Being one of the biggest states in the United States, Texas has become an extremely diverse market to penetrate that has a lot of interesting opportunities built in. This has made Texas real estate something of a challenge, but the deals there are just fantastic. Scott Carson discusses the note market in Texas and the opportunities that lie in the Lone Star State. He shares his experience and where he sees deal flow in the major cities of Austin, San Antonio, Dallas, Fort Worth, Houston, El Paso, Corpus Christi, and Waco. He also shares the difficulties that investors face when looking for deals and several ways for you to uncover distressed notes or owner-financed note opportunities.

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Watch the episode here

 

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Finding Note Deals In The Different Texas Markets

The First Tuesday Of The Month

I want to give a big shout-out to our Note Nation audience all across the country and our podcast listeners that listen across a variety of different platforms and then everybody on our radio station network as well. With this episode, what I wanted to get to is talking about the Lone Star State, the notes in Texas. I know a lot of people get excited in the note industry. When they come to know the notes space, they’re like, “I want to buy deals in Texas. The fastest foreclosure laws in the nation.” We can foreclose here in 21 days as long as you publish the notice of default within 21 days of the first Tuesday of the month. In Texas, all the foreclosure happens on the first Tuesday of the month. It’s not every week. It’s not every day. It’s not once a week. It’s the first Tuesday of the month. No matter what it is, no matter how cold it is.

First Tuesday of the month at the County courthouse, you will see foreclosures taking place there, tax sales and things like that. I wanted to talk about what’s so great about Texas and also what’s so bad about my Lone Star State. I live in Austin, Texas. I love it here. It’s been my home since I graduated from college in 2001. I grew up in Corpus Christi, Texas, which is down on the coast. My parents moved there when I was young. I was born in Minnesota, but I call Texas home. One of the great things about Texas is Texas does a good job of a Texas history and indoctrinating kids with the pride of Texas. That’s why everything’s bigger in Texas. We have a whole year of seventh grade in our middle schools where there’s Texas history where a lot of other states don’t teach state history. Texas is very proud of our background.

 

Like Texas, we have so many different niches that we’ve got available here. That’s what this episode is all about. I’m talking about where there are opportunities, where we don’t see opportunities and talking about the Lone Star State and where you can find deals if you’re here. I moved to Dallas, where I went to school and play football at Texas A&M Commerce. I transferred out to West Texas and went to school at Angelo State University before coming to Central Texas and finishing up at Southwest Texas State University, which is now called Texas State University in San Marcos. It’s a great university. I loved it. It’s smack dab between the middle of Austin and San Antonio so I was able to enjoy both areas. I worked in New Braunfels, which is a very growing market. San Marcos which is Hays County, I talked about it on one of the previous episodes being one of the top 50 counties that are growing in the country. We have San Antonio and Austin people move in there because they didn’t want to get away from the crowd.

Let’s share a little bit about it. You’ve got Houston as well. I’ve never lived there. I’m not a fan of humidity and then the floods are horrible. It has been hammered hard by floods and also by the hurricane and Corpus Christi was hit a few years back, especially on the coast. What are the other opportunities in Texas if you’re a note investor? If you’re looking for non-performing institutional debt, it’s going to be harder to find assets here. Why is that? It’s the same reason. We’ve got fast highways, fast foreclosures, fast executions but you’re not going to see as many deals priced at numbers that make sense. More oftentimes than not, banks are going to take the assets back and go ahead and do their own foreclosure and sell it at the foreclosure auction. In rare situations, it doesn’t mean you can’t find deals. Our good friend Kristin Gerst from Capricorn Mortgage, she buys owner finance notes that are performing and packages those often sells and makes split in the middle.

We have bought loans in Texas. I think here in Austin I’m at ten notes or less. Ten notes I think is what it is. San Antonio has got a few, Houston has got a few and Dallas area has got more around there. You’ll see occasionally down in the Valley where more of the default rates are. We’ve done some short sales. We bought the note and then sold the note out from that here in Austin or Houston, San Antonio. Here’s what you have to look at. I’ll give you an example. Everybody likes to move to Austin because it’s the metropolitan we have. Austin is divided into two areas. You have the older area of South Austin. You have the North area of Travis County, South Williamson County of Austin which is where I office at which is more the families. The minivans for the most part.

When you add in a geographic area, it’s about $1.2 million, $1.3 million people here in Central Texas. I call it Austin area home. It’s very hot. Medium home price in Austin has escalated at about $390,000. We have less than two months of inventory on the MLS. What does that mean? The normal sales of all the homes will be bought up and sold in less than two months. There’s nothing added. We have new construction going on here, people trying to build new homes. We have a lot of apartments that are trying to be built up here because the vacancy factor is less than 1% annually in the apartments. That keeps going up there. A medium rate keeps going up and climbing too. I don’t want to say exactly like Austin is turning into and what we’ve seen in San Francisco or San Diego or LA, but we are starting to start to price up the middle-class.

