Keep the Ball Rolling with 6 Creative Exit Strategies

When our clients purchase a distressed mortgage note, they generally have an idea of what they plan to do with the note. However, like with any plan, sometimes things do not pan out as expected. You may not be able to get ahold of the homeowner, you may not be able to come to a financial agreement or you may want to foreclose but after hearing the story of the family you decide to work with them to keep them in their home because you choose the ethical investing route. If you purchase a distressed mortgage note that does not align with your original game plan, there are multiple exit strategies available to keep the ball rolling. After all, you are now the bank and the ball is in your court.

One key benefit when investing in the note industry is you are not “married” to any note. If it is not working you have options…

Keep Circulating Your Investments

If you purchase a portfolio of loans, you might have (for example), 8 non-performing and 8 re-performing loans. Your original plan was to renegotiate the terms with the homeowner, however, you could not come to an agreement with 4 of those loans to start paying again. Now that you have 4 loans that do not align with your initial investment strategy, did you know you actually have the option to put those loans back on the market? You can either sell the loans privately or find a broker to sell the deals for you. When purchasing one of our bank direct assets, it is not uncommon to receive 20-40% ROI. Meaning, you are still potentially able to turn a profit. Whichever you choose, if you play the game right you can grow capital while circulating your investments.

Utilize a Creative Exit Strategy Approach

Before deciding to continue circulating your investments by selling off your loan, you can also choose to take an alternative or unconventional approach.

If you keep up with our educational blog posts, we tend to compare the traditional real estate industry vs. the distressed real estate industry. Typically, a traditional single-family home real estate investor has two main exit strategies. You are either going to decide 1) Am I going to put money into this property and dump a bunch of money with my contractors/construction crew, then renovate this as low as possible so I can eventually re-flip it and turn a little profit, then rinse and repeat and do this over and over again -or- 2) Am I going to clean this property up a little bit and create a rental play as a landlord.

By putting a new spin on the way you invest, you are talking about buying distressed notes (the mortgage debt). Generally, you have about 5 or 6 exit strategies to start with, then there could potentially be more depending on if you are a short-term investor looking for capital growth, or are you a long-term investor looking for consistent passive income.

What creative exit strategies are available to you?

  1. You can try to avoid foreclosure altogether
  2. You can convince the homeowner that foreclosure will affect their credit for the next 7 years, and to avoid it you will rid the debt entirely if they sign the deed over to you. You could even offer the homeowner a first and last months rent at a new place, this is called a deed-in-lieu or cash for keys
  3. You can convince the homeowner that we can do a short sale on the home and approve it within 48 hours
  4. You can give the homeowner a modification that allows them to stay in the home and continue to pay
  5. You can work a deal with the homeowners friends/family members to purchase the home at a reduced payoff, and the homeowner will make subsequent payments to the friend/family member which they will then be off the hook with you
  6. You can work with the homeowner if they went ahead and filed bankruptcy
The Ball is in Your Court When You are the Bank

When you purchase these bank direct assets, you can make these kinds of decisions. The ball is in your court when you are the bank. Furthermore, these are the same offerings that the bank can offer its customers but because they have not set up an infrastructure to carry out loss mitigation and debt collection loans that they originated, it is not in their business model to offer creative financing. The quarterback doesn’t run down the field and catch it. The functionalities are separate. At this point, a firm like Revolve Capital would come in and alleviate the bank’s issue by not being able to collect on a debt that is not paying them. We offer the bank a bump above 0, which clearly is an incentive for them to sell it.

There are a handful of different ways that we can look at buying a mortgage for a steep discount. Depending on which route we want to take, all of those routes mentioned to you are profitable and if you bought that loan for $50K, but it is worth $100K, all of the routes we just walked through would sell that deal for much higher than the $50K price you bought it for.

When you are “the bank”, the sky is the limit because you do not have traditional or expected rules to follow, you can utilize a creative exit strategies… and if you decide the deal you purchased from us is not panning out how you expected there is the option to sell the whole loan (private party or with the use of a broker) and keep circulating your investments, then move on to the next portfolio of assets.

Keep the ball rolling by expanding your note investments. If you’re interested in expanding your note portfolio and utilizing creative exit strategies, get started now by clicking here.

