cost of a particularly lengthy battle that involves different legal maneuvers and stuff like do the costs pile up, the taxes and what’s worse than taxes. In most places, taxes, they may have an interest in them, but code enforcement fines often the penalties for not paying those. In Indiana, pretty much everywhere a lawn cut or weed code enforcement fine is $250 if they come and mow your lawn. It is easy to rack those up. On the positive side, if you’re shopping at not a tax sale, but a sale where the taxes are forgiven. You see these fairly humble houses that might have $30,000 in different kinds of fines on them and tax. It’s all called taxes, but a lot of it is code enforcement fines. If you can get them at certificate sales where the taxes are eliminated, they’re some good buys.
I have a question, speaking about the probate process and timeline, are you referring to when a borrower passes and it goes through an estate through probate, that type of process? Which process in specific because it’s more like a borrower passes and goes to probate, it’s basically you sit and wait and the timing can take forever. I’m caught in one on a CFD that it’s a two-yard line of finishing it. The family opened up a probate case on it to delay the forfeiture. They allegedly want to pay it off, but they’re offering $0.30. Why would I do that?
I’m confused about why probate is such a problem. I’ve been an executor, technically an executrix several times. I don’t understand how probate becomes a defensive tactic. You can’t do anything until they settle in the state and they can take their sweet time settling these states unless it went to a trust class. One of the major reasons that people put things into a trust so they don’t have to do probate. The biggest issue with people wanting to avoid probate with their own estates seems to be privacy almost more than any other aspect. It’s not difficult to settle an estate if that’s your goal. That sounds like your borrower’s family isn’t trying to settle it.
If there’s a CFD with two borrowers and one of them deceased, that shouldn’t have to go through probate.
Whether it’s joint survivorship, like CFDs, I’ve never even seen that addressed like the right of survivorship, joint tenancy or whatever.
That’s an interesting thing if a CFD isn’t recorded and it’s one borrower and they pass. Does a family even know?
Do they have any rights at that point? You’ve been there. You have lots of dead people. Tell us what happens.
The ones that I’ve had wasn’t anybody or they were so far delinquent and the family didn’t want it. I’ve got one in Arizona who the borrower’s wife had passed away and I’m converting them from a CFD to a note. I was trying to get title insurance or a lender policy. These title companies want to treat it differently and want to gouge you for costs. They’re trying to overstep their bounds. They want to get involved with the underwriter and everything and make the process. It’s almost like they want to add a bunch of red tape to it, which all they’re doing is driving up the cost. It’s not feasible. We’re trying to quitclaim deed because it’s impossible to get a title company to try and understand what it is you’re trying to do. In this instance though, the borrower went to court to get the contract for deed innate. He inherited it so he got a court order noting that he got writer survivorship.
In my trust class, we were talking about executors’ deeds. Have you ever heard of those? That seems to be a little more than a quitclaim deed, but not a warranty deed.
I’ve heard a special warranty but not an executor.
We also were talking about a source for title insurance so I will dig that up to see if that means anything.
What I did find is there are franchises where there’s a mothership company that you’re under their umbrella. Basically, then come to fruition and I passed. That’s been another whole trilogy/saga of trying to convert them which has been painful because originally, I had a bunch of them sold based on the premise of converting them and went back to the buyer and like, “It isn’t happening.” He still bought a bunch and there were some that I’ve already promised to borrowers that I will convert them. I’ve been reaching out to them and I’m picking away, going through getting a bunch of them converted.
Without title insurance, you can’t give a warranty deed.
I could give a special warranty deed. You can give one but you’re on the hook. If there ever was something, if they ever came after you, you don’t have a title insurance policy cleaned it up. It’s your expense if you’re even still around. That’s a whole other one.
I thought a special warranty deed though you weren’t on the hook.
Special warranty is you’re on the hook for when you owned the assets. You didn’t do anything that added while you owned it that impact the title like additional liens or something like that on it. Something that got even recorded out of order would still be on you. A special warranty deed isn’t doing anything honestly. You need the warranty deed or nothing.
Have you had good luck when you have made claims on a title insurance policy? It hasn’t happened.
I’ve never had one denied.
How many claims have you had?