We do have an affordable housing issue although it’s nice because we do see some Austinites working to do something about that. I’ve got a friend who does tiny houses building those houses in communities. We see a lot of people that would rather drive twenty miles for an hour in traffic in the mornings or the evenings to live outside of Austin in some of the surrounding communities, Leander, Hondo, Pflugerville, Round Rock areas, Manor as well if you’re in the Southside of things or even Kyle and Buda which is South of Austin because they can get a much more bang for their buck. They can get a newer built house a lot of times on a half-acre for a half to a third of the cost of what a downtown condo or downtown home might be.

 

A few years ago, when I first got into real estate investing, we had a lot of these older shacks that were getting bought and then re-gentrified, rebuilt up on the East side of Austin. Austin has I-35 that runs from the Valley all the way up to Minneapolis. That’s our major highway. You have East and West Austin. You saw a lot of the stuff take place. For a lot of communities, they put a strain on water, septic, things like that. You saw lots that would sell for $10,000 and go for $100,000 in a matter of about 24 months. I have bought and sold a lot of real estates here in Austin and surrounding communities and a lot of fixes and flips early on in my real estate investing career. I had some rentals.

There’s an opportunity, you’ve just got to know where to look. The way Austin is as being a pretty good size, mid-size city, we don’t have a lot of the opportunities than other places got since the downturn in 2008, 2009 and 2010. We did not see as much of a decrease in value as other places up there. We stayed level for the most part. There were some areas that got hit harder, communities over there doing zero down, $500 down payment and stuff like that. Those areas had more short sales. I was involved with the longest short sale in all of Texas. That was over four years here in Austin, trying to move it from 2009 to 2013 before it finally sold.

If you’re looking for opportunities, here’s where I would look at here in Austin, Texas, I would not be in Austin. We have less than 90 foreclosures every month, usually less than twenty. It started to creep up a little bit. I would be targeting short sales but don’t expect to get too big of a discount here. What I would be doing in Austin is I would be looking for subject to deals. I would be looking for a property where the homeowner is looking to move out of the property. They maybe have some equity but don’t have enough to sell a property but it still would rent well. You’ve got a low-interest rate on the property because they’ve got decent financing and you turn around to a wraparound mortgage via your subject to a deal, turn around and put a renter in the place.

Short-term rentals aren’t an option here in Austin because they ruled against that. They’ve approved a law that outlaws Airbnb. Your short-term rentals aren’t an option in Travis County. If you’re outside of Austin and Travis County, you have the opportunity to do the short-term rental thing. It’s not been a fun thing here. The city councils here in central Texas have not been the friendliest with Uber or Airbnb. Uber was not here for a while, about nine months and finally, it just comes back in. What I’m trying to get at is if you’re investing here in the Lone Star State, you’re going to find more deals in Houston because of a bigger market. You’re going to see also people defaulting on their hurricane homes. You’re going to see it’s a little bit more affordable to live in Houston. You can see, especially as the refineries, the oil systems, increase or decrease layoffs, you’re going to see people struggling with that. It’s got a lot of more other areas around Houston than you do necessarily here in Austin.

Dallas is so big with the DFW, Dallas-Fort Worth network here, you see stuff around that neck of the woods more likely to fall into that. That’s an important thing. People ask me about San Antonio all the time. San Antonio is the most affordable spot outside of Corpus Christi if you live in Texas. I would rather live in San Antonio than in Corpus. Corpus, while quite affordable as this has the worst. It doesn’t have good school districts. San Antonio is built a lot better. When they built up the city, they have an inner loop which is 410. The outer loop is 1604 and they’ve done a good job for the last twenty years with the infill between those two loops and things are great. You have a lot of growth going on in the west part of San Antonio and there are a lot of opportunities out there. We bought quite a few notes in San Antonio over the years and I got a couple of students that bought a portfolio from a local San Antonio bank.

That’s the thing that I would look at. I would look at the banks. It doesn’t have to be a huge bank, smaller regional banks that have had some liberal lending practices, maybe lending to people without a green card, a Social or some of those programs. Oftentimes, if they’ve got some nonperforming, they would rather sell that stuff off versus looking to foreclose and be the bad guy. They’re usually embedded into quite a few neighborhoods and they don’t want their local people coming in and pick forks and axes when they start foreclosing. That’s an opportunity and we’ve seen that happen with a couple of our students. They bought a portfolio in San Antonio notes. The bank didn’t want to be the bad guy. Those are also sold off in that way. The bank is like, “We don’t own your mortgage anymore to deal with such and such.” It’s an opportunity there.

