There are plenty of note deals and private capital to go around. On this episode of Note Night in America, Scott brings on Joel Markovitz to go through some assets that can be closed on by Halloween. Joel is the Client Relations Manager from the Singer Law Firm. He dispenses some great advice and insight on what to look out for and what to expect when doing note deals, and touches on some things he’s working on, including a new portfolio of 40 new assets from a fund.
Listen to the podcast here:
Halloween Assets with Joel Markovitz
We have a very special guest here, Mr. Joel Markovitz. A lot of people are either screaming, “I’ve got to get my taxes filed tonight,” because it’s October 15th but that’s okay. We have a five-year goal here and we set this goal at the beginning of the year to help educate and create over 10,000 note investors in a five-year goal. We have our Fast Track training for our final Fast Track of the year for November 9th through the 11th in Austin, Texas. We’d like you to be a part of that and get out to the Mastermind in December. We’ve got a few spots left available for you. Our Note CAMP 6.0 is a month away. Tickets are now $399. Grab your ticket of the event now before it goes up too much on that stuff. It will cap at $599 coming November 1st, so take the opportunity. Go to NoteCamp.live to grab your ticket there as well. We have our final virtual Note Buying workshop of the year, November 30th through December 2nd. Sign up for the virtual workshop. We’ll give you a ticket to Note CAMP for free. That’s a bonus.
Our granddaddy of them all, our Note ballgame, it’s on December 7th to 9th at sunny Cape Coral, Florida. We’re excited to be there. It should be our biggest Mastermind of the year. It’s our number 21 of the Masterminds for you. Some of you have seen the video of the assets that are part of our WC and crew membership that we had a coaching call with them. We asked them to take a look at it. Some of you have looked at assets and are excited to dive in to get some stuff from there. We’ve got a curveball. The seller pulled the tape on us literally. I was looking at the asset and I am glad they did because they were smoking some serious crack on some of the assets. Supposedly, the seller wants to sell the whole papers itself, which there’s no way they’re going to be able to do that. Joel and I said, “Let’s take a curveball of this and bring out some different assets.” I’ve got to give a big applause to Joel for bringing on another take for us to go through. Thank you so much, Mr. Markovitz.
Thank you. I might have overshot the runway on the other one a little bit but I’m happy that you like these assets.
You had nothing to do with it. You’re awesome as always on that stuff. We’re glad that we’re saving a lot of heartache from people making bids at somebody who doesn’t want to sell the whole tapes off. Let’s bring that first tape up here. First of all, how are you doing?
Joel, we’ve got the seven mixed tape aspect. What do we have here?
It’s a mixtape of REOs and there are some firsts in there. Some of them are performing, some of them are nonperforming. There’s an interesting little blend there. I’m eyeballing it. The performers are the ones in New Orleans. That’s a BK-13 performer. Keizer, Oregon is a BK-13 performer. Augusta, Georgia is a performer. Ohio is a performer. Then the REO at St. Louis is a duplex. Galion, Ohio is a single-family residence. Bella Vista is just outside Bentonville and that’s right near the Walmart. That’s a growing area. That is an REO. Then the Montgomery, Alabama and Mobile, Alabama are both REOs. Sandwiching them you have Continental, Ohio at the top, Andalusia, Alabama and then on the bottom Wichita.
Do you know how much the sellers are looking for on the REOs?
The one in St. Louis is a duplex. Rents can be anywhere depending from $600 to $800 when I spoke with an agent. St. Louis is an interesting market. I was told that the market itself is good for rentals as opposed for sales. If you want to purchase this one, you’d have the duplex purchase price on this they’re looking for $49,000. If you can yield $600 from each unit you’re going to be in a good spot.
Do you know what the value came in of that?
The value is about $55,000.
Does the property need any work?
The property will need a little bit of work. Probably it will need some paint and some interior or cosmetic type of items. People can access it and take a look at it so you can do your own assessment.
Is this the property that has one tenant in it already?
It has one tenant in there. We’re in the process of evicting.
The best way to submit your bids is not into me, it’s into Joel Markovitz. Let’s look at the one in Galion, Ohio.
