How I once made 40% in a matter of weeks. - Posted by Eduardo (OR)


#1

Posted by John Behle on October 18, 1998 at 13:20:30:

Forgot to mention. There are more details on the creative ways to use the MLS computer in the “How to articles” section in an article titled “A Million a Month.”


#2

How I once made 40% in a matter of weeks. - Posted by Eduardo (OR)

Posted by Eduardo (OR) on October 14, 1998 at 22:43:40:

Just a little story to help get this forum going (I firmly believe knowledge of “paper” is just as much part of real estate investing as buying real property is). One time my partner and I were offered a note at discount that had been shopped around. Nobody else wanted it because it was a straight note with a balloon but no due date. Instead it became due and payable only when the property was sold. Well, we checked one thing that apparently no one else thought to check–was there a likelihood the property would be sold soon. As a matter of fact, it was up for sale and, to settle an estate, had to be sold. We bought and within weeks had a 40% yield. What fun! --Eduardo


#3

Great example! - Posted by John Behle

Posted by John Behle on October 14, 1998 at 22:52:45:

They say that the rewards are in the “extra mile.” What a great example! There’s usually money in taking the steps someone else doesn’t want to take or doesn’t know to take. Good job!

Many times when I look at buying a note the property is for sale. As I look for comps on the MLS computer, it comes up. Sometimes the payoff is only a few months away - at full face value - instead of many years.


#4

Q:Notes/Mls - Posted by Adam

Posted by Adam on October 15, 1998 at 22:57:06:

How do you find notes in the mls?What do I ask an

agent to find notes in the mls ?

Thanks


#5

Using the MLS to find notes - Posted by John Behle

Posted by John Behle on October 18, 1998 at 13:16:56:

There are at least 4 ways to find notes using the MLS computer. I am an strong advocate of using computers and technology to zoom in on potential deals, yet I still know the value of the one on one contact. There is a time and place for both.

Method 1 - Searching for sold listings.

You can search the sold listing section. Many times there are clues that tell you the type of financing. This varies from area to area. The type of sale may say something like SF for Seller Financing or CT for contract. A good appraiser doing an appraisal or even an agent doing a market analysis should take into account the terms of sale. Many times seller financing is used to boost or justify a higher sales price. Two properties might both be worth $100k, yet one sells for $115k because of liberal seller financing terms and another might sell for $85k because of an all cash quick sale. Appraisers should take financing into account. Lower than average “Days on market” can be a tipoff for a cash sale, and is something to look for to make sure the comps used are valid.

2 - Searching for active, sold, expired or under contract listings with private financing.

Many MLS systems will display some information about the existing financing. It may say if the existing loan is a “Private” loan or seller financing. Here’s a note. Yet you may not know whether it is for sale, but your odds are higher. You can even step in, arrange a discount on the note and offer the note at a lesser discount to a potential buyer to help the property sell. We did one where the property was for sale and had to be sold, but wasn’t selling because of a due on sale clause on the private financing. We arranged with the agent, buyer, seller and others to buy the note and make it assumable.

Finding existing properties with private or seller financing also means you can likely buy it at a discount. If I discount the financing, I have in effect discounted the price without having to torture the seller. If the holder of the private financing is reluctant to discount, I can take another note I bought at a discount and trade it to them. Substitution of collateral is a powerful note/property technique. I still get my discount and the seller and note holder get full price. Neat.

3 - Searching for Potential Note transactions.

Many times the terms available are listed. It may say SF or CT to indicate they will take seller financing or may say so in the “remarks” section. Look for something like; Seller will finance, owner financing, contract sale, even “no qualifying” sometimes means seller financing.

4 - Listed properties database.

They changed our system a while back and I couldn’t search for some items as easily as I wanted to. I found it took about three hours to download the entire database to my computer. They didn’t have an option that said “download”, I just widened my search criteria to include every property in every area and then captured the screen contents as they scrolled by. They had a feature that would only print ten listings at a time, so I tricked it with a program that answered yes to the question of “10 listings printed. Do you want more Y/N?”

So, I come in the next morning and the database is smiling back at me from the hard drive of my computer. I could then search for anything I wanted.

I would search for the items mentioned above, but also found that I could do a couple fun things. First, I set up a macro in my word processor to strip out everything but the agent, brokerage and their phone numbers. I now had an active MLS agent database. I then sorted it and could tell what agents and brokerages were the most active. It’s nice to know how many listings an agent has when you run into them. When Chuck startes bragging about his 31 listings, you say “no you don’t you have 13 listings and by the way, they’re over priced.”

I also found I could strip out everything but the property address and city. Our system didn’t have the zip codes included, but I found software to add that. Now there was a mailing list of every listed property. Not only can you send something letting them know to call you if they should take back seller financing, but you can encourage them to do so and show them how.


#6

Re: Q:Notes/Mls - Posted by John Behle

Posted by John Behle on October 18, 1998 at 11:48:16:

What I mentioned was that I check for “comps” on the MLS and many times the property securing the note I am looking at buying is listed.

So, Sam comes to me to sell his note secured by the property on Pine street. I check for comps to find out the value of the collareral for Sam’s note. Out pops the property I am trying to appraise as I search for comps.

It is listed for sale. Good news or bad news? It can be good news because it could mean there might be an early payoff. So, What if I buy the $20,000 note from Sam for $14,000 and it pays off in 60 days for full face value? What’s my rate of return?

$14,000 invested, $6,000 profit in 60 days. That is a 43% return - in 60 days. That equates to an annual rate of 257% (not compounded). That’s one possibility and it happens all the time. Much of the time, the note seller does not know that the property is up for sale.

What else? It can also mean that Sam is selling the note because he does know the property is up for sale. It may be up for sale because they are having a hard time making payments. Maybe they are current, but just lost a job or ?. So, a little more “due diligence” on the payor is needed here.

So, what I was referencing in the above post is the fact that the property used as collateral comes out as it’s own comp. It may be currently listed, under contract or sold. If the sold listing pops out, it can help verify the terms I’ve been given. If it is “under contract” then I may want to check into that transaction more. A quick call to the agent can be very revealing in any case.

In another post, I’ll go into how you actually can find notes in the MLS.