Having a rental business have its rewarding aspects with its passive income, but always having turn-over tenants can make it tedious. Pari Thiagasundaram experienced the same thing and wanted to make a rental business exit but still stay in the real estate. As a network engineer, he still needs to put in 40 hours a week in work, so dealing with his landlord duties just didn’t seem productive to him. With the Note Closers crew, Pari was able to buy 14 notes this past year and sold two of them. Learn how he was able to make $26,000 on a $56,000 investment in just 12 months.
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The Rental Business Exit To The Note Business with Pari Thiagasundaram
We have a very special guest who is joining us all the way from California. One of our good friends and students out there who is doing some amazing things with their own note business. I’m always excited to have this guy around because his energy is always great. He’s always got a positive attitude. He is working diligently on his plan to financial freedom with his wife and his two kids that are growing up like bad weeds, as he’d like to say. My good buddy, Pari. Thanks for joining us from California. You’re up in the Bay Area, correct?
That’s right. It’s my pleasure.
Glad to have you. For those that don’t know who you are, tell them a little bit about your background. What are you doing? Are you still working? How did you get interested in notes?
I do have a full-time job and just picked up the note business on the sides because I wanted to get out of the rental business. There was always turnover of tenants, almost every single year for one property or the other that we were managing here in the Bay Area. I was researching online and trying to find out how I could stay within the real estate business but not in rentals. That’s how I got to know about the note business. I did some research, got into that and I attended your Fast Track training back then and also when you were here in California at Napa. That was good.
You came to one of the Masterminds in Napa there. It was pretty nice. You live in the Bay Area. Where exactly in the Bay Area do you live?
I live in Fremont, California.
You said that you’re working a full-time job. Tell everybody out there what you do full-time.
I’m a network engineer, building up the internet circuits and stuff like that, wireless from my company.
Great thing I love is that you take action. Actually before you took the class, between the class to the time that you came to the Fast Track training and stuff like that, you actually bought some notes. You went and bought some performing stuff because that’s the stuff that you like. You don’t want to be a landlord. You’re tired of the headaches of toilets, tenants and trash outs. What were your first couple of deals that you bought?
The first one that I bought was in Michigan. The guy sold the property. That gave me 16% return just on the principal without including the interest. That was a steep discount that I got because it was a sub-performing. The reason I picked that was he had enough equity on the deal. I knew that he’s not going anywhere. He is going to pay so that was a good one.
It was a note you bought, it was owner-occupied. Is that correct?
You bought it at a discount but it was a performing note?
It was a sub-performing note. He would pay one month or after 60 days, he would send a big chunk of money.
Let’s talk about the numbers on it. What did you pay for?
I paid somewhere around $12,000 plus or something like that.
Did you know what he owed?
16% more than that.
16% more is around $15,000 to $16,000 then?
He is paying, he’d miss, but then he just basically refinanced you out or sold the property?
He sold the property. I was monitoring that on Zillow so I would exactly know when he put that on sale so I know the money was coming. I was a little nervous because that was a first deal. It was a sub-performing note but I did all my due diligence and I was tracking that offline as well.
You had a servicer that was reaching out and basically, one day you find out you got a deposit in your account from your servicing company, correct?
That’s right. I went with the allied on that one to keep the cost low because it’s a small amount, I didn’t want to pay much with the big boys. It was good.
You had just one recently pay off that was a pretty good shocker change. Let’s talk about that deal.
That was a good way to finish the year actually. I bought this from Joel Markovitz from JH Mortgage, now The Law Office of Daniel Singer. I know that you had told us a thousand times on the Facebook event or the Fast Track event that an IRS lien can be removed. You don’t worry about that. I’ve heard you say that a thousand times, but I was still not confident because I have not done it myself. I knew it can be taken off, but I wasn’t just confident because I haven’t done it. It’s just another individual’s perception. Some people are confident just by hearing things and then doing it. For me, I wanted to do it so I will feel confident. I don’t know if even Joel remembers this. After I bought it I asked him, “Do you think you can remove this IRS lien?” Joel, he was so calm and he said, “Don’t worry about that. That can be removed. First things first, let’s get all the docs done for you so that the loan is transferred to us, and then we’ll go one step at a time.”