It’s 4 or 5. My wonderful one is in Flint where the woman with eight dogs that had a title insurance claim. Either they recorded the mortgage before the deed or something that record out of order. Even like when you have a mortgage and deed, you have to record one before the other. If you’re with the mortgage before the deed, technically it’s out of order. The mortgage needs to be recorded after the deed because the mortgage is tied to the property. It even gets down to that much of a nitty-gritty.
Here’s a devil’s advocate question. The ones that you’ve had claims on, what would you have been out of pocket if you hadn’t had the insurance?
One of them would have been $1,500. The other one is probably $300 to $500. It’s money like tens of thousands. I look at title insurance as more almost like smoke and mirrors in a sense. It gives people comfort. If there’s an issue, it’s still at the end of the day, the time that it’s going to take to clean up the issue is going to cost you more than what the actual cost of the issue was. The only time you’re going to need it is if you’re going to foreclose. All of a sudden, your closure gets delayed for 6 to 8 months because you have to do something and you’ve got six months of taxes. You’ve got six months of force-placed insurance. You’ve got six months of servicing costs. Typically, that will end up costing you more than the actual what it would’ve cost to clean it up.
The people that I was studying trust with, one of them is a cowboy. I don’t mean he’s from the West but just in his thinking. He doesn’t even believe in title insurance because most things can be fixed. The money you save over not having it pretty much pays for those rare instances we didn’t have to.
In some instances, not everything can be fixed like we’ve seen deeds that were from stewardship fund. If there are deeds in stewardship fund, you are not cleaning that one up. You could maybe try and get the quiet title, but good luck or adverse possession or something, but those wouldn’t have title insurance anyways. It’s interesting though because I’m wrapping up a class on global real estate investing and talk about eye-opening. The US is the only country that has title insurance. Most other countries don’t. A lot of emerging markets, their recording systems are archaic, not digitized and completely literally like what we may have had 100 years ago.
It’s a huge issue investing in some of these foreign countries. I had to do it. Mine was based on India and outside of Mumbai and some of these other areas, who owns what and where the property lines. Title insurance is the system of having it in place is good. What’s going to happen is once we do go to more blockchain technology, not Bitcoin but blockchain, title insurance is going to be a thing of the past because everything is going to be digitized in the sense of you can’t do X until Y. It’s going to kick you out and so forth basically. There are still lots of errors. I’m trying to clean up one because Harbor signed over a deed in 2011. When they signed it over with a power of attorney, they didn’t record a power of attorney as well. Technically, it’s not a valid sale. I had to get Harbor to write a brand-new deed and skipped over everyone that’s right to me.
Not all states require that there even be a power of attorney.If you have notes, properties and mortgages, people can come after you. Click To Tweet
There needs to be one. The question is it should be recorded. If it’s not, sometimes it’s okay. It depends on the state in this state. I won’t say what state is my favorite state and I only have headaches in it. They require it to be recorded.
Does the state begin with an O?
It’s round on both ends and high in the middle.
At least you didn’t give it away. I want to say in most of the collateral files I’ve seen, I don’t see powers of attorney for the most part. It had come up when we were selling in Oklahoma, we had to get a corrected power of attorney in a case where the wrong fund, 6 instead of 7 or whatever. Luckily, everyone was still around and we could get it.
When people are doing collateral reviews and due diligence and stuff, most people will check the chain seal from A to B, B to C, C to D, but all of a sudden now, that was a curveball loop. That for me is okay, there’s the power of attorneys and you’re supposed to have or make sure that is recorded. It’s no different than like Gail signing a deed for one of my properties. You have no signatory authority or there’s nothing that has anything written, signatory authority, so it’s invalid essentially. Gail, I’ve been talking about rolled into struggles and stuff like that. Anything else you’ve been struggling with?
I was thinking about my trust class. We’re talking about insurance and that you clearly feel strongly about the importance and value of insurance. I’m a little more on the fence about the whole thing. To me, liability insurance is the most important insurance because everything you have is at risk if you don’t have it. Particularly people like us who have a lot of properties that are in our company names or our names. You and I both own everything in LLCs, which in theory would protect our personal stuff. In reality, there is in principle what insurance is supposed to accomplish? There’s the legal system and what an ambitious attorney would attempt to do or possibly could do if motivated by finding out that you own a lot of things. It seemed like there’s insurance. There are also asset protection strategies. It feels a little bit like if you have a decent asset protection strategy, maybe insurance isn’t that important anymore.
