Mortgage Note Investing Weekly

EP92: Seller Financing Method To Generate Notes on Paperstac

• Brett Burky • Season 4 • Episode 92

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In this episode, we dive into the world of seller financing and real estate investing. We discuss a strategy for creating notes and taking advantage of the current market conditions, where cash buyers and fix-and-flippers are holding back due to falling prices and tightened lending.

This presents a huge opportunity for investors to take advantage of owner financing, as wholesalers are dropping their prices. We also discuss the importance of boots on the ground and finding seller-financed real estate deals that work best for you and your numbers. Plus, we show you how to use this tactic to generate notes on Paperstac and how to use our new yield feature to make the most of your investments. Don't miss this informative episode and the chance to learn more about this valuable strategy on seller financing!

What's Covered?👇
00:00 Introduction
01:10 How To Create Notes To List On Paperstac
02:55 Why There's A Huge Opportunity For Seller Financing
06:16 Negotiating Tips for Seller Financing & Running Your Calculations
13:08 The Importance of Boots on the Ground
14:36 Finding Seller-Financed Real Estate Deals
16:27 Seller Financing Examples on Investor Lift
20:41 Seller Financing Tactic to List Notes on Paperstac




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Rick Allen:

Coming to you from Sunny Orlando, Florida. Welcome to the Paper stac Podcast, where we cover current topics in the note industry, give you tactics for your note business, and talk with industry leaders to make you a better note investor. And now your hosts, Brett Burkey and Rick Allen.

Brett Burky:

Welcome to another episode of the Paper Stack Podcast. I am Brett Burkey. This is Rick Allen.

Rick Allen:

Rick Allen. Rick Allen. It's just Rick. Just Rick, they used to run my name together in football. Reg Allen. Rick Allen, reg Allen. That's how, that's how you got your,

Brett Burky:

your, your

Rick Allen:

Rowen thing. Huh? kind of, yeah. Yeah. So,

Brett Burky:

so today we were doing something that's pretty

Rick Allen:

cool. Can you, uh, can you add some bass to my voice in the post production? Because I feel nicely still. I can try. Yeah. Well, so we'll see. You can start it from right here

Brett Burky:

and see if, I'll, I'll give it a shot. I don't know if I can separate my voice from your voice. I don't even know who

Rick Allen:

that is. Uh uh, the Green Mile.

Brett Burky:

Oh yeah, yeah. I haven't remember that movie.

Rick Allen:

Anyways, so what are we talking

Brett Burky:

today? So we're talking today is a way for you as a note investor or someone who wants to get into the note. Understands real estate, maybe, um, wait for you to create notes to list on Paper Stack. So the goal, the course was things we talk about is it's always about the yield and trying to figure out a wedding, again, back into your numbers. Mm-hmm. And, you know, sometimes you're wondering how, well, how do I, how do I create a note? You know, what, what's the process? Where do I find, what am I looking? Well, what's a good place to find

Rick Allen:

this stuff?

Brett Burky:

And so, you know, Rick had shown me a strategy he's using and I find it fascinating cause I'm like,

Rick Allen:

wow. It's just, you're not putting out bandit

Brett Burky:

signs, you're not finding things or you're not doing a new construction. It's, it's a totally different, and it's something that comes to your inbox, kind of like if you're a

Rick Allen:

user. So we're talking real estate. It's real estate. We're talking what? See, it's gonna be a little bit of a real estate. And note based podcast. So you're kind of gonna have everything working together, right? So you gotta take like all for me, all the disciplines. Um, I started buying distressed real estate. Um, I started as a wholesaler back in 2005, right? And I did that for, uh, six years. And got really good at buying discounted properties. And so,

Brett Burky:

so break down the strategy. What, we'll give him a high level and then we'll give him a, some, so we're gonna be doing it talking like this, but we're also gonna be recording what's on Rick's screen so that you can understand what's