Let’s go through the numbers on this so I get foundation. How much was owed? What’s the UPB?
UPB was $90,000 plus.
They haven’t paid how long?
They haven’t paid for three and a half years.
Where was it located?
It was in Florissant, Missouri. I bought it for $50,000.
What was the value of the property?
That time the value of the property was $90,000.
They owed $90,000 plus three years of back payments, you picked up for $50,000.
I picked up for $50,000. There was this IRS lien for $30,000 or so, and a state tax lien for another $10,000, $15,000 or something like that and a sewage lien for $1,600. I know that the state tax lien and the IRS lien can be removed. I was okay with that and then we went with Polaris for door knocking and borrower reach out, and the lady doesn’t want to pay.
For those that don’t know, Polaris is a company at California. They are not a servicing company. They are not a debt collector. They are a non-profit company basically that works on behalf of us as investors, trying to reach out for the borrowers to get them to make right party contact or make a decision. The fact that they’re not debt collectors allows them to contact people basically the day you fund, which is really beautiful. They’re just basically, “What’s going on? Do you want to stay? Do you want to go? What’s the situation? We’re here to try to help out a resolution.” They do that very quickly. Do you remember how soon did they talk to the borrower on this one?
The guy went out almost the second week. He said he had already started the paperwork. He sends out two or three letters. They also talk to the servicer to make sure that the borrower calls back, everything aligns. She didn’t want to pay and that’s when I reached out to The Note Closers Crew and asked if someone was in St. Louis. One of our friend replied back saying, “I’m there. I’ll be visiting my father-in-law down there in St. Louis. I can drive by.”
Who was the guy?
Kent Sparrow is a Mastermind student. He just closed on his first couple of notes as well. He’s an active realtor and he use the Mastermind crew and really go out and take a look at it. What did Kent find out?
He said the lawn is mowed, and people are there. He spoke to the neighbors and they said that they have taken care of the house really good. I knew that maybe she’s not going. I thought maybe she would reinstate. Then we started the foreclosure process and everything. Then before it went to sale, I got a letter saying that she wanted to reinstate. I said, “Fine, but we are not stopping the foreclosure process.” We went ahead with that and she was trying to play a game or something to stall the process. We went ahead and foreclosed it. I had a local realtor go there, take some pictures, and the house was a trash. She just left a lot of stuff, and we didn’t want to do the rehab.
Let’s talk about that. There are two types of trash if they look at things. One is they’d punch holes in the walls. They rip crap out that concrete down the toilet. That’s the extreme side of things. Second thing is they just leave a lot of shit. They leave trash. They leave stuff in the refrigerator and don’t do anything with that. That’s the second aspect. Where did it fall in those two phases?
It was the second aspect of it. When I looked at the kitchen, the cabinets are really in good shape. They are old, but she had maintained it really well. It was just trash lying around everywhere.
It was filthy and outdated basically is what you’re saying. A lot of people get a little concerned about that, but outdated isn’t that bad. I’ll take them leaving trash around because it’s $1,000 to $1,500 to do a clean out and you’re sitting in a lot better place than you would if you left the trash in there.
That is when I got into the nitty details of the property and the neighborhood. I was trying to sell this, price it right so I can sell it out, get out really quick. At that time, I noticed that in that street, my house was the biggest in size. Our experience with that had never been good. Back in Milwaukee, we have another rental property on that particular street. If you look at it, that was the biggest house. It just happened, I didn’t look at it when I bought the asset. It just happened after the fact that when I wanted to sell, I was looking at all the numbers. At that time, we wanted to take the trash out so I posted an ad on Thumbtack to get some contractors out there and clean the property. There was one lady, she said she’s been doing this business for about eighteen to twenty years or so. She knew the business really well. She took really good care of it. For $800, she even fixed the fence which was not on the project scope. That was really good. Once that was done, that is when we started doing Facebook Ads for people who are in that neighborhood living in apartments. We also posted it on a lot of Facebook groups in St. Louis.