For me, the title insurance thing, honestly it’s not as big a deal for me. I was trying to do it to try and help out people to give them the clean start on certain things and also from a selling perspective a note with the lender policy gives somebody a little added protection. At the end of the day for me, it’s somewhat inconsequential. Setting up business and asset protection and stuff, as you know, set things up. In twenty days, I will be an S corporation. That’s the next shift for me to move things around and stuff. I’ve got several things. I’m shifting around as we move towards the end of the year. We’ve got things set up. I’ve got a sophisticated set up based on dealings with the attorneys and stuff like that I’ve dealt with. I didn’t pay $15,000 or $20,000 for it. It was literally a one-hour phone call.
It’s not that complicated. Figuring out what to do is a big part of it. The execution is not that big a deal.
The bigger thing isn’t asset protection. It’s taxes and trying to maneuver through the tax game. Everyone is trying to pay the least amount of tax as possible and stuff. What are some of the things and having the solo 401(k)? I was on the phone with my accountant. It’d be like, “I want to put $35,000 from the company’s profits into my 401(k) and stuff and we’re running numbers and stuff. He’s like, “Okay.” Right then and there, it’s going to save me $10,000 in taxes. I’m paying more because you’re in a 35%-plus state tax. It’s saving me a considerable amount of money.
It’s aggravating to realize that we’re all paying more taxes than Amazon, the company.
When you have attorneys, you’re paying millions of dollars a year to figure out how you don’t have to pay taxes. I’m not going to go on a political rant. You can try and beat them, but you’re never going to because they can spend as much money as they want to game the system or to walk that fine line with the laws.
I discovered in this trust class that LLCs give you actual legal protection against aggressive attorneys trying to get money. Borrowers are getting hurt in houses that are CFDs. If you own them in an LLC, that in itself is supposed to insulate you as an individual like your LLC can be invaded. If it’s found at fault, your LLC would have to cough up a bunch of money, but supposedly they can’t move through your LLC to get your personal assets. Having trusts is a way for what you own to not show up in that all-important first review when a litigant first goes to see an attorney and talks about their case.
The attorney is trying to decide whether to take it on a contingency or not will run your names to see what you have to see if it’s worth it. There’s anything there to go after. If you have your properties in trust, particularly they’re separated so you only have one property per trust. They’re not going to find that you have a lot of properties. It’s interesting and there’s a layering technique where instead of you personally being the beneficiary of your trust, you can have your LLC be the beneficiary of a trust. Now you’ve got a double-walled layered around.
When I hear about that and stuff, it’s true. What happens though is too many people too early try to follow that process. You have to be at a certain point where you have a lot of assets that you personally own that could be at risk and stuff. If you’ve got notes and so forth or even your properties and their mortgages on, they can go after you, but they’re not going to get the property because there’s no equity in it and so forth. Anybody can sue anybody for anything. The whole LLC thing is true, but the key component is you have to manage it like a business. I know people who are like, “I have an LLC,” and still use your personal bank account and stuff like that. That will get pierced. That’ll get popped like a water balloon with a pin from that instance.
Typically, I’ve been in court cases where I’ve had individuals try and pierce in LLC. They’ve sued the individual. It wasn’t me, but they’ve attempted to sue the individual. That quickly gets thrown out of court usually quickly as long as things are set up and run properly. I use it for more probate evasion and stuff. I know people will set up trusts or land trusts or all these other types of trusts for not knowing who the owner of the property is and stuff. I sometimes chuckle because the only time you don’t want to know usually is when you’re going to foreclose. When you go to foreclose, you as the lender have to sign the complaint. You have to sign it with your name. You might be the representative or so forth. At the end of the day, people are like, “I don’t want to borrow or see my name.” If you have to foreclose, they’re going to find out who your name is.
I don’t think people too much use them. They may for owning notes. It’s more like owning rentals in long-term goals, which some of our people do.
For me, I’ve got my rentals in a separate LLC that is owned by our trust. The LLC is owned by the trust.
That’s exactly what we’re talking about. You not only don’t believe in it but you are doing it.
The reason I do it isn’t more from the asset protection side. It’s instead of putting each property in the trust, I dump them into the LLC so that way if I buy or sell something, it’s the LLC. The LLC is always owned by the trust. It’s not like putting things in and out of the trust because honestly, it’s like going to edit and add things into a living trust. Adding things and pulling things out take too much time. Let’s put an LLC and dump everything in and out of the LLC. That way is much cleaner. It’s faster.
