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Specializing in seller financing, Dawn is a visionary real estate professional who gets families into (or out of) homes and investments in a way that empowers and enriches them, as well as the communities in which they live… with or without banks and regardless of market conditions. Dawn is the antidote to America’s addiction to Wall Street’s financial opium. She makes the powerful, non-bank, strategies usually reserved for sophisticated investors accessible to everyday people, making or saving them thousands and instilling hope as she illuminates hidden opportunities. As a seasoned note investor intimate with seller financing and the secondary market for private mortgage notes, she provides mission-critical expertise that is extremely rare in today’s marketplace. Sellers: know what your note will be worth before you create it. "Landlord Liberation", "Buyers: The Seller is Your Bank" and "Note Investing for Newbies" are key gateway books for those wishing to engage with The Realm. Visit www.NoteQueen.com.
That's my passion for the note business, seller financing in the note business because it speaks to my love for and passion for freedom, for sovereignty, for the ability to have more control over our lives, have non bank housing and non bank Wall Street, non non Wall Street retirement solutions for people. Keep more money in the community, quit letting the wealth vampires of Washington and Wall Street reach in and with their big vacuum and suck up value out of our individual pockets and out of the community. So the same reason why I like using cash instead of a credit card because then that keeps more money in the community instead of going up up the food chain and out of the community. So, that's why I'm really passionate. That's my geeky soapbox thing.
Dawn:And when we really, that's what the note business means to be to me. We have an alternative paradigm that functions privately, making the regular institutions, which which are crumbling every which way a little bit more every day, it makes them optional. It makes them optional. It's, yep. It's time to start this, and Gilbert just dropped in.
Dawn:Welcome, Gilbert. Alright. This is Dawn Rickabaugh, your host of, the Owner Financing and Note Investing Podcast, which is aka Property and Paper Live, aka just whatever we end up talking about, this is what this is. Of course, my the reason that, I'm really excited about this is because we when we understand the discounted market for notes, that's the invisible thing. That's the people that that's the thing that professionals and seasoned investors alike do not understand.
Dawn:And when we understand that secondary market for notes, it makes the it makes a completely separate parallel paradigm function outside of Washington and Wall Street. And I was just describing this to to, a new coaching student that I, just got, and we were having a lovely long chat this morning. And I'm just saying, look. You know, when when the banks give a loan, they give a loan knowing what they can sell that loan up the food chain. Right?
Dawn:Most of them aren't portfolio lenders. They don't keep it in house. They sell they originate it so that they know what they can sell it to Freddie and Fannie Mae for. Right? So they make the loan.
Dawn:It goes out. Then they sell the loan. The money comes back in. There's another real estate buyer and seller. So now then they put out another loan, and they sell it off in the secondary market.
Dawn:They get more money, and they keep the wheel going around. Most people don't know that there's a private paradigm that works just like that. When an owner carries, so there's no bank involved in this at all. No bank. If the owner carries to get the income, that's wonderful.
Dawn:See, we can we can do buy and sell real estate without a bank. But what happens if that owner ends up needing some liquidity, needs some cash for some reason, whether it's a little bit or a lot bit? Right? So they need to know that there's a secondary market of of private Freddie and Fannie people like me and like a lot of people on this call and listening to this podcast. So when we understand there's the owner carry, but there's a private secondary market for mortgage notes that can provide liquidity, then that owner can get the cash they need, and then the thing keeps going around.
Dawn:We get another owner carry, and they carry the paper. But if they need liquidity, they need to get out of it. They can. And that's where we can keep a whole wheel going around, keep the real estate world going around, keep people's retirement accounts going around. And not to say we would make the traditional banking system obsolete, but we could certainly make it a lot more optional than it is right now.
Dawn:Most people think you you can't do a deal without a bank. I mean, they don't even think it's possible. And I'm going, I don't even think of banks. That's the last thing I think of. Banks I mean, like I've said many times, and I keep bragging about it, and I keep getting this this number keeps getting higher.