You didn’t go the traditional aspect of listing on MLS?
I did. While they were cleaning and doing stuff, this had already started.
A lot of people don’t think about assisting their realtors in finding a buyer. A lot of times they’ll list it, but there’s nothing wrong with making sure you get a realtor to do it. You were like, “I want to get this done.” Let’s go back to that. You listed it, you ran some Facebook Ads for people that live there in the area. Is that correct?
That’s right. People living in the apartments and are from 25 to 65 years of age and who are renters. The only thing I did not target was homeowners.
I wouldn’t because they have a home usually. You don’t want to sell to them. Did you reach out to any of the Meetup groups, the real estate investment clubs as well?
I did not post it down the Meetup groups. Those guys were the one who were running some of the Facebook groups in the neighborhood, so I just sent it out to them. Then we still have the IRS lien on it so I called Daniel one day and asked him, “We still have this IRS lien on this. How can we get it removed?” He gave me a very valuable tip. He said, “Take it to escrow and it is much faster.” That is exactly what we did. We took it to escrow and we had the title company send a letter to the IRS. They removed it. The state tax lien was removed and the only thing left was the sewage lien. $1,600, I negotiated to $1,500, that’s the best I could do. I’m happy with that.
The state tax lien was not a property tax lien. It was like an income tax lien?
Income tax liens, that’s right.
I just want to make sure I clarify that people aren’t confused. If it’s an income tax, it follows the person. You just had to show the state that the original borrower wasn’t getting money from the sales, I think for the IRS, correct?
Once you get it under contract, you went to escrow. You’re obviously the buyer then, what are they going to pay for?
We listed it for $95,000 and got an offer at $92,000. I said, “I’ll take it.”
How long did it take you to close?
It took almost one year for us from start to finish.
When somebody took your account and get $92,000, how long did it take to close, 30, 45 days?
A little less than 45 days is what I would say.
What did you end up netting after closing cost and liens and stuff like that?
We bought it at $50,000 and the cleanup, foreclosure cost, everything done like $56,000 or something. We listed it at $92,000. We had to pay the property tax that year. We netted like $82,000 on that.
You made $26,000 basically on your $56,000 investment in twelve months. Just about 45% ROI in your money. That doesn’t suck.
I’m very happy with that.
Did you use your own money or did you have JV money involved?
We use our funds for this deal.
You were a landlord. You like passive income, but you don’t like the work and all the headaches that came with being a landlord, correct?
That’s right. When tenants move out, we would take the kids, drive from Fremont all the way to Santa Clara. We would do the touch up painting, clean the house just like any other first time home buyers. We lived in that property, we converted it to a rental. There was a lot of emotions involved in that asset. We didn’t want to do that. We didn’t want to go clean the house. We didn’t want to do the touch up painting. We didn’t want to do any other fixtures that needs to be fixed. We had cleaners come do the cleaning, but still I would like to go. We had a marble in that house so I will do the coating on top of it, trying to keep it clean. That is what we wanted to get out of. Especially taking the kids down there, me and my wife doing all the work. That was not working out.
That’s the most effective use of your time after a while, especially now if you’re buying properties in San Antonio, in Milwaukee, in Michigan, and other areas across the country and Missouri as well. How many notes have you bought so far?
I had fourteen and two of them are sold. Right now, I have twelve in my books.
You’re still working 40 hours a week though, right?
What’s your ultimate goal, Pari? Is it to leave the dues and stuff to help you retire faster, get out of your job?