Our good buddy Jason Bible in Houston is starting to get into the Corpus Christi market. It’s still affordable, especially in the Texas Riviera area. The same thing like what happened in Houston. They had a lot of homes destroyed or damaged with the hurricane a few years back. People fighting and stuff looking to build back or not and finally said, “Enough is enough. We had enough rainstorms that come through. I want to move somewhere where I am not wet every weekend.” That’s the thing I want to get at with you guys is there is an opportunity here in the Lone Star State, you’ve just got to know. One of the most important things you can look at and I’ve seen this mistake happen often. You have to double-check your property taxes. That’s the one thing with taxes. We don’t have a state income tax here, but our taxes are higher.

It’s somewhere between 2.3% and 2.7% depending on what’s going on, which can be a pretty good chunk, especially if the taxes are not escrowed in the loan. If you don’t see that happening, you always double-check the taxes. Most counties make it easy for you to log in and see what’s owed, if there are any back amounts owed or not. Most of the time the tax sales are publicized on the local county websites as well so you can take a look and see what’s going on. To see if there are any overages and work that market as well too. If that’s something that you like looking at an asset that maybe there’s a tax overage. We’ve used tax overages here in Texas to our benefit in a couple of ways. We bought a note in Houston a couple of years ago and we are missing an assignment from the Bank of America to one of the lenders.

It took forever. There is still no update assignment. The borrower was willing to deed the property over to us so we did that. As we’re working through getting this assignment so we can go through and do a foreclosure, the property kept getting busted into multiple times, three, four times. Somebody would break back into it. It was not fun. We started getting tagged by the zoning department for the guy leaving trash out there and breaking in. We eventually said, “Heck with it. Instead of paying taxes on this and what we are into it, let’s quit putting more money into it. Let’s work a creative tax foreclosure situation.” That’s what we did. We went to tax foreclosure. We knew we’d get bid up at 80% to 85% of fair market value and sure enough, it did. We ended up getting a nice $45,000, $50,000 profit between the proceeds of the tax overage, what was owed left and then what we paid for the note.

While it was longer than expected, it was a lot of fewer headaches than what we were dealing with and trying to fix that property up and get it sold and flipped and things like that. You’ll see that will happen occasionally. We’ve had that happen in Dallas and used it once in a property in West San Antonio. In West Texas, you’ll see some opportunities there. It’s just that the houses are spread out a little bit more. I’m talking nonperforming notes. There are a lot of banks out in West Texas with the oil refineries and oil companies. Occasionally, you’ll find some stuff out that neck of the woods if you’re targeting banks out in the area. Bank of Arizona, Bank of Sonora, some of those are pretty good-sized banks for where they’re located, but still regionally in nature. Oftentimes, we’ll have some stuff on their books that they’re looking to move.

With Texas, you don’t see lease options. This is an important factor. Several years ago, we had lease options to get out a bond if they’re longer than 180 days or to a primary. We used it as a primary residence. I even used lease options with investors all day, to entities all day. That’s a different thing, but it’s going to go to owner-occupant, that’s got to be 180 days or less. We had a situation years ago where somebody’s state representatives’ cousin, nephew, I don’t remember who, a relative put down a large option fee on a lease option. They didn’t make the payments, didn’t follow through and were evicted and lost their option. Since he ran it up the pole and the investors didn’t show up to fight this, it got made into a Texas Law. Once something is a law on the Texas books, it’s very difficult to overturn because our state legislature only meets every other year having for like 170 days, 160 days.

State Legislature

They’re not in session every year. They did that getting back to the Civil War. After the Civil War, the parties wanted to go in and create laws to make it difficult for the carpetbaggers to come in from the north and change things. Texas has the weakest state legislature almost. Maybe not the weakest but pretty close, but weakest state legislature in the country. The law is changing and it takes a lot of work. There have been some multiple talks over the last couple of decades of working to admin that and change it up a little bit. We have a different state legislature, but it’s a difficult aspect. Texas is a large state. It takes about eight hours for you to drive across it from Houston, all across to El Paso or driving from Brownsville, Laredo all the way up through Lubbock, Texarkana. Texarkana is the East, Lubbock, and Amarillo to the West or to Dallas if you’re there in that neck of the woods.

El Paso being its own zip code, I rarely see stuff out there. Occasionally, I’ll see a nonperforming note. With it being on the border, you would think you’d see more as we do down in the Laredo, Brownsville, and Matamoros areas. We’ll see some nonperforming debt down there. We’ll see that pop up if we see stuff on a bigger bank’s page from time to time. It still has the same laws, still faster foreclosure. One of the things that’s a little difficult about El Paso is it is on the border with Mexico and you’ve seen a little bit more gang and drug activity in El Paso. You’ve got to be careful about where and when you’re buying. The same thing goes for the Valley as well. Make sure you’re not buying a cartel note or something like that. There’s a lot of gang violence.