Dawn:I don't know why. But first, it was just twenty five years without a bank. Now it's twenty six years without a bank loan, and next year, it'll be twenty seven years without a bank loan. And when I'm when I'm being laid into the into the earth for the final timer, I'll probably just get cremated or something. But I'll just say that'll be a that allowed my RIP will be ninety nine years without a bank loan, something like that probably.
Dawn:Yeah. Because, anyway, that's my passion for the note business, seller financing and the note business, because it speaks to my love for and passion for freedom, for sovereignty, for the ability to have more control over our lives, to have nonbank housing and nonbank Wall Street, non non Wall Street retirement solutions for people. Keep more money in the community. Quit letting the wealth of vampires of Washington and Wall Street reach in and with their big vacuum and suck up value out of our individual pockets and out of the community. So the same reason why I like using cash instead of a credit card because then that keeps more money in the community instead of going up up the food chain and out of the community.
Dawn:So that's why I'm really passionate. That's my geeky soapbox thing. And when we really, that's what the note business means to be to me. We have an alternative paradigm that functions privately, making the regular institutions, which which are crumbling every which way a little bit more every day, it makes them optional. It makes them optional.
Dawn:So that's why I really, really am excited about it and, love creating all sorts of solutions with that. To that point, when I emailed or put whatever social media thing together, whatever got you here, it just reminded me that we did just the thing last week where the sellers actually was they'd inherited the property. And so here's three people that have been on the market for, like, a year and a half because they can't decide on what to do, and they're probably hanging out for top dollar or whatever. But, anyway and the guy that that ended up being the buyer, he's got money coming. He's got money.
Dawn:He's a very seasoned operator, but he's not gonna get a bank loan on a nonconforming property like it was, a house on 47 acres. So, anyhow, we just we just reverse engineered it so that, the sellers could get out not all, but most of their money shortly after closing. Okay? So that's where we didn't ask Washington or Wall Street for anything on a private basis, making sure things were we balance risk risk and reward. We make it equitable win win win for everybody, for the person that came in as the investor with me, for the buyers, for the sellers.
Dawn:Everybody gets paid. Right? The agent the agent finally got paid after marketing a property for a year and a half. Right? So, anyway, that story.
Dawn:But, I know before I take up any more air in the room, Ken's on here, and I always love bringing people on. And please, chat or unmute if you have situations, scenarios, or something you'd like to share. It's so great to have you have you put your input. So, Ken, tell us what's going on in your world and what you're what you're thinking, and just just let us feast on on what's going on in your world.
Ken:Well, I like yourself, I've I've invested in real estate for quite some time. And right now, I'm trying to get out of some of the properties, not all of them, but just some of them, and just basically carry the loan. I've done that a couple times, and it's worked out really well. I'm not making huge amounts of of cash flow, but it is a good amount. And I'm not trying to, you know, pull the wool over anyone's eyes who wanna buy the property right now.
Ken:I've got a property that I'm trying to do a a 10% down on a commercial property, which is unheard of, and also a 6% interest rate amortized over thirty years if they'd like, just to make the payment a little bit lower. So I'm trying to do whatever I can do to entice a potential buyer and, just take my money out of the property and then, not not to reinvest it because if I do a loan, obviously, I'm stuck with that. But I'm okay with it because I'm at the end of my real estate career where I don't really need the money for anything out there other than possibly an estate planning for my grandkids, basically, at this point. So I'm just trying to basically just reduce the number of hours that I have to worry about certain things that when you have commercial buildings, you still have tenant problems, you still have homeless problems, you still have break in problems, and cleaning the places, and making sure landscaping is up and everything else, and just doing a loan and getting the cash flow every month at this point of my real estate career sounds pretty enticing.
Dawn:Yeah. So let me, recap that. You've got a commercial building you've had for a while. It is do you own it free and clear, or you wrap? Did you
Ken:wrap No. One one one I own free and clear. It's and I'm trying to do the same the same loan on each building. One I own free and clear, and the other one I do not own. It's seller financed.