I wanted to start my own funding in 2019. I still have a long time to go, but next year I wanted to get my ducks in a row and do that and probably hire a virtual assistant or any other person either here in California or within the US to do the backend office work for us. That’s the goal for me and my wife.
What does your wife do?
She is a realtor at Keller Williams.
You’ve got a network of realtors you can reach out to and pulling values and stuff like that. Now it’s a little bit easier for you in a lot of stuff as well. We’re talking about how you bought a note from a hard money lender. Let’s talk about that deal because I think a lot of people forget that hard money lenders who often have notes on their portfolio they may be looking to get rid of. I’ve bought quite a few loans from hard money lenders that were first lien. Why don’t we talk about that situation?
That was a time that we wanted to get out of the rental business. What we did was we had two rental properties here in California. Including all four that we had, we were getting somewhere around a little shy of $1,000. Four properties, $1,000, that’s not really a good return for us. What we did was we sold the California rental properties and converted them to a note. What we did was we reached out to a hard money lender and said, “We like this asset. We’ll go buy it.” The property was worth somewhere around $450 or $460. The guy wanted $265 for the first mortgage at 10% interest only for one year. We bought that asset and it was giving us $225 a month, which was pretty good.
You bought the note on that house?
We bought the note. We didn’t put additional money. It was just the funds that we got from the rental. The moment we converted our rental properties to a note from little under $1,000 our cashflow increased to $2,500 a month. That was an eye opener, “Why have I not done this before?”
You used the hard money lender to create the loan?
They are here in Northern California. They originate the loan and sell the trust deeds right away, you sell the notes right away. That is what they do, so we bought it from them.
You’ve kept it for over a year or you’re keeping it longer?
It’s due this April, so we have time on that. If they wanted to refinance it, I’m okay with that. I’ll just recycle the process and be in the paper business.
What is owed on that loan? You borrowed it for $265 but what’s owed on the note?
It was $265.
You paid par for it but there was equity in the property then, right?
Exactly. If he misses, I’d go for the property.
Basically, it’s 30%, 35% equity in the deal?
Yeah, $460, I paid $250. The property is about $450, $460.
We’ve got some questions, “Is this better than wholesaling real estate?” Yes, note business is a lot better than wholesaling. In wholesaling, you’re making that quick transaction fee and that’s about it. You’ll go keep finding your next deal. Note investing is so much easier, but it’s a lot more profitable because you can use other people’s money to fund your purchases. You’re getting great cashflow, and great profits in the backend like several scenarios that Pari has discussed here. We have another question, “How’s Polaris different from a special servicer like Singer Law Group?” Daniel Singer is an attorney. They’re an attorney that handles special servicing. They do more on the special servicing side than Polaris does. Polaris will do literally 90-day contracts. They want to do it on the frontend, get your right party contact. The borrower going to stay or the borrower going to go. They’ll help you create a modification. After 90 days, if you don’t have any luck, they’re just going to push it off their books to give it back to you so then you can start the foreclosure. Polaris is not going to handle the foreclosure. They’re going to help you with the right party contact and modifications, reinstatements, deed in lieus in the frontend. That’s about it.
Daniel Singer of Singer Law Group, they’re attorney and they also have a branch of home servicing as well in-house. They’re going to help you with the foreclosure. They’re going to help you long-term and stuff like that. They’ll still do a borrower reach out for you, a little bit cheaper than Polaris does, but they handle the whole process start to finish. It just depends on what you want. Now, The Law Office of Daniel Singer, they’re not going to really start out anything until two to three weeks until the goodbye letters are at least mailed out. That’s the difference. If you want to get really big start, you go to Polaris right off the bat, you may have a resolution in two to three weeks or to be old fashioned and just handle it with your existing servicing company who won’t really do anything for the first 30 to 60 days.