We have found in some cases where we bought in the Valley. Your borrowers brought money to the table to stay in the house and were able to make it up. Those that didn’t buy that left just left. It’s often an easy thing and that’s the benefit of buying notes in Texas. If they don’t do something, start your foreclosure and you can get things done. What does it cost to foreclose in Texas? They are attorneys that can do it roughly about $1,000, maybe $1,500. It depends on the situation. It was a relatively inexpensive process to do. We’re a non-judicial state. All you do is to publicize it and your attorney can go to the county steps and the crier on the first Tuesday between 10:00 AM and 4:00 PM and foreclose it.

The thing about Texas, you have to have the full amount of your bid in cash there. We have found that a beneficial way to raise capital is going to the foreclosure auctions and networking with people, passing out cards, getting cards, talking to people that are there. Why? They often have a lot of money in their briefcases or cashier’s checks ready to go and pay and take care of things. You’ll also find people that are also packing heat because it is legal to carry concealed weapons if you’ve got your concealed permit here in Texas. Keep that in mind when you’re out talking with people. Another thing that’s beneficial about Texas. It’s nice weather. Most of the time, we’ll see some cold in the Northern part of the state and some snow from time to time.

I don’t see it very often. It’s only a few bad days. Austin is a mild climate compared to others. We do have 90 days to 100 days of three-figure temperature. A hundred degrees is not uncommon, a 100 plus for 100 days throughout the summer but that’s what they made air conditioning for. I’ll take that. We’re not nearly as humid as you would say in Houston. Houston on a hot summer day, you’re going to go through 2 or 3 shirts. The same thing in Corpus Christi. San Antonio’s humidity is a little bit worse than it is in Austin but still roughly two hours from the coast. While it is much more humid here than it was, say Arizona or Phoenix, it’s not nearly as bad as along the coastline.

Here’s some opportunity. Here are the places that we see. I’ve talked briefly about the opportunity in outside areas, secondary markets around your major cities, short sales are starting to increase. I would be looking in the major cities and targeting the outskirts. Take a mile out from the major cities or where the thing is and then in the next five years, that area will be grown up. I learned that from Bob Lee and Amy back in the day, talking about the path of progress. Don’t go where it’s at right now, go a mile out. In the next year or two years, sometimes five years, it will grow out to that aspect of it and your property values will go up.

A very nice way to do that is to reach out to those property owners on the outskirts of town or those residential-commercial owners and see about putting an option on the property of five-year, ten-year option on the property. Lock in a price and as the property value goes up, you’ve got an option for five years to exercise that option to buy that property that is up. In that case, maybe take over the financing in the subject to worked out well. We’ve seen some opportunity in the self-storage markets on those outskirt communities. Mom and pop companies are tired of running a business or leaving one job for another job when they wanted to retire more. You’ll see some opportunities out in that neck of the woods outside of your major cities. There is also one of the things you can keep in mind is your travel time if you’re buying assets.

 

If you’re buying somewhere and you’ve got an asset in San Antonio, it could take you 1.5 hours to get to San Antonio depending on where you’re at in Austin, depending on the traffic. We have toll roads around here in Austin, especially between Austin and San Antonio. It makes things a lot faster. I can be in San Antonio in roughly 1 hour versus 1.5 hours which is depending on the time of the day that you’re traveling there. If you are here in Austin, it can take you 2.5 hours to get to Dallas. It will take you about two hours to get to Houston. It can take you roughly 3 to 3.5 hours to get to Corpus Christi, depending on which way you go. El Paso will give you about a five-hour drive. It’s a good drive out there as well. The nice thing is that we do have pretty easy Southwest airlines that fly to about anywhere in the country.

That’s the nice thing that I like to call about Austin home. I’m a 2.5-hour to 3-hour flight from 90% of the country, depending on how Southwest flies. I don’t have to go through Dallas or Houston most of the time either to connect. There are a lot of times a straight shot somewhere here to Chicago, here to New York or here to say Tampa, Orlando, here to San Jose, San Francisco, here to San Diego. There’s a straight shot, a nonstop in the morning or in the evenings. During the middle of the day, there are often more connecting flights, so you may have to layover. That’s the thing when you’re an investor is that you want to try to find something within 2, 3 hours of you. The thing is I like using Southwest as an opportunity because I can fly to those areas and be there in 2 hours, 3 hours if I need to be.

My market is bigger than what it would be normal here in Austin. I have not bought anything often in Austin in 5 or 6 years at least. I starting seeing the value of the house increased quite dramatically in the last couple of years. For the most part, it’s pricing affordability out for a lot of people out there. If you’re looking for stuff here, we do have a lot of banks and we do have a lot of mortgage companies enjoy coming into Texas and lending here because we have the friendliest foreclosure laws. It’s easy to evict. It’s easy to foreclose here. One of the most beautiful things and I’ve used this thing I’m about to share with you guys out there is the Texas Savings and Lending Department, which is the department here in Texas that handles the licensing of mortgage brokers and mortgage bankers, publicizes their list of licensed mortgage companies and mortgage brokers and service companies that are licensed to do business here in Texas.