I have a question for anyone who is out there. Are you doing any planning for the New Year, life planning, business planning, goal setting?
I was going to have the next episode be about 2020, closing out 2019 and what people are planning for in 2020.
David said he is goal setting. David, what are your goals? He wants more goats.
I was going to say I saw where somebody’s giving away goats somewhere in Maryland. I was going to forward it to Dave to send them a goat but a goat in the box. Any planning? Yeah, it’s funny because we’ve got kids and stuff. We didn’t write our will or do any of this stuff. It’s like, “We should have done this a while ago.”
When you got married, when you had your baby, who is now eight.
One of the things Gail and I have planned for next year is we’ve got a lot of guests coming on Thursday nights in different aspects, avenues starting in January. I know Brian Gallagher is coming on January 9th right after the New Year. We’ve got James Wise, who is a real estate agent, a broker in Cleveland. If people are interested in the Ohio markets, he is well-known and you may have seen him on Facebook or on BiggerPockets. He’s the one who did a documentary on Clayton Morris, which Clayton Morris has turned around and sued him for $7 million. It is entertaining. It makes you feel like a note investor with some of these borrowers. We’ve got IRA specialists, preservation companies. We’ve got servicing companies coming on. Between January and March, we’re pretty much booked with guests who are going to come on and talk about different topics, subjects and things to help everyone in your business in California.
I don’t think he’s signed up yet, but my IRA guy has set up my checkbook. IRAs are coming on. I don’t know if I told you, Chris. There’s a big change coming in the inheritance rules with Roth IRAs. It used to be if you left a Roth IRA to your kids that they could keep it for their entire lifetime and take out the money as they wished. Now there is, even though Congress is not getting much done, they have them both the house and the Senate have passed their own versions of a bill to limit the number of years that an heir can hold an inherited Roth IRA and take money out of it. The House bill is more generous. It gives them ten years. The Senate bill gives only five. It’s a bummer because my beautiful dream was that my kids would inherit my Roth IRA and they would be living off the fat of the land for their entire lives. That doesn’t look like it’s going to happen.
I get the sense that you’re going to see a lot of ransacking retirement accounts in the sense of finding ways to tax them. It is a way to try and bring more revenue into the place eight miles Northeast of where I am.
David is documenting everything so his wife could take over if he got hit by a bus. Now, it’s an interesting thing about that, David. I don’t know if you saw our episode where I talked about my “If I die” file, which before I flew, I update it with information about my latest deals. It’s important to have an “If I die” folder for your loved ones because most of us have a lot going on. Unlike the good old days when everybody got paper statements for every account they have and everything else they have. I’m paperless for the most part. Everything is on my computer. I have to have a password manager on my computer and get my “If I die” folder and the password manager is in there. You need to lay it all out. Things get complicated fast.
Let me say to you a little bit too, David. I would never succumb my wife to being involved in a note business.
You need a note guardian. Your children might be grown, but your notes are not.
I wouldn’t succumb my wife to try to figure out the mess and dealing with all these things and stuff.
She’s probably good though. She’s a quick study.
Gail, you’re dealing with them and take a management fee.
The other thing is Diana, after an initial period of sadness when you die, she’d be cursing you like, “Chris, you left me with these.”
Some of them are definitely some boroughs and some cursing coming off.
Christina, we’re talking about goal setting. I took Walter Wofford’s trust firewalls class, which I love Walter. I do enjoy visiting Mississippi. I own property there, but I can tell you he also sells the course. If you don’t feel like traveling, you can get it easily.
She mentioned some about 1031s and they’re great options. I was getting ready to take a class on taxes and 1031 exchanges. I realized that I’d completed all the classes that I need. You have to do a final project. I’m basically like, “I’m not going to take the class because I don’t need to.”
When is your graduation?
It probably won’t be until the spring of 2021 because what happened is, I was supposed to do what’s called the capstone project, which is a final project. Mine is going to be a business plan for investing in distressed debt is what I’m hoping I can get a pass-through is my business plan and writing. I was supposed to submit something in mid-November to do it in the spring, but I didn’t realize it. I thought I had to take eleven classes because that’s what they do now. It was only ten. All the classes are done and I’m like, “I missed the deadline.” You’ve got to wait until the following school academic year and I would graduate in 2021.