I really wanted to give a shout-out to Daniel Singer here. I never worked on this asset at all. Honestly, I never worked on it. I just call Daniel and ask him the status. That is all I did. He did the whole nine yards for us. He took care of everything. Honestly, I didn’t do anything. I just call them for the status update.
You still call, do you still tell them roughly what to do?
We don’t want people thinking that, “You just plan it with them and don’t respond to them,” because some people will do that. Not you, Pari. You’ll get them, “What’s going on? I’m trying to get some of where we’re at.” He will give you, “We got this option A, B or C. Which way do you want to go?” You’re directing that way. There are people that will just drop a loan with a servicing company or servicer never reach out and give him a phone call. That’s a big problem. You follow up. It’s a regular basis over two weeks, three weeks something like that you’re talking to him?
Three weeks to a month. I’ve been talking to Joel on a different stuff to buy assets. He would also tell me what’s going on.
What’s your goal for 2018 besides hitting your ducks in a row for a fund in 2019? What’s your number of deals you were looking to close?
As far as the deals, we wanted to maybe stick to the same thing or do better, maybe like twenty is what I’m thinking. Other than that, we really wanted to get one VA onboard.
Let’s focus on it. I think between this week and next, you can get a VA. This is good for a lot of people who are listening to this episode. What are some of the things that you’re going to have your VA do?
It will be the Facebook marketing that we are doing. We might even give them access to some of the assets and do the bookkeeping for us. If they have to work on a loan, they would work on these loans. Talk to the servicers, just copy me and pretty much that’s it. Do all the advertising for us, for me as well as for my wife. Everything is related to real estate. If someone knows about the loan processing side of it, that will give us a head start. We want someone with experience. They could be anywhere within the United States but they should have worked with a title company.
You’re looking for somebody who’s not overseas, but somebody domestically who can work remotely for you and can call out. You’re doing a lot of due diligence and you’re doing some capital raising. There’s a servicer called NoteProz, they’re a great little service that will help you speed up your due diligence aspect of things. If you go to NoteProz.com/ScottCarson, they’re running a special for just our Scott Carson students. That’s a great little thing. You just plug in your addresses and it will help you give all the online information. Not going to give you accurate comps because it’s still an online, like an AVM, but would help your wife and her connections from Keller Williams across. It’s going to be easy to pull comps relatively pretty easy with friends and stuff like that. I would have you check out contracts to close people. They have this title contract that close a lot of realtors. There’s maybe somebody who will maybe help your wife with her stuff as well. It will help you guys both doing different things but very, very similar aspect of things. Obviously, anybody in title or a loan processor would probably be a good one besides just title work for you.
For those that are listening out there, if you’re looking at great places to find people, loan processors, not process servers but processors. These are people used to looking through loan files, putting loan files together so it’s an easy transition once they get a loan file and be able to go through it, “This borrower has this.” That works in relevance to you seeing what the borrower may have for a workout or right party contact or what they did and what happened with the rest of the story after you buy the note. What’s your favorite thing about the note business, Pari?
I just work from anywhere. I just love it. I don’t have to handle any calls from property managers or the tenants. It’s just me staring at the Pipedrive, that’s what it is, then making a few phone calls from home. I need to give a shout-out to Adam Adams. He definitely helped us all in setting up the Pipedrive. That just really helped our business.
The Pipedrive was great with Adam putting videos on YouTube and you walk them through. He’s done a really great job with sharing his knowledge. What’s your least favorite thing about the note industry?
The due diligence. Maybe I should outsource that one as well.
I would not say outsource everything because you still want to put eyes on it. We’ve bought a couple of 100 assets. The staff did a great job of narrowing it down, but I still put eyes on all the files as far as where we are, values. Give them the thumbs up or the thumbs down on our formulas and stuff like that. It’s still good when you don’t have to pull up everything because you’re still working full-time. How old are your two kids?
One is nine and the other one is four.
They’re pretty very active kids in school too?