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Put a New Spin on the Way You Invest – Transition Into Notes

Buying the Debt to the Property

When you think of traditional real estate investing what benefits come to mind? Some might say cash flow, long-term financial security, and gradual appreciation to name a few. Depending on your own experiences you may think traditional real estate is a gamble. Although traditional real estate investing has become a mainstream method of capital growth there may be drawbacks and limitations. Most likely there will be an increase in liability and duties as well as unforeseen expenses. While you do have the benefit of being your own boss, your schedule may become more demanding than a typical 40-hour work week depending on the particulars of the property. Not to mention that no two investment properties are the same, there will always be new surprises.

Transition Into Notes

In our opinion, buying the debt to the property (notes) vs. purchasing the property is a more profitable and scalable play. When you purchase the debt, you become the bank. This spin on investing allows you to decrease liability while increasing the amount of exit strategies available to you. It’s important to remember that a national note portfolio can be managed from the comfort of your home or office. Should an issue arise, our network of nationwide vendors are available to assist you.

Another key reason to transition into notes are the substantial discounts and their obtainability. On average distressed mortgage notes can be purchased at 40-50% discount off market value. Also, the distressed note industry is not dependent on a thriving economy. If our country were to have another recession there would actually be more inventory for you to choose from.

In conclusion, converting your assets from traditional property investments to distressed mortgages is beneficial for many reasons. You will have less hands-on work with the ability to utilize our nationwide vendors. This allows you to work from the comfort of your home or office. Liability will decrease and your ROI will increase. Note investing will increase your exit strategies (long and short term options). Becoming the bank and acquiring the property with 40-50% discount off market value. Notes are not dependent on a thriving economy, there are pros to an up and down market. We strongly believe if you transition into notes you will find positive results with your investment assets.

If you are a traditional real estate investor, put a new spin on the way you invest. Give us a call and let us help you transition into notes, CLICK HERE.

Auction or Judge gavel on a laptop

Buying Homes at Auction VS Buying Notes

Learn to Purchase Home Prior to Auction

Traditionally, when an investor wants to purchase a foreclosed home they would typically go to the courthouse where homes and assets are auctioned off at discounted prices. Is buying homes at an auction the best method in obtaining an investment property, and more importantly what is the best way to use your resources when it comes to buying homes at auction vs the note?

The all-out craze in buying homes at auction has dramatically decreased since the height of the 2008 residential mortgage crash. The main reason(s), competition from newer buyers and less inventory. Since the foreclosure moratorium of 2010, foreclosures were halted by many lenders so that a less expensive route could be sought after, loan modification. We would recommend learning to purchase the home prior to going up for auction. You can purchase the same piece of real estate for roughly 30-40% cheaper than at auction. By purchasing the actual mortgage note from the foreclosing bank, you could save yourself thousands of dollars by learning to acquire the actual debt vs. the property itself.

Buying Homes at Auction

Buying homes at auction can typically turn a seemingly “smart” investment into a nightmare. How may an investor know the interior condition of the home, prior to auction? He can’t, he must wait until the offer is placed and the bid is accepted to take ownership of the property to eventually get inside. You must fully understand the scope of work the property will need to bring to market, to sell quickly. Therefore, we recommend learning how to buy the same property at auction well before it’s listed.

For example, instead of purchasing a $100k property for $90k at auction, you could learn to purchase the same house for $55-60K buying notes.

Buying Notes

Purchasing a distressed mortgage note enables the investors (like yourself) to purchase homes for a fraction of the price you would at auction, and getting it before it heads to auction. This gives you a greater return on investment with less room for error. Buying notes give steeper discounts and usually provide larger profit margins.  Our sales team has national portfolios ready so you can take the guesswork out of purchasing real estate at auctions, and start buying notes and purchase custom-tailored distressed real estate tapes. Our management team and sales floor are standing by. Please contact us to see what options are available to you.

Delinquent Loans May Still Be Distressing Housing Industry

Since the 2007 recession, most of America has believed our economy is on a steady incline and we are free and clear of another recession. According to Keith Jurow, in his article written “Why bubble-era home mortgages are a disaster waiting to happen” this is actually not the case.

“The truth is these mortgages are still dangerous and could soon undermine the housing recovery.”

KEITH JUROW

The below chart shows the drastic increase in loans delinquent more than 5 years… Hawaii (for example) once only had 4% delinquency rate went up to 67% in 2018.

His explanation points to factors such as homeowners who stop paying their mortgages without consequences…

Jurow’s claims are strengthened by the actions of Fannie Mae and Black Knight Financial Services. These companies regularly provide delinquency rate statistics, but for the past 2 years, the data has not been provided. The last available stats showed the re-default rates were nearly 40%.

To find out more about why Jurow believes we are only 6-12 months away from another housing bubble, visit his article HERE