You have a nice final semester. Maybe you could go abroad for a semester.
I’ve been abroad before. Interesting enough, I got an email from my college professor who was my advisor asking me if I could assist a class on a project abroad in regards to providing some input. I was like, “Absolutely.” It’s nice to hear from him.If you have decent asset protection strategies, you might not feel insurance is important. Click To Tweet
You’re not going there.
No, it’s more something construction things they need.
I want to say about 1031 exchanges. It’s great when you’re still getting out of properties and getting into properties and everything, but at a certain point, if you ever want to stop, don’t you have to pay all that different tasks all at once?
The only way out of it is if you were doing, which is a whole other animal is opportunity zones. If you’re on opportunity zone for ten years and you get a significant difference and all that.
We need to have someone on about opportunity zones. I found out that John Hyer has an Opportunity Zone Fund. I didn’t know he did that.
I’m involved in a project in the Opportunity Zone right now. I’m dealing with lawyers who are getting paid $1,200 an hour on the whole working the system or interpreting the laws of these. It blows my mind. It goes back, when you mentioned about Amazon and taxes and stuff, these are tax attorneys that easily are well over $1,000 an hour. I’m sitting around the table and hearing them. The way they think is amazing, the way they can figure things out, problem solve and stuff like that. The opportunities are if you’re in real estate, if you’re doing rentals and stuff like that, Opportunity Zones or new construction, Opportunity Zones or something to get into for notes. It’s not interesting and stuff. For me, I’m involved in notes. I’m aware of what they are, but it’s not something I want to learn about because I’ll want to chase that bright little shiny star, start chasing it and take my eye off the ball.
Opportunity Zones, you do get huge discounts on your capital gains, that’s front and back. Anyone who’s interested in asking John Hyer about his fund explains the benefits to you. Christina said, she’s familiar with Walter’s classes.
I have a question for everyone out there using servicers. I was speaking with someone who was using AHP. They had a cool portal. I know some people were using Allied, Madison, FCI, Land Home, Evergreen, NAA.
I’ve seen some new names cropping up on tapes names that I’m not familiar with, names that I can’t recall at this moment. If Allied had a better portal, they would have a better reputation among people. I did not have great experiences with NAA but yes, it’s an impressive portal.
Tell me AHP’s portal is impressive.
No one is using them though.
It’s typically Allied, Madison, FCIs. FCI is good. They’ve been a pretty decent portal as well.
Their portal makes you forgive other things about them. How many states have they pulled out of at this point? I don’t have a list.
I don’t know what the list is because I know it was a few. I didn’t get a clear answer in that sense.
Are they the ones who told you, not only are we not going to board these for these states, but the ones you have with us are already in these states?
Those they let me still stay boarded. It’s a challenge to find somebody in all 50 states. Land Home, FCI and SN are the only three that will board in all three. Allied, it’s New York, North Carolina, Hawaii. The one thing with Allied now I’ve got two loans with them. Their portal is pretty generic. They’ll probably work on it, but their financial reporting I heard is very challenging in regards to trying to get your books done. They pulled out of some states. “Is there an updated list of states?” I would ask them because literally in this course of two weeks I had some loans boarded. A week later I bought more loans and those ones get bored and I’m like, “We’re not doing Iowa or Arkansas.”
I’m trying to think some of the other states that they weren’t doing as well. They’ve been no longer doing multiple states that they have pulled out of. I don’t know what their data list is. I would say you’d have to reach out to them and get an answer because I haven’t gotten one yet. Melissa emailed me from Allied because I asked her and she came back and said, “We do not accept servicing in New York, North Carolina, Hawaii or Maine. However, we don’t hold a license in every state as in some cases they’re not required or we don’t have any enough loans. What happens is, for servicing, if you’re not servicing a certain amount of loans, you might not need to get a servicing license. It’s basically New York, North Carolina, Hawaii and Maine for Allied.
You’ve got one in Maine, don’t you?
I do. It’s in foreclosure now. My path, two states and what states I would be investing in have grown significantly. We’ve added Arizona and California. We’ve added Delaware, Illinois, Kentucky, Montana, New York, Texas, South Carolina, which I hadn’t had before, West Virginia.
That reminds me of the family road trips where we tried to check off all the different license plates.