That’s right. They take away all our time. That really helped in this note business. Now, I’m spending more time with family than my rental business. With rental business, I always maintain different checkbooks for different properties, writing out checks for different contractors to do some job or the other or refunding the security deposit within 21 days for California rule. It’s a tedious process with rental business. Now, it’s all online. It’s just me and my computer and my phone is what I need.
Of course, also a good team and Polaris and The Law Office of Daniel Singer, and Joel Markovitz and stuff like that too as well. You bought from hard money lenders. You bought from hedge fund, basically to Joel. Where else have you bought from? You bought from a servicing company or anything like that or any of the online portals?
The ones that you’ve bought from Direct Source, those are contract for deeds. Have they turned into performing or non-performing or it’s a mixed bag of both?
It’s a performing note that we bought from them.
Let’s go through those numbers. If you got those offhand, where is it located?
It’s in Van Park, Texas. It was a performing loan. We bought it at a 12% discount on that. It is a re-performing note. The borrower has been paying it on time.
The yield is about 13%, 14% to you?
13.5%, something like that.
You’re using your own money. It’s on basically autopilot. 13.5% just to collect basic living payments coming in. It works out really well for you. We have a question, “Is the note business better than holding rental properties?”
Any suggestions for somebody who is new to note investing? Any tips you’d like to recommend to them, Pari?
You definitely need a mentor for this. I should say thank you, Scott, for that. It’s not just you, and also your entire team helped me grow my business. When someone newbie is onboard in your team, I would be more than happy to chat with them.
I appreciate that. I’m very blessed I’ve got a good team that helps.
I think that’s one of the great things. The note business is full of some great people. Wayne has done an amazing job, 300 plus notes bought. Adam has done a great job. He’s almost closed to over 80, first year, a year plus. I’m excited because I get to hang out with those guys on the Quest IRA cruise. It’s roughly for about ten days. We’ll be hanging out somewhere in the Caribbean being note pirates. Those guys have done a tremendous job. I’m very proud of them. I appreciate the kudos. One of the biggest things that I always tell people is, “I’m not here to motivate you. You have to find the motivation in what you do. You have the motivation part, you got great family. You’ve got a desire to pad your retirement, to speed up your retirement to do some bigger things.” I just provide some of the tools and show you the way to do it, and you’ve gone out and done a tremendous job with these things like that. I think you can do more than twenty next year. I’m going to challenge you to do 40 in 2018. Have you done any joint venture deals with people yet?
I did with one guy. We still have three more who are ready to fund. We need to find the deals next year.
If you did 40, instead of doing one a month at twelve or one and a half at eighteen. 40, it’s just three. Three and a half deals or three in a third deals, you can get that done. I’m very proud of you. You’ve done a tremendous job, Pari. You’re always at the light. You always got a great, positive attitude about you on things and we’re very, very, very happy for your success. I look forward to your continued success here in the New Year. Pari, thank you for joining us in this episode of The Note Closers Show. Great insight, I’m very proud of your deals. We look forward to seeing you at the top.
Thank you, Scott. My pleasure.
If you guys like to get a hold of Pari, what’s the name of your company?
SA Note Funding Group.
Pari is living the American dream not only in 2018 but for the last couple of years and looking forward to even more success. We’ll see you later.
Thank you for joining us. As always, if you’re listening to this on iTunes or Stitcher, please leave a comment and go check out our back catalog of episodes. We’ve got tremendous amount of great information, great nuggets from people just like Pari who are out there making things happen in their own note business on a day in, day out basis. I’m a big believer that’s the one way that we can truly make America great again. One mortgage at a time. We’ll see you all at the top.
- Law Office of Daniel Singer
- Adam Adams
- Automation Finance
- Wayne Snell
- Direct Source
- Quest IRA
About Pari Thiagasundaram
SA NOTE FUNDING GROUP is a note buying company located in Fremont, CA. We work with private investors and national companies to buy notes here in California and nationwide.
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