We have possession of it. It’s going to need about $4,000 worth of work to bring it up to rental condition. We’re looking for $44,500 on that. The value of the last BPO that we had come in was at $55,000. We have interior pictures. Galion is an area that was a big manufacturing area, a suburb of it. A lot of stuff in Ohio and in Western Pennsylvania went away. It’s a nice community and there are nice bones on that one. When you go inside, make sure you picture things like wooden staircases or things of that nature.
We’re looking into some part of ownership that didn’t fall through on payment plans and things like that.
They have a property three blocks away that they’re living in.
What about Halifax Lane in Bella Vista, Arkansas outside of Bentonville?
It needs a little bit of work but there’s a lot of upside on it. If there is an HOA in there, it’s small. It’s less than $100. I can give all the particulars on it but there is an HOA in the neighborhood. We have had ours on. We have some estimates coming in on what it’s going to cost to bring it up. On our understanding is that the property itself at AVM is probably going to be around $115,000. It’s probably going to take anywhere between $10,000 and $20,000 sale price on it. It’s a nice neighborhood. It’s one of those houses that you can pick up.
Then 505 Glade Park Loop in Montgomery, Alabama.
This is one of those you’re going to have to put some love into it and I’m not sugarcoating it. AVM probably will be around $80,000. You’re probably going to have to put in about $20,000. We have interior pictures and there’s probably $3,000 worth of clean out costs. It’s in an area that can sustain the upside upper value.
The worth into it is about $80,000.
With the condition it’s in, it’s worth about $55,000.
What’s the sales price?
You’ll get $40,000 on it.
The last REO is in Ward Road in Mobile, Alabama.
I’ve spoken with an agent who has been there and been inside extensively. You’re going to need about $30,000 worth of work but he feels that once the work is put it into it, you can list it for about $130,000. He would list it for $139,900. This one is working out for the purchase price of about $85,000. If you’re good on your rehabs and your contracting cost, you could probably compress that down. It’s a big house. It’s a big lot and it’s in a good neighborhood.
Whoever is selling these is smoking crack based on the pricing. I just put this there as a teaching. If it’s worth $139,000 after $30,000 of repairs and they want $85,000 plus $30,000, you’re at $115,000. Let’s say $130,000, you’re paying $0.88 on the dollar for it, which doesn’t take too much for it to be repriced. Is it somebody we know who is selling these or they overpaid for the assets? They used to be non-performing and are they taking it back that way or what?
These are nonperforming that we’ve done the workouts and taken over back.
That’s more pricing for a retail buyer at $0.88 of where you need to be at once you have the repairs in versus the investments. Not just this one but the rents are great. It’s a little bit of different story on some things. It’s still awfully high for a lot of these REOs for the most part. If you’re going to rehab, make sure you know your numbers. Make sure you’ve got a good crew because if you over rehab, you can be upside down relatively quickly on any REO for the most part. We have a question, “What should those prices be then for REOs?” I don’t know the after-repair values in REO, which is always an important thing. It’s nice that Joel talked to the realtor that the last ones up but I don’t like it, especially in today’s world. If you have no work being done, then great. You’re an investor. You still want to see a good return on your money.
Depending on what the rent rates are, the management and stuff like that, you don’t want to be above $0.70 on the dollar. It may not be feasible of where it’s at right now but paying $49,000 for a $50,000 asset, you might as well be paying retail or even at $55,000, that needs work. The rent rates are something that people want to look at to add to their portfolio, but you’ve still got to look at it. What’s it going to take you to get up running and go from there and then rent rates are not the greatest thing? Let’s dive into the nonperforming side here and go from there. We’ve got 919 South Emporia Street in Wichita, Kansas. UPB of that one is 35, the value is on it. What does the seller want for this one?
The seller is looking for about $7,000. It’s going to probably need a little work on the outside. We have not been inside but the outside needs some pruning. I saw the bushes and the branches that came down in front of my house and I was like, “There are more bushes than trees and the branches that I thought would come off.” It’s a cute neighborhood, older like a lot of the assets that we cross our paths. It’s a craftsman style.
Let’s dive to the top of Continental, Ohio 78 Road 21.
That’s a nice home. They’re looking for $5,000 on the property. The total accrued debt is $31,000 on the payoff statement.
Are the borrowers occupied or vacant?
It is occupied. We have had contact with the borrower.
Are they just playing games?