We stood out all the time we drive to Florida, so 32 States. I could probably much tell you. There’s no Oregon, Washington, Alaska, Hawaii, Vermont, Massachusetts, Rhode Island, Connecticut, New Jersey, Louisiana is one I still haven’t done. I know we’re getting there so eighteen more. I’ll probably get to fourteen and now probably be like the hard stop. Any final thoughts, Gail?
I’m looking forward to recording some new episodes with you. If people have subjects that they’re interested in or questions, if there are any subjects that you would like to see on our show, please let us know. We love to hear that people enjoy the show. We would love it even more if we could speak directly to your needs and interests.
Karen popped up a question. This is an interesting one and I’m curious about your opinion because I have an opinion. She said she foreclosed from the second position on a property, which is the property is now in her name. She’s the owner. It’s a first mortgage. “The borrower is not paying and is now foreclosing on me. If someone gets hurt on the property, will the first insurance cover it? I have not taken out any insurance on the property yet.” The first thing I’ll mention is the borrower is gone. You are now the borrower on the first because you foreclosed. You basically can either continue paying the first. It’s you on the property and you’re supposed to be there. It’s up to you whether or not you want to pay the first or have them wipe you out. They have force-placed insurance and you would want to probably also put some liability policy on that property. You are the owner of the record. If somebody gets hurt, I bet you that the lender would not indemnify you.
How in default is the first? If you’re thinking about letting them foreclose on you, you must feel that there is no equity in the property to cover you. Otherwise, what is the point of foreclosing if you’re going to let them foreclose on you? Why spend the money to lose the house? This is intriguing, Karen. You’ve raised some interesting questions. What’s the plan? What are you doing here?
You’ve got to let them foreclose and walk from it. Whatever the case, if it’s occupied, I would probably have some umbrella policy unless you already have one with all your assets.
The easy answer is to get liability on it. It’s not expensive.
The first mortgage probably has force-placed on it. If you technically own the property right now, they may not have indemnification for you. Somebody did get her and stuff. Anybody can sue anyone. I would probably look to go after an insurance company, but also anybody.
If you own anything, better get some insurance.
Probably short money, you’re probably looking at $20, $30 a month. It’s nothing ridiculous. That’s a good question.
It’s the first time we’ve ever had something like that. We don’t know that many people who do a lot of seconds.
I’ve got mine right now that the borrower was attempting to refinance and he ended up passing away. Now it’s like, “It’s in foreclosure, but the first hasn’t done anything in five months.” I’ve reached out to him like, “Do you want to sell it to me?” Get off the pot type of thing because of his equity in it. It’s a property in Indiana that’s on a big lake and it’s lakefront property. I’m like, “Should I foreclose and pay off the first?” It’s one of those things because they’ve already started, it’s like, “If I start, I’m already going to be behind them. Do I want to throw money at it?” I paid $150 for the note. It’s like, “Why do I want to throw more money at it? The patience kills me having to wait.
I had the situation in Georgia where I foreclosed, it did not sell at auction and now it’s mine. There is an HOA that has a couple of big liens on this. They were wiped out in the foreclosure, but if they had foreclosed first, all they would have had to do was pay me off. If there was money on top of that, at that point, it would have belonged to them if they had foreclosed. If they had foreclosed, it would have sold.
What happens a lot in Florida is individuals will go by the HOA lien from the HOA and foreclose and knowing that, the lender is going to take two years to foreclose. What they’ll do is during that time, they will rent out the property. They may buy the lien for $5,000. All of a sudden, rent it out for $800 a month for a year or two years. Basically, the first will finally come in and foreclose. It will wipe everyone out, but they’re like, “We turned around and made good money during that time frame.” It’s shady, but it happens a lot in Florida because of the lengthy foreclosure time frame. My Note and Bolt, I may have mentioned this in the past is if you use force-placed insurance with your servicer, have them set it up and you do foreclose on a property, the moment it forecloses and that loan basically gets the boarded and turns into an REO. They cancel the force-placed insurance. You need to get a policy yourself because the servicer is no longer managing the note or it’s not a note anymore. It’s Real Estate Owned. They are done. You can’t exclude them.
You can’t keep the insurance and keep paying for it because it’s on their master policy.
If you use Madison or Allied and I know Allied automatically puts force-placed on my thing. Somebody said, “I’ve been telling him don’t put it on because I have it.” If you foreclose on that property, you are no longer covered if you’re using it to your servicer.