That’s a free website to go to download a free list. I just downloaded the list with one of our new students, Bob, who was here on two-day one-on-one coaching with me. Once we’ve even filtered it down and getting rid of the other auxiliary stuff that we’re not using, it still leaves us almost 3,000 contacts and company names that we can reach out to. It’s a beautiful list with the company name, when they were in business if they’re licensed, is it good or bad, where their home office is located at, phone number, fax number and also an email. It’s either half the time it’s with a person in charge or half of the time it’s with the licensing department at the company.

You’d say, “Scott, why do I want to talk to the licensing department?” If you’re calling the phone number using email, it’s an easy way to say, “I’m looking for somebody in your secondary marketing department.” You get transferred to the right department, phone calls and emails, “I’m looking for somebody in your secondary marketing or your special assets or your whole loan training department to do that.” That’s a beautiful list. It’s free. The only thing you have to pay for would be your email campaign. I have been using the Texas Savings and Mortgage Lending website, straight on there to download it, clean up a list and it adds 2,000 contacts directly that you can email out to.

The mortgage company is going to be a lot more hit and miss because they’re not all originating their loans. They’re being a broker. The mortgage bankers, the servicing, there are 270 licensed mortgage loan servicers who are servicing here in Texas. That’s the one thing too. Texas does not require you to have a servicing license if you’re going to be doing loans here. We do have the thing in Texas that if you do more than one owner finance note, like Dodd-Frank, they want you to go out and use RMLO. They’re trying to get that push back to four but that’s okay. We do see a lot of opportunities here with that list that you can reach out to the mortgage bankers and the licensed servicers to see what they have on their books here locally or even in other states using it. If it’s a honeypot here, honey attracts more flies, you need to reach back out to the flies is the way I look at it or in this case sometimes bears.

If you have a note in Texas, you don’t have to service it. That works for you and against you as a note investor here in Texas. It works for you because they saved the $20 a month. You only have an extra license to do that. You can handle yourself. It works against you though because you don’t have a license and you don’t have a third-party servicer to handle that payment collection and tracking and mailing out notices and stuff like that. I’ve seen this happen with some of our clients. The student had an owner finance note and it wasn’t serviced with anybody and it costs them dramatically more so because they offered a 5% interest rate to the borrower. It still costs them extra because they didn’t have a servicer who was collecting the payments and handling that stuff as well. That’s the big thing. I get phone calls from people all the time, “I’ve got a note in Texas.” I’m like, “Have you serviced it?” “No.” “Do you have a payment stream?” “I got hit and miss. They paid me cash each week. They give me a check.” I’m like, “That doesn’t help. It’s a lot more work on our part to see if it’s an actual true deal or something that’s ugly that you’ve got to step away from.”

If I’m limited in Texas, do I have a big Texas community of note investors? Not really. I would say the majority of our note investors fall in line around Houston or Dallas for the most part because of the Quest IRA offices at the neck of the woods. Austin has a couple of smaller Meetup groups who meet occasionally. I don’t even know if they’re still meeting or not. We don’t have that big enough investors because a lot of people want to touch and feel, they want that sensation. There is one real estate investment club that meets here in Austin on a monthly basis. It’s pretty much focused directly on the leader of that group. The people that run that group, they try to forward everything in business into them. They’re not in the note space, so they don’t spend any time on the note business which is unfortunate. It’s all about what they want to focus on and that’s fine. It’s their business to run.

We have started some Meetup groups here in the past and they fizzle off. We’ll focus on where most people are out there. Although Austin is our number eight, San Antonio is over number nine and Dallas is our number ten markets. Houston is number 2 or 3 consistently. For the people that read our blogs, that also comes from and I spend a lot of time with Quest Trust Company for the last couple of years. Some of the things that you have to look at our property values. A nice thing here locally in Austin and also across most of Texas is the County Appraisal Districts, especially here in Williamson and Travis County. They’re a little low but they’re about within 5% to 10% of your true market value since everything is annually updated.

Some neighborhoods, it would not be that depending on appreciation but for the most part, your online appraised values will be within 5% to 10% of what your true value is. In Texas, we don’t have a sales disclosure. When you buy a property and it’s filed with the county, a lot of buyers of property will get a letter in the mail from the county, hoping that you’ll fill out until you tell them exactly what you paid for. It is not required to fill out the form. It’s the county trying to figure out where you got it so we can adjust your taxes. Another thing, it’s easy since we do have higher property taxes, is we also highly encourage you to go in. If you’re an investor here and own a real estate in Texas to go on and fight your appreciation and fight your property taxes. It’s not too difficult of a thing to do. Pull some comps, talk about your property and take it before the county and they’re often pretty good.