They are great there. A lot of them are disputing the debt. We have an O&E report that shows everything is straight up accurate.
That would be a great little one for somebody to put in their IRA. If you’ve got $5,000 and the total debt is 31, that’s the back payments plus other fees and stuff like that as well too. You’ve got a higher interest rate in that one. It surprisingly didn’t pay off or figure out a settlement of some sort.
Sometimes you get someone on the phone who will say, “That was settled, that was paid off,” and they have no clue about what was paid off or wasn’t. We never know. An O&E report shows that the lien is a fact and we’re going to move to foreclose.
If they made a payment for eighteen years, what statute of limitations do we run into that?
It will be long matured prior to it so it was accelerated.
Moving on to Andalusia, Alabama 301 McDonald Street. What’s going on with this one?
This is of the borrower. It’s a property at Andalusia. It’s a nice neighborhood. The borrower, it’s a little overgrown and we’re foreclosing on it. The borrower had made payments. In Alabama, we’re trying to work something out, but it looks like it’s not going to so we’re foreclosing on it.
We have a question, “I want to know what an O&E report is?” An O&E report is an ownership and encumbrance report is a title update or title report. It’s not a full-time report but it’s looking at who’s the current owner, any encumbrances on title, liens. What else is on there, Joel?
It’s the taxes, liens, judgments. If there is anything that could potentially appear on the title, it potentially could have a history of the deed transfers, lis pendens.
We get into the performing ones in New Orleans, Louisiana.
This borrower is at Chapter 13: Bankruptcy. He got behind. He’s been paying in bankruptcy on time like clockwork. It is a duplex outside the French Quarter. The borrower lives in both units. It’s a nice property with value on it. We had somebody go out to the property and the value of it is probably a little higher. They had told us $3,218 at the time so we left it at that.
Is there a lot of equity there?
Yes, a ton. This is the one that the borrower is going to keep performing. There are no two ways about it.
One, which is a little duplex.
It’s the funky colors in the neighborhood.
Is it the borrower there? Do we need to reach out?
I don’t know. I’m going to go with no. It’s outside the French Quarter. If you did default, there will be a benefit because you take it back. It will be a great Airbnb outside of French Quarter if you fix it up. It would be nice.
Let’s go to the one in Kaiser, Oregon in the northeast.
It’s a nice house and a nice area. The borrower is outside of Salem. The borrower has been making payments since he filed clockwork. He filed bankruptcy, so he wouldn’t be in danger of someone not working with him. He’s been making his payments like clockwork at $1,099. There are lots of equity.
I’m looking at the house and that picture was taken from August of 2016.
The borrower was living in it making the payments.
Let’s begin Chapter 13. Let’s go to 32 Libby Drive in Augusta, Georgia.
It’s in Augusta, it’s not near this property. To me, not that it’s a nice property, don’t get me wrong. We’ve had numerous conversations with the borrower. It seems like the guy, the family man, went sideways on it but he’s gotten everything together. He is making file bankruptcy. He came out of the bankruptcy making his payments every month, servicing on the wall of the non-performers and the performers at Madison. If you’re ready to work with him and he has decided to move forward, servicing would not be an issue if you were already there. He’s a nice man who works hard. He has probably two or three children. He’s a trucker.
It’s a decent looking house and a decent little neighborhood. That is from years ago but still, you get a feel for it. Let’s go up to equity bus hometown of Euro, Ohio.
The homeowner passed away and the daughter wanted to stay in it. We went back and forth and negotiated with the daughter. We have her in a modification. She’s taken over the property and she was making the payments on time every month.
I drove by this one for you.
You may have. After a while, when you get so many in so many states, they start to blend.
She’s taking her payments.
The payments were never made consistently. On all of these, we have other performers who can provide updated pay entries easily.
I remember this one. We drove by this during our Ohio road show. We’ve got some contract for deeds too.
Daniel Malcolm was looking for a note in Battle Creek, Michigan yesterday. Battle Creek is not a bad little area.
Battle Creek, Michigan is the home of Kellogg. When I was a kid, for what my parents thought was a cool vacation, we went to Kalamazoo. We went to Battle Creek.
At Michigan, go from Detroit, Ann Arbor, Battle Creek and then Kalamazoo for the most part, if I remember correctly.
We went to Kellogg’s plant and had some cereal. It was a great vacation when you’re eight.