I don’t know if this is true of other servicers, but if it’s an escrow account, Allied, if they’re going to put them on their own policy. I always buy insurance right away from the day I close on CFDs especially. This is weird. The loans were escrowed for taxes, but I didn’t think insurance and Allied would not let me put them on my master policy for force-placed insurance. They insisted on putting them on theirs, which I don’t even understand.
I’m going through that with them. I’ve had a conversation with Beth because they go through JB Lloyd, but the policy I have is not exactly the same policy. I have a little better policy and I’d like to keep the better policy. I only have two loans at Allied. I’m not losing sleep over it, but if I wanted to move 50 loans over to them, it’s a discussion that I absolutely need to have with them before I do something like that.
What is in a nutshell better about your policy than theirs?
There are two types. Basically, there’s a render policy and an investor policy. There are two types of policies to have. The lender policy is more if you are strictly a lender. The investor policy is more for if you have REOs or CFDs. It’s got a better umbrella for liability. Lender policy typically doesn’t carry liability insurance on it because you’re the lender, you’re insuring against the asset. Where it’s covered is if someone trips and falls. If somebody asked the question of who do we use, I use JB Lloyd. Ross Diversified is another one to use as well. Those are the two main ones I’m aware of, but I’m sure there are several others as well.
Your assignment is to think about what you’re hoping to dream of. Anyone who has never formally sat down and figured out, put pen to paper about what their goals are. I haven’t been doing it for years and years. Some people I started a couple of years ago. It is beneficial. I’ve had people say to me, “I want to retire on notes.” I’m like, “What does that mean? How much money are we talking about? How much are you starting with? How many years do you have to build your cashflow? These are for me, nothing happened until I decided, “Three years. I’m here. I want to get to here. This is how much more I need. This is how much I can get from this. This is what I need to do.” It makes all your decision-making so easy compared to that feeling like I could do anything. Many things are interesting. Why don’t I try this?
You realize that you put all that down on paper and none of it is happening.
Mine is happening right now. It is like my husband wants to buy soda. I’m like, “Honey, we’re working the plan. Put that back.” There’s a water fountain for notes and everything.
Out of curiosity, Gail, did you meet your goals?
I have to say my goal has been to transition into long-term holds. I’m buying in a couple of places where I know exactly what it costs, the cost of acquisition is and the rent that will come from it. It makes it very easy to plan. I know I’m looking for particular kinds of properties or particular returns in particular taxes that are no higher. I’ve exceeded my plan in terms of getting cashed together to buy rentals because a couple of things have happened. This property I foreclosed on, I thought it might sell for $70,000, because there’s currently one for sale, but I got the comps back. The realtor after we fixed it up a bit, he wants to list it for $120,000. Things like that happened and they’re like, “I jumped ahead, chutes and ladders.” I went up a chute on my plan. That’s the other thing. When you have a plan and something good happens, you know you can assess something good has happened. You can see exactly where you thought you would be and where you are.
I exceeded my acquisitions and things this year and so forth. For me, it’s my goal is I’ve got college coming up in a few years and it’s like, “That one paid off and another one in ten years.” That one got several investment properties that we bought several years ago that would already, essentially those will be paid off by that point in time, so that would cover that education if need be. For me, people say, “You’re going to leave your full-time job.” I like my full-time job. For me, I enjoy this as well but it’s more paying off certain things. Life events are going to be coming up. I’m not going to be sitting there at 75 years old, still sitting behind a desk somewhere working because I’m still trying to pay off a mortgage or something like that.
Colleges usually let you pay monthly, which is handy for people who are using their cashflow for that. You don’t want to end up being a Walmart greeter because you didn’t plan when you had a chance. You didn’t get creative when you still had time. That’s my message. That sounds depressing but if you embrace the challenge, it’s liberating.
My task for everyone who’s out there, if you’re going to join us, if there’s one thing that you’re going to start the year off to do, what is it? Whether it be something marketing or taking a class or learning something, buying a note, buying an asset or buying a property. What’s that one thing that you want to do?
Everyone comes with something.
People don’t sit there reading this, bring something to us. We’ll discuss it as well. If you don’t want your name named, that’s fine. We don’t need to name names. I’m bringing something cool. Thank you for joining us on this episode of the show. As always, if you enjoy the show, please leave us a review on iTunes, Stitcher, Twitter, Google Play, and wherever else you are consuming us. Thank you.
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