They won’t always meet you eye-to-eye and see what your value is, but they sometimes will meet in the middle. I don’t like that. There’s not an appeal to it except the first time around. There are companies that will do that for you here locally. It’s a good idea if you don’t have the time to do it because you save you money year in and year out on your property taxes. Even though your property taxes are something you can write off, you still need to look at them and make sure, “That seems high.” Sometimes it’s a simple procedure to take advantage of that they get dropped down. One thing that you’ll need to do a little bit different here in some counties, in Houston or Harris County in a tax overage, if you’re looking to claim on a tax overage, you will need to often hire an attorney to go in and do that.

Harris County is not the friendliest about releasing information about how much is an overage and things like that. I had to hire an attorney and paid him $1,000 to go in there and get a tax overage that we were fighting on taken care of. I got $50,000 going back. I can afford to pay $1,000 to get it taken care of. Most people are friendly here in Texas for the most part, but you’re going to see like with any real estate community, you’ve got to keep your cards close to the vest. I will say that I have found that the San Antonio real estate community is some of the friendliest and nicest communities of people working together and networking. Don’t get me wrong. I’ve seen great stuff happen in Dallas markets and seen great stuff happened in the Houston market. What’s also weird though, is that you don’t have a big self-directed IRA community in San Antonio.

In Cuesta, they were working with the stuff, but a lot of people don’t take action a little bit but I don’t get what it is. You do have a military and call center focus based in San Antonio. Austin is going to be banking technology with Dell, Samsung, and IBM. Dallas is going to be oil and natural gas. Houston is going to be oil and natural gas. Houston is one of the top ten channels, the Houston Ship Channel. Corpus Christi is doing a lot of work to its ship channel area down there. I expect to be a large area close to rival in Houston when everything’s done here in the next 5 to 10 years as well too. You’ll see a lot of stuff happening, especially in Corpus Christi and any military activity. We have Fort Hood which is more of those about an hour and a half here. It’s North of Austin. It’s one of the largest military bases in the country. Anytime we stop going to war, you see a lot of vehicles going down to Corpus Christi and being hauled out of there or the Lexington Aircraft Carrier Museums down at that neck of the woods as well too.

Here are the things I like about Texas. It’s friendly. I love the weather. I love the environment. I do like being centrally focused although there was a period of time that I did live outside the state as I was traveling a lot of time in Florida and Southern California. If I could move somewhere, I might move to San Diego, probably not. South Florida, possibly or even somewhere else. If we do end up moving here, we will be moving somewhere a little more tropical, but Austin has been nice. I’m fortunately very spoiled. My office is very close to where I live. I have less than a minute commute in the morning coming from the house to the office. I don’t drive around in Austin that much because it’s here, the grocery store, movie theater, dentists and other stuff are all within less than a mile radius of where we live here in Austin. I’m in Northside. We’re blessed that way.

Things I will look at too is Williamson County which is on the north side of Austin. It was one of the fastest-growing counties in the country years back but still going well. Georgetown is the biggest city inside of Williamson County. Round Rock is a part of that aspect too. They are a few minutes apart from each other off of I-35. Those areas are great to invest in. If you’re going to be in the landlord business buying notes, turnkey rentals, I would be looking in the Pflugerville, Round Rock, Georgetown, Leander, and Cedar Park areas to find those because that’s where homes are much more affordable than being an actual Austin. The thing that you look at, we have so much influx coming in from other states particularly in California. We do get a lot of influx of outside people. You see it all happen all the time. A lot of times those are influxing and coming out here near the Lake Travis which is our main lake out here. They can sell their house, $1 million shack to come in and buy a $300,000 house or $400,000 house near the lake. Who wouldn’t do that and put a $500,000 money in your pocket?

The thing to keep in mind when you’re doing that stuff is that it helps you identify opportunities and where you need to avoid. Don’t market to those higher-end areas because we see very few foreclosures, very few short sales in that neck of the woods. Commercially speaking, we are seeing more commercial space popping up, mixed-use. Just like other places in the country, big-box stores in some of the malls are having a difficult time. We had a major mall in the middle of Austin shut down years ago because they couldn’t keep anybody in there. It was a tough time. We see that here on the north side of Austin. We have a mall not too far from here and you’re seeing a lot of the major chains pulling out or closing the store, their retail outlets because they start getting the business and can’t afford it.

The beautiful thing about Austin is with us having such a high tech community, a lot of people do work from home. You have that option. A lot of times, other people I’ve talked with, employers are open maybe one day or two days a week working from home. If you’re coming to this area, keep that in mind as a possibility. The thing is as an investor more so than anything else, what’s nice is we do have a lot of money here. The appraisal districts make it easy for you to log in online and track down people that have bought a property where their IRAs for the last couple of years. I would go back 2 years, 3 years to see about 250 people who have used their IRAs. We do have roughly about 45,000 people that have an IRA of some sort here roughly in Austin, in Travis County. I’ve pulled those numbers and we marketed those directly here and there. Rent rates are a little higher.