Do you know if any of these needs any work?
I’m waiting for pictures to come back on it. I do not know.
We have a question, “Is Gary, Indiana a good area to invest in or does it vary by neighborhood?” It varies by neighborhood and Gary for sure. We’ve got a couple in Dayton, Ohio. Are these first ones REOs now?
These are REOs. There’s nobody in them.
What do we see for 2313 Eastview Avenue? For one, it’s a pretty good size. It’s a 1,500 square foot house.
It’s always interesting. I saw a table that had some CFDs on it and a couple of them were 2,300 or 2,400 square foot homes. They’re all performing, that would be nice homes.
Here’s one in Eastville with a good size two-story house there.
Some of these, if you go to Zillow, there are pictures of them online. The interiors have been fixed up.
At 911 Ferndale Avenue, I remember this one. We were on the blue bus. I’ve driven by this one. Columbus, Ohio has a short bus around the Coit Drive. We usually have more information for you but we had a different list and that was pulled from us so we jumped on here to go through it and pull up some of these other assets as well. Take a look at what Joel had available for sale too. Unfortunately, that happened.
There isn’t an asset on this CFD tape that I don’t like. I’ve done some background, especially on the performing side. I’ve seen CFDs in the past where you’re looking and wondering if a good strong wind comes, they’ll be crashing down. These are a little bit larger not like the 722 square feet, 950 square feet properties, which are though more substantial.
Then we have the last one here, Tyson Avenue which is the vacant REO. We have a question here, “With CFDs, do you look for the same $0.70 on the dollar deal or do you want the REOs with the CFD prices slightly higher than the assets for the market value?” In contrary, it doesn’t matter if it was a contract or it’s the first lien. Once it’s an REO, it’s an REO. That’s what it comes down to. What’s the price point market value? It’s the same thing for an REO whether it was the first lien or a CFD. The difference with the CFD, if it’s occupied, it is a little bit different than it is with some occupied first lien because you usually get to evict a little bit faster with a CFD than foreclosing on the nonperforming note. Once it’s vacant or once that CFD is canceled, it’s an REO. An REO is the same thing across the board for the most part. This takes us to Gary, Indiana. Are these occupied still?
These are occupied both by young couples looking to get on their feet and make a life for themselves.
They are brand-new ones.
Four or five months on each of them. They were popping into six months.
The selling price was $38,400 and then $32,800 on those.
It’s $15,000 to $16,000 as far as what they’re going to want for them.
Let’s say we’ll go $16,000 on the first one because it’s got a little higher sales price. Also, $15,000 for the one below this. Let’s figure if you’ve got PITI on that. That’s a 25% yield on that first one and 22% ROI. If you take twelve months in the PI payment and divided that by the roughly strike price. This is an estimate. It’s not bad, especially if they’ve moved in and been paying on time for five to six months, that’s good. Figure in that between the two of them, they owe 70 between the two, picking this up for roughly 30, 31 herein below $0.50 on the dollar, $0.40, $0.45 on the dollar. That gives you a lot of flexibility in the back end too if they’re paying on time. It’s a no-gun neighborhood though.
I couldn’t tell you the crime or anything out of Gary. I just know that when I grew up in Chicago, we would drive by Gary and there would be snow and it would be pink from all the factories.
$16,000 or $15,000 roughly is what they’re looking for. I took the twelve months PITI and divided that by that price to figure out what the yield is up here. PI times twelve divided by our rate. Then same thing PI times twelve divided by our rate. He’s got something as $30,000, $35,000 IRA coming from the deal. You put a little $4,000 in your pocket right off the bat there. It’s a pretty good return for the 22%, 20% ROI. It’s not a bad way to split it then you’ve got a bunch of backside equity on the back end as well. Let’s move on to Lansing, Michigan 1044 Ontario Street. Is this nonperforming?
It’s nonperforming, so much for the group above.
Always you want to put eyes on a property as well. Either you go out and take a look at it. Let’s move on to Des Moines in Iowa.
Des Moines, St. Louis, Lancaster and Jackson are all performing. There are yields on them. Two of them if I remember correctly speaks out about 14%, one home is 21% and the other one is 19%. When it’s blended, it comes in about 17%. I look at those, they are all very nice. I have someone looking at them. If there is interest there, I should take a look and be aggressive. There’s a nice pay history on each one of these.