Rick Allen:

on Rick's screen. And, yep. So it, it kind of all started with, um, I, I believe there's a little bit of a market anomaly going on right now that really, um, Presents a huge opportunity. Is owner financing something new? No. Ha. Have I owner financed houses before this I had to take back through foreclosure. Absolutely. Are there people out

there

Rick Allen:

teaching owner financing The power of it? Mm-hmm. Shoot. I think any speed's. Been teaching it for 15 years. Mm-hmm. So it's nothing. It's not something that's new. What we're doing is a little bit unique because we're taking advantage of the market. Right. Right. Now you have this, like I said, like it's an anomaly. It's this market, Condit. where a lot of the cash buyers, a lot of the people who are doing fix and flips are holding their capital back. Mm-hmm. I'm not seeing as many people do it. And the reason for that is prices are falling a little bit and people are, you know, I'll hear people say, well no, prices aren't falling. I'm watching them fall. I'm seeing them fall. Uh, when wholesalers are dropping their. Prices are falling. Prices are falling It's just the way it is. And the reason for that is, is there's a couple things. One, it's, it's harder to get lending. Yeah. Right? So, well, not harder to get lending or the rates are, well, they've tightened a little bit, but the rates are up so people can't afford as much house. So all of a sudden that sweet spot of somebody could afford, or 500,000 house, well now they can't afford a 500,000 house. They can only afford a 300,000 house. Correct. But, What does that do? Well, it means that the, the people that were buying and fixing and flipping into that$500,000 house range mm-hmm. now are holding their money back a little bit. Mm-hmm. right? Or people who, you know, had smaller incomes and they could buy a$250,000 house with a$1,200 payment or$1,300 payment. That's just not there. It's not. Mm-hmm. right? So those payments are, you know,$1,800 or 7,800, whatever, whatever the, whatever that number is. So what you're having is, I said earlier you have, you have wholesalers who are dropping their prices, correct? Right. So they're out there doing all this marketing. Mm-hmm. and believe me, there is no shortage of wholesalers, That is the easiest, lowest barrier of entryway to get into flipping real estate. And I don't hate it. I, I started there. Mm-hmm. uh, I started. Mm. With a company that was a nationwide company that was doing it in 2005. Before, before, you know, everybody was a wholesaler. There was, there was a few of'em around, but most, you know, now it's, there's, there's just, they're everywhere. But you have wholesalers that are doing all this marketing and then they're getting these houses and they're used to buying houses at one price and selling'em, and they're making 20, 25 grand assignment fees. So they're making big fees. And when you have buyers, throwing money down because it's easy to sell. It's not a problem. Right Now you're running into a situation where wholesalers now can't sell their real estate. Mm-hmm. they can't, they can contract it, but they can't sell it, but they can't sell it. Mm-hmm. And so I'm seeing stuff where I'm seeing the same house that's, you know, a$350,000 house gets slashed on the price by 50. Yeah. And it's, and it's not all one chunk, 50 grand slash it's like, Hey, price reduced, uh, 15,000. Hey, another big price reduced 15,000. Hey, huge price reduced 20 grand. Right? It's just still happening and people aren't able to buy it. We're able to come in and capitalize. Negotiate a really lower, a much lower price with them, first off. Mm-hmm. you can submit an offer. Seven months ago you weren't submitting offers. You were trying to be first to the table with your deposit check. Now you can submit an offer to'em and at least start negotiating and working with them. Um, pro tip, uh, they'll some, you'll see most wholesalers say Buyer pays all closing costs. Right. That's just, that's on there. I'll agree to it most of the times cause I've been on the other side of the equation, but I'll also say I'm putting a cap on it at 1100 bucks or 1500 bucks. Cause I'm, it's a cash transaction. It shouldn't cost me more than 300 on my end. So I'll cover 700, uh, you know, 11,$1,200 at your cost. Because I know you're a wholesaler, you're doing the marketing. I just look at it as a marketing expense. Cause I've gone out and marketed for houses. Mm-hmm. and for me it's like, okay, whatever. It's just a marketing expense. It's not a make it or break it. Mm. And what we're doing is we're buying houses that are very clean. Three, two newer roof within the past 10 years. New AC within the past five years. Stuff that I don't have to get in there and mess with. I don't. Cosmetic rehab will me. Yeah. I'm not doing rehabs. I don't want to, I'm not even painting. If I can get out without painting, I wanna do that. And then owner financing them to people. Mm-hmm. who can, who can get loans or who didn't know they could get loans, or just not trying to do it and backing into our numbers at, um, you know, I try to keep it around rent, what the rents for the area is, but I'm requesting big, big ticket money down. So like 20, if a house is worth retail, two 20, I might sell it for two 30 with, with 30 grand down or with 20 grand down. Mm-hmm. and there's people lining up the bottom. Mm-hmm. which is great. And then I back into my, I back into my interest rate. Mm-hmm. through, once I plug. Okay, this is what the loan amount will be. Here's what, uh, the payment I'm targeting and here's the, the term. And then I'll, you know, run my bii and I'll say, okay, this is a 9.4% interest rate. Right? So a couple things with that. If you're originating it and you're planning on selling it, it's great because you can buy something originated, turn around and resell it, and it's a nine, you know, 9% interest rate loan. The borrower's got, you know, 10 or 15% down on it. Mm-hmm. And you know, you originated like you would originate a good owner finance note. Use an R M L O loan app. Make it look, smell, taste, and feel just like institutional paper or something that Bank of America would originate, but. it's not, it's something you did. So that way you've got all the proper docs there, title insurance. Mm-hmm. all that stuff. Lenders policies, set all that stuff up. So it's a, it's a qualified loan. Then you can turn around and sell it and you can say, well, I can, what if I wanna sell this at an 11 Yeah. Percent yield. What if I wanna sell it in the 12% yield? And you can say, oh, I can make 30 or 40 grand in, you know, 60 days. On$130,000 investment. It's crazy. It's nuts. You can do it. It's crazy. Now, if you're looking at holding these, that's different. If you want to keep it, yeah, but imagine this, so you're running your calculations and you're figuring out, it's like, okay, I'm originating this. It's a$210,000 loan. It's at 9%. Mm-hmm. or 9.4%. I bought it for one 40 mm. Didn't have to do anything to it, you know, but I took in 20 grand. Mm-hmm. so now my basis, you know, maybe got some$3,000 in origination cost to set everything up. so you know, 1 43 minus the 20. Now you're into it for 1 23. Go ahead and plug in

