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I Helped Someone--Now I Have a New Tool and $18,000

by Joe in OK   

A local real estate agent contacted me recently. He had heard that I could possibly solve his problem. I told him that if I were able to solve his problem he would have to refer me to other clients. He said sure.

Here's the deal:

He owns multiple rentals and was having a problem with one. He was facing foreclosure (big problem).

Original note amount $23,000
Payments of ~$230
Loan made in March 1998
Number of payments made - 2 (He made the first two and is now five years behind.)
Amount now due $39,500 (attorney fees and interest)
Appraised value $54K

Are you asking how a loan can be five years behind? I was. The loan was sold twice and he had gotten two forbearances. The third note holder was finally foreclosing after two years. (I don't try to understand mortgage companies.) I never asked why he didn't make the payments. (I didn't want to know.)

This was my first note deal and by listening to Terry Vaughan and Ed Garcia, I felt that I could talk to the mortgage company in an intelligent manner. (These guys know what they are talking about.)

I contacted the mortgage company about buying the note because of the non-payment. He said to make an offer. I offered $15,000, and he said he would have to talk to the "boss." I also asked if he has anything else he wants to sell. He would check.

A couple of days later he countered with $20,000, and we settle on $17,500 (looking back I could have done better). He then asks if I am interested in any notes on the East Coast. I said sure, send me a list.

To make a long story short, at the closing table (I let the title company do all of this.)

  • I bought the note ($17.5K)

  • I paid the attorney fees and closing cost ($2K)

  • The owner deeded me the house in lieu of foreclosure

  • I stopped the foreclosure and helped save his credit (He's tickled pink.)

  • I get a new mortgage on the property at 70% LTV ($37.8K)

  • I walked away with $18K

  • And the house is rented for $450/month ($150+ cash flow)

I got a rented house, $18K in my pocket, and future referrals to solve other people's problems just by making a few phone calls. Is this a great business or what?

Never limit yourself to just one area. I have the lease option and subject to down cold. I have studied real estate notes and understand them but have just never used them. Now by helping one person, I have another valuable tool in by arsenal.

I am a graduate of the How to Get Lenders Fighting to Give You Money Workshop, and I was attending again this past June. I missed the first day because I was closing on this note. Terry asked me to tell my story on the last day.

Over 30 people asked me later how I did it and where grateful that I told them about it. It gave them the motivation and encouragement that they could also do it themselves. I had no intention of getting up in front of 100 people to talk about my "small" deal, but if it helped just one person it was well worth it.

Terry and Ed, thank you from the bottom of my heart for allowing me to share my story at the workshop (and on the website). You guys are awesome. About the other notes, the list was "just" 100 notes with a face amount of $2.5 million. Terry, Ed, and I are working on it now. I will send another success story about it.

 
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