A Need For Housing

Rent rates keep going up for two reasons. One, the apartment is getting packed. There is less than 1% vacancy factor. That means you get up your rent because there’s a need for housing here in Austin, Texas. It’s easy to bump the rent up $100 a year or $50 at least and looking to make that work. We see some people having successful short-term rentals outside of Travis County and Austin like I talked about. I’ve seen that happen. People and students coming in for our masterminds living or being at short-term rentals and saving a lot of money versus a hotel nearby. That’s great. There is nothing wrong with it at all. I know that Steph used to use that as well before they banned Airbnb here in Austin, Texas. The big trucks, we have low gas costs here, so it makes it not so hard to have a big truck and drive across Texas. What’s great about the Lone Star State, going back to what we talked about before, is you have a lot of several bigger cities. Dallas, Fort Worth, Houston, Austin, San Antonio, and Corpus Christi. You could even say Waco. They’re in between and have a lot of growth going on. El Paso, if you want to drive out five hours up there or fly out there in an hour.

That’s a nice thing going back. I could be in Houston in 30 minutes. I could be in Dallas in 45 minutes once I hit the airport and jump on a plane because it’s a pretty fast flight. It’s not too difficult and I’ve seen it happen. I’ve done that myself. I fly up to Dallas for a meeting. A taxi will pick me up and dropped me back off the airport. I’d have to spend the 4 hours, 5 hours driving because they will get some stuff done and go back and forth from there. It’s the same thing in Houston, dropped off, picked up, rock and roll. Opportunities are here going back to the subject to deals. We saw a lot of subject to deals several years ago with a meltdown. There are a lot of opportunities for that. Subject to wholesaling is difficult here because we do have such a lower price. We do have tax foreclosures, but they often get bid up at the foreclosure auction above where you want to be as an investor. We see that in the foreclosure auctions. It just doesn’t make sense. It either gets pulled or it’s overbid and you have to be much more selective in what you’re doing. That’s why the smart play here, not only in Austin but in other areas too, is tracking that banks and looking at your defaults.

The thing that’s a little bit difficult here in Texas with default is we do not publish the NOD, the Notice of Default lists. A lot of states will have the Notice of Default list. We don’t publicize that. You see the foreclosure list, but then you’ve got to scramble. One thing that we used to use here and it’s still available is the notice of substitute trustee. This is the pre-foreclosure list. A lot of times with your Notice of Defaults, you’ve got 90 days, lis pendens, 90 days or longer. If you’re in Texas, it’s so fast. You’ve got to jump on the notice of the substitute trustee list. That’s often a listing that’s filed with the County where the bank is hiring a new trustee to handle the foreclosure aspect of that asset. That’s close to a 90-day or less procedure. That’s a good list to use, seeing who’s starting in the default rate and working that.

If you’re an aggressive person, I’ve seen door knocking work. I’ve seen letters work and postcards work. You’ve got to invest in that aspect of things here. We don’t see as many bandit signs as you would see in Houston and Dallas. We see more of those on the outskirts of Austin than we do here. I see a very busy intersection of where I am at right now. I can see them both. I don’t see too many bandit signs out there. I will tell you that though, that the zoning department and the code enforcement department of Austin are very aggressive in taking those signs down, taking down those bandit signs. In other areas, those departments would be great places to reach out to see what properties may be in default or distressed. It’s a winning list, especially in Houston, Dallas and San Antonio on the lower socioeconomic areas where people don’t have the money. It’s a little more affordable. Here in Austin, you’ll see a lot of that.

Checking out the zoning departments and code enforcement is a great place to go in the bigger cities here in Texas because they’ll give you a list. Those will often be great ways to reach out for potential subject to deals, people who can’t afford to fix up their home. We see some opportunities in the probate lists here, especially in Georgetown, Texas. North of us here has a big retirement community. It’s a Del Webb Sun City place. You see a lot of people getting old. You see probates working there. It’s a list that we used quite a bit. We are pulling the obituaries up on a daily basis and mailing out yellow letters to the obituaries to get properties or other things. I’ve seen a few deals converted as families don’t have the money to either pay taxes or take care of things.

One of the things that’s important here is lending. Cash-out refinances were not available in Texas until 1995. They still set a precedent where the homeowners can only pull up to 80% of the equity out of the loan wherein other cities, other states. They can pull up to 100% of the equity out in a refi. Here in Texas, since the real estate laws are written by realtors, they wanted to make it more difficult. If you’re going to sell your house or pull the equity to sell your house, which in turn, you had to hire a realtor to do that. Most of you can pull out is 80% of the loan-to-value and cash-out refi, once it’s a cash-out, it’s always a cash-out.