the

Rick Allen:

1 23 as the present value, right? Plug in the principle and interest payment and the term and see what it does to your, your yield. Like we're talking eighteens, nineteens. That's crazy. It's in, it's really, really, really high.

Brett Burky:

I mean, another thing that you, uh, we haven't talked about, but could be a really cool option is the fact of if you are buying it at such a low level and you're say, let's just say one 50, right? One 50. If you're able to sell it for two 30 to somebody, you're not doing rehab. So you're closing costs, which is say 5,000, whatever, whatever. It's, you know mm-hmm. all the stuff you might have to do, so whatever. So what I said one 50, so if you're at 1 55, you're. two 30 or whatever, you can get 20% down all that, you know, that's it. That delta right there that you have there, um, you could probably technically sell, you could take that 20 back and then you could sell your, your, what you're into it for as a partial with less term and technically just turn around, get the 20,000, and then do it again. And then keep those for

Rick Allen:

sure. Absolutely. You could sell a partial on it. Mm-hmm. and start setting up, you know, 50 or$60,000. Yeah. You know, residuals at the end. Definitely. That's pretty

Brett Burky:

cool. But, uh, so the, the thing is too, that you want to make sure is that this is, I mean, you guess you could do it nationwide, but ideally when you're doing the real estate, you wanna be able to view it. You wouldn't be

Rick Allen:

able to drive to it. So, yeah, for, for this play that we're running, as we started, started out doing this, it was, you know, the anomaly became apparent. It is. the area we're local to is Orlando, and I've just been buying in real estate here for almost 20 years. So I'm on, it seems like every wholesaler's list, like every I, I get properties. I've had properties sent to me ever since I got out. Right? So since I stopped in, um, when did we stopped 2011 into 2011, 12, I've still been getting stuff. So for the past decade I've been getting, everybody will still send me their deal. So I was always able, You don't want to use that as a pulse on the market, right? Because yes, you can look at the actives. Yes, you can look at the pending. Yes, you can look at the solds, you can look at the price drops, but to see what's going on in the wholesale market is a big indicator for me of what's going on out there. That's right. So yeah, you can just start getting those, those properties in and start, um, backing into your numbers again, we're looking for. Three bedroom, two bath plus one 15 below. Um, yeah, it just roughly, it just depends on the market, depends on the area we started locally. Uh, like I was saying, uh, that's what we talking about driving and I got off track. We started looking areas locally cuz it was just, I saw, saw a deal and it was like, hey, let's, I'll go check this thing out. and it was sitting there and I was like, oh yeah, this is a, this is a deal. I was like, I could probably just buy this. It's super clean, newer roof, new ac. I was like, yeah, I'll owner finance this one to somebody and I can turn around and resell it. And consequently, the, the tenant who was I was gonna evict. Said they were interested in buying it. And, um, I was like, all right, you know, how's your credit score? I'll give you a, you know, happy to make a loan. This is the, the down payment. And they said, well, are you negotiable in the down payment? I'm like, not a lot And they said, well, I'm gonna try to do conventional financing. Go to a bank. I'm like, okay. And they, he had a seven 80 credit score and uh, went and got financed. So that one was kind of the first one outta the gates was like, That worked out great, but you know, it, it didn't, it's not what wasn't the play. But since then, it's you start buying them and doing as little work as possible. If you have to do work, it's important to have boots on the ground. Yeah, and I think that's kind of the thing you were like, you wanna buy nationwide. I'm staying local right now to, you know, something within, within an hour drive. I've got a good group or a good, a good guy. You know, everyone's got their guy, um, and his, he's got a crew that can knock stuff out at a reasonable price. He's trustworthy. And so I can, I can kind of work there. As we start wanting more inventory, I put more capital into play at that point. I can start searching out, but again, I'll, you know, it's no different than buying. you gotta focus on your area, you gotta have boots on the ground. You gotta build a team. Mm-hmm. So, you know, for us, venturing out is probably gonna be something like going over to Tampa, St. Pete. Mm-hmm. or moving over into Brevard County over on the east coast, um, potentially Daytona, and then start looking at other areas like, you know, Palm Bay up to Yeah. You start looking up. um, Jacksonville maybe. And just, just areas I'm familiar with. Gainesville is a big one. This is a great play for Yeah. College towns. Um, especially if you're, you know, you got some, you got people that could put, you know, kids that could potentially going there. Um, if you can, that's just, if you want to buy it and hold it because. Yeah.

Brett Burky:

I mean, but you have, you'll have the parents that are looking for something

Rick Allen:

for their kids. Yeah, yeah, yeah. Another do that. But I mean, yeah, so there's definitely o opportunities there. So what we talked

Brett Burky:

about all the house, like the, the big picture, so. Where do they go to do this? What would be the best thing to do? Like, I mean, first get on a number of

Rick Allen:

wholesalers. Lists. Yeah, wholesalers. So if you're driving around and you see banded signs, um, as is house for sale, you know, 180, if you see a r v that's after repair value. Mm-hmm. that's a key. You know, that's an indicator, that's a wholesaler. Call'em up, ask'em what they got. Tell'em what you're looking for. Don't have to tell'em what you're doing, just tell'em what you're looking for. That's a quick way to do it, you know, searching Facebook marketplace. I found a deal in Facebook Marketplace you can search, um, Craigslist is kind of a dying animal, but you can still, you know, you can maybe pull one out of there. And then there's a website called Investor. Right. And investor lift is, is pretty unique because you can, um, it's a nationwide platform as you can see. We'll, we'll roll through it real quick. Nationwide platform that you can really dive down and see what's available. So I'll, I'll look in here, um, in, you know, the Orlando

Brett Burky:

area. Also, if you are familiar with Paper Stack and our safe search process. Uh, there's a very similar thing, uh, um, maybe not as granular as ours, but you can at least put in counties, cities, beds, beds,

Rick Allen:

right? Stuff like that. So I'm focusing by the way, I'm focusing on like the 250,000 after repair value or less, just because for me, I think the. The 20 grand down is a good number that people can come up with. And then that allows me to do something between 1500 to, you know, 1750 or 1950. Keep it under that two grand mark and you know, that will kick me off a, usually it's coming in 9%, and so if I want to do like a seven and a half or 8%, you can do that. You just gotta understand that if investors are looking for an 11%, Yeah, you're gonna have to take a bigger discount. Yeah.

So,

Rick Allen:

um, let's look at that first one. Uh, this one here is 42. This is a 42. I know this area pretty well. This neighborhood is a little bit rough, but we'll just look at the house. We won't look at the numbers. The house, um, you gotta look at, this one

Brett Burky:

has some

Rick Allen:

flooring issues. Yeah. It seemed like it's got some flooring issues, not. uh, let's see what else we got here. Mm-hmm. Okay. Stainless steel appliances. Kitchen don't look bad. And again, you're like, well, this place, place is a mess. Well, yeah, it's a mess. But you gotta understand that somebody who's getting a chance at home ownership that never would have that opportunity, they'll take on a little bit of an issue. Right.