I’m looking at them as well.
I like those four. The two Gary ones are very good but these four are very nice. The pay history is substantiated. They’re longer than the average payor histories.
The contract for deed is at 8%, 9%. You shouldn’t be doing anything. If you’re going to be carrying paper, you don’t want to give them a 5% interest rate. That doesn’t make any sense. Make them go out and get that financing themselves but normal 8.5% to 9.9%, that’s what I would be carrying that for sure for the most part. You can see that these have been paying for Des Moines originally in 2003, St. Louis in 2014, Lancaster, Texas in 2011 and Jackson, Michigan is 2001. They’re all due for November paid up to date, which is great. We have a question, “Would you all consider a swap of notes for any of his notes here?”
Maybe on the first day but not on these. I like the performers on both tapes. There’s something there. Then on the CFDs, there are some interesting opportunities. If you get someone in there, whether it’s a renter or a contract for deed, there’s an interesting value there.
Thanks, Joel. I appreciate you coming in. We made a little lemonade out of lemons. We’ve got these deals to take a look at. For our audience, we’ve got a good group in the WCN crew. For those of you who are members of that awesome part of the Facebook group, that’s where we’re going to have you. I’m very protective of my students and I’m very protective of people. I’ve had some disturbing responses from some people going out and claiming things against other people as a way of doing business. That’s not what we are here for. There’s plenty of business to go around. There are plenty of note deals going around. There are plenty of private capitals going around. If you throw a fellow member or a fellow note investor in the bus just because it’s a way that you are trying to get back at them or trying to do something, you will not be in this business very long. The worst thing that you want to do is do that and have it come back to me. As I’ve said many times before, many webinars, I don’t mind being the A-hole.
If you find somebody who’s been mean or shady to you, let me know because I’m glad to go chew a piece of ass fast off on somebody to send them straight. If you have something that’s happening to you like that, please let me know because I’ll be the first one to reach out and figure out what’s going on. Let’s make sure that we treat people in the golden rule, “You treat people as you would like to be treated.” That’s very important. If somebody goes out of their way to help you in some things like that, you need to be very respectful of their time and the fact that they took time to help you out on your way to where you need to be. Keep that in mind. You do not want to piss the bear off and be eliminated from all these workshops, webinars or the groups as well. I take this very seriously and I mean that for everybody. If you have somebody that’s been rude, pulls stupid stuff from you, says things that are not true, you need to let me know immediately and we make sure to get this fixed fast and get that person blacklisted out of the business.
We have a question, “Due to the fact that I have a rental property free and clear with long-term renter in place, I may sign a CFD for 15% higher than fair market value, to see if I can make it attractive and worthwhile for a note buyer or just sell beneficial interests to a note buyer who could rent it out for a while.” I do not think it’s a smart thing to sell an asset above just a few percent to what it’s supposed to be of the actual value. Try yourself for 15% above value and then try to sell that note off. The note investor is going to come back and discount it to what the value of the property is. They’re not going to give you extra because you sold it owner financing. That’s a very bad way of doing business too. There are a lot of people who teach owner financing and say, “You can sell it for 15% higher than what the actual value of the property is for you to buy. You can but don’t over-expect to sell that note off for the price that is above value for the most part. Joel, thanks for being a part of here.
Thank you. I appreciate it. Hopefully, we’ll have some new assets so we can do this again.
Are you trying to feel that more stuff is going to pop up here as we dive into the beginning of the fourth quarter?
I’m going through a new portfolio of 40 new assets from a fund. What I do is when I get them, I go through them. I make sure that I get many blemishes as I can get through before someone is going to do due diligence so when we come, we know exactly what we’re talking about. That will be coming, and I have some other couple of things that we’re working on. Any questions, if I can help on servicing and laws mitigation, the Law Office of Daniel Singer would be happy to help.
Joel will be speaking at Note CAMP. We have a question, “Will we able to get the strike prices?” Yes. You’ll work on those and get those out to me and I’ll get those emailed out to those who have attended. Thanks for joining us here.
About Joel Markovitz
Joel Markovitz is the Client Relations Manager for the Singer Law Group. He has an extensive background in loan servicing and special servicing.