That’s the thing to keep in mind. If you see loan balances being at 80% of the as-is value if somebody is on a loan mod but they can’t necessarily tap into that 20%, there are a few creative ways that we were able to help some people with things. Divorce decrees, IRS tax liens and then also paying off. You can get into that if you have a lien that you’re paying off. If you had a private line or a second mortgage that was slapped on, you can do a cash-out refi to pay those off. That’s a different way. That’s one way to exceed the 80% LTV aspect of loans. For the most part, if you’re doing a cash-out refi, the max you’ll go to is 80% of the appraised value and still leaves 20% equity in the house. It’s not a bad thing, but it also leaves a lot of people looking for equity deals here in Austin. People will fight you for that because there’s that 20% or more equity in the property that they’ve worked to pay down.

We see a lot of stuff. We are starting to see more and more of the 0% financing and 100% financing. I talked to a Bank of America mortgage broker out of Vegas who was talking about how they’ll pay the 3% down payment at Fannie Mae. They’ll pay up to $7,500 in closing costs. It’s truly 100% financing on people with decent credit to go ahead so that Bank of American will originate those loans so they can get them on their books because they realize they’ll make that money back faster than they will if you do other things. The true 100% financing is back. It’s scary. Somebody who’s not supposed to be in a loan and getting a loan. We’ll go ahead of you. We’ll go ahead and give you the string and we’ll tie the note and loop it around your neck for you. How does that sound? All you’ve got to do is step off and sign. It’s very sad out there. Texas is a great state. We were very lucky. We didn’t see a big decrease in values.

I wish I had a crystal ball to figure out what’s going to happen here in the next 12 to 24 months. It will be more micro changes. Companies laying people off and having a default amount. I’ll give you an example. iHeart Radio laid off a bunch of people across the country. If I could find those people, that would be a great place to target is potentially maybe being in trouble. More so here, it’s more around the bigger businesses when Dell laid off years ago here when they were moving their manufacturing over to Memphis. That affected me with my first couple of investment properties were my tenants now were unemployed and couldn’t pay the rent to me. You also look at refineries laying off. I doubt they’ll be doing any but assuming ConocoPhillips was going up and up and a lot of people getting excited about it and then they had a dip. I don’t think BPs got too big of an office, but British Petroleum, if they did, they didn’t take a big hit here locally but it happened in the Gulf years ago.

 

If you’re looking for Texas notes, that’s great. Kudos to you. I would not make Texas one of your top 2, 3 or 4 or even 5 states. As a note investor, we don’t see enough compared to Ohio, Michigan, Indiana, Illinois, the Carolinas, North and South, and even Florida. We don’t see as much as we used to. Texas, as I said, fast foreclosures, fast highways, and fast executions. You don’t see that much. The banks are willing to foreclose and take it back but that doesn’t mean you can’t work. It doesn’t mean you can’t use a distressedpro. You can’t use Texas Savings and Mortgage Lending to reaching out to these lenders. It doesn’t mean you won’t see stuff from time to time, but make sure that it’s not the bottom of the barrel, something ugly that you end up regretting and you ended up buying the note on.

I love it here. I had a friend who was buying a note in La Grange. The hometown of ZZ Top. La Grange is about an hour east of here and they were all excited to buy this note. The value of the house was about $100,000. They’re picking the note for $50,000 and they need about $25,000 in repairs. I was like, “That’s awesome. That makes sense. How are you financing?” They’re like, “We’re going to use hard money to finance. I got a hard money lender willing to lend them money to us because we can get a foreclosure so fast.” I was like, “What are the days on the market?” They got 365 days. I’m like, “Kill it. Don’t do the deal.” They’re like, “Why not?” I said, “Your hard money costs are going to kill you financing that. That doesn’t mean you can’t get it foreclosed. It doesn’t mean you can’t take it back and put some rehab into it. If it’s 300 days on market in La Grange, Texas, you’ve got to be very careful because that could kill you right there of the money costs.”

Always look at your days on market. Always look at your things. Sometimes the values are pretty in line with the County Appraisal Districts. Do yourself a favor, hire a professional. If you’re buying notes here, get a service. If you’re going to originate, get a service. We’ve got some great attorneys here that understand owner financing. I want to wish you all the best of luck guys out there. If you’re looking for stuff in Lone Star State, welcome. As always, feel free to reach out to me as well. Guys and gals, if you’re looking for more information, always feel free to text the word NOTES to 72000 and we’ll make sure and get you added onto our list for great updates. Otherwise, have a great day and we’ll see you all at the top.

 Important Links:

• Capricorn Mortgage
• Texas Savings and Mortgage Lending
• Quest Trust Company
• distressedpro
• http://www.NoteBlueprint.com
• http://NoteWeekend.com

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