Brett Burky:

No. And I imagine these people wouldn't be there anymore, So I feel like they would take their

Rick Allen:

stuff, right? So this one pressure, what she, uh, yeah, the house. Not terrible. Um, the area, I mean, we'll see. They, they usually give you some, um, information here. This is a, yeah, this is kind of a particular area. This is good. It's got a 10 year old roof, six year old AC that falls within the parameters. AC is kind of on the edge there. Kitchen was updated five years ago, so not terrible. So this. It's not, it's not bad, it's just, it's on that upper end of this area is, um, you know, rents are, it's a 42 so you might be able to rent it out to a, uh, a section eight, or, I'm sorry, owner finance it to an investor who's maybe only got 30 grand to play with and they would, uh, be able to cover their nut and everything with section eight and Section Eight's is really big down here for a 42 in this area, you're probably getting close to 22. really well. Yeah. 2000, something like that. So another

Brett Burky:

tip though, if you're watching this, when you're clicking on these, on these houses, a lot of times what's the, the wholesaler will do is they have their own internal lists too. So it's good to click on the house, then click on the person. Yeah, just get on the phone, call'em up, talk to'em, say, Hey, look, this is exactly what my buy box is. When you have it, send it to me. Because what they're gonna do first is it costs money for them to use the system. Of course. And so what they wanna do is they wanna send it to their private list first. And that's like their hot list, that's their buyer's list. So if you wanna be on all the different buyer's lists mm-hmm. and then just that way, what's here is kind of not second picking, but it's, it's um, a lot of times they have an internal list. They'll send you first cause I have to upload it here and blah, blah blah.

Rick Allen:

Yeah. So let's see if we can find another one to kind of look at that would. kind of fall into the, I looked at this

Brett Burky:

one right here. This one's pretty nice.

Rick Allen:

Okay. It's, you know, it's a three one, not the, not the three, two we're looking for, but, um, let me look real quick and see what we got here. Uh, that one's, that one with the crack. Yeah. Oh yeah. This one's got cracks on the, uh, That's got settlement settlement's an issue down here. We'll look at this one. So this definitely works. Um, you got 2 25, 80,000. The house acute roof looks like it's end of life. I don't know if they say anything about it. They don't. There's pictures coming soon. So I guess nothing really to, in a decent neighborhood, neighborhood's decent, you know, a little pride of ownership here. So you gotta think that the house isn't that bad. So, uh, you know, that's kind of it. That's the way we. we've been working. The stuff we've been looking at, really, it's all about getting in there, finding a house that's gonna kind of work for you with the numbers. And being able to back it out of there.

Brett Burky:

Just need patience, that's all. Cause they're, they're not there every, I mean, they'll, they'll come, but it's a, it's a very

Rick Allen:

specific type of thing you're looking for. Yeah. I mean, and you can go back and you can look at, you know, you can change this up and let's go look, what's another big area? Uh, you know, I don't know, Ohio. Let's go look at Ohio and see what Ohio looks like. You know, the Columbus. So the, there's houses kind of really all over the place. Oh, it's one 10. Yeah. White Hall. I did a house there. Yeah. So definitely it, it really, it really works in the Midwest quite well. Taxes are a little bit higher, but you can. The, the price points are a little cheaper also. So I guess that's

Brett Burky:

it. I mean, yeah. Pretty much sums it up. We're gonna kind of make this into a, something that you can kind of digest a little bit better. I'll put some links in the, in the description, but, uh, again, this is a, a unique strategy that Rick's come up with, or Rick's using. I'm sorry it hasn't come up with, but, uh, Course, it's, uh, something we wanted to share with our user base. You get these notes, you get'em under contract, just get'em, sell our finance and you can hold'em for a little bit. If you wanna season'em, then you can turn around and put'em on paper stack list it at the yield now, which is a feature you just put in the yield. Do you wanna list at? We'll adjust the pricing for you and done and done and flip your money, go back and do it again. So it's pretty much gist. But, um, if you have your own questions or topics you want us to cover, of course you know the thing to do, leave us a comment. And, uh, we look forward to seeing you on the next, uh, episode. Yep. Yeah. So that's it. Take care.

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Rick Allen

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