Ken:That's the only way I generally will buy a building as well, like you said. Yeah. So it's seller financed. And on that one there, I'm trying to get the owner user in one of the spaces to actually buy the building. So we're going through that process right now where they're trying to I think they're trying to get some some loans and stuff.
Ken:They don't have a lot of money, but I'm only asking 875,000, and it's gonna be, like, 10% down. And after they do their taxes and write offs and things of that nature, basically, they're gonna be probably paying roughly the same amount that they'd be paying me to to rent the building once they take off their
Dawn:This is someone that you know, you're you're so this is an owner occupant, at least one of your tenants. Correct. Commercial building. You're you're willing to carry for them if they can come up with $87.05 probably plus a little closing cost or something.
Ken:Correct.
Dawn:So and then, that makes their loan $7.87 5. What are gonna charge them, Ken? Did you say
Ken:As far as the price?
Dawn:No. No. You said $8.75 on the price?
Ken:Yeah. $8.75 on the price, and it'd be 6% interest advertised over thirty years.
Dawn:Over thirty. Yeah. And what what's your underlying on that?
Ken:As far as
Dawn:The the rate? Just the
Ken:It's 6% interest.
Dawn:Okay. So you're not making a spread on the interest rate, but on the the value of the property. Because you picked it up for 600. Am I right?
Ken:I picked it up for $5.70.
Dawn:$5.70. Okay. Yeah. I thought I think you brought that up last year sometime on the one call.
Ken:And that was about three years ago, so, you know, roughly a three hundred thousand dollar gain. I I put very little into the property. And another thing I wanna sell is because it's probably gonna need some some maintenance and some upkeep and stuff. And this new potential owner is a kind of a construction guy. He he owns a flooring company, and he did a really nice job inside his unit of about 2,500 square feet.
Ken:And there's another, occupancy right next to him that's a church, and they're only paying, like because I've kept it really low because they're a church, like, 85¢ a square foot. So down the road, if that church moves out or they want to increase the rent, that's another benefit for the potential owner of that building. So it's a win win, I think, for everybody. And, again, you know, the cash flow is gonna be decent, and, obviously, the equity is is you can't beat $300,000 in a three year period. That's not too bad.
Ken:And 6% is better than what you'd get out of bank at at three and a half percent, basically. So I I'm okay moving forward with that gain. And on the other property, it's the same thing. 6%, 10% down, thirty year amortization if they want it, or twenty five year if they wanna make more. And, basically, I would carry the loan on both of the properties for ten years.
Ken:It'd be fixed for ten years, and then basically a balloon would be due. Or if I'm still around, I'd still negotiate. That's one of the things with the owner financing. If they're paying on time, maybe I wouldn't call the call the loan. There'd be an option and stuff.
Ken:But 10 would give them plenty of time to pay off the building or at least pay it down where they could refinance it if they wanted to. And at 6%, that's not a crazy rate. So who knows? It could be where we could see maybe 5% again. So they might get a little bit break on the a lower interest rate.
Ken:But it's not it's not a huge payment either and stuff. So I think Yeah.
Dawn:What are they just out of curiosity, what are these tenants paying now for rent?
Ken:Well, the he's only paying $202,800 a month, and the church is only paying 1,500 a month. But he should be paying I gave him a break as well. He should be paying probably more, like, around 35 to 3,700, and and the church should be paying probably more like 2,200, realistically.
Dawn:Yeah. So this note that you're thinking of creating, their their PNI is gonna be 47 and change. Mhmm. But still
Ken:it's Minus minus what the church would be paying them, but that's 47
Dawn:minus 1,500. That's true. So even at the current, you get 1,500.
Ken:And then then don't forget the tax write off that you'd be getting because of depreciation and the interest that he'd be writing off on the mortgage. So once I did all that, basically, he's gonna be paying roughly the same amount that he's paying right now, which is
Dawn:But now he's gotta pay taxes and
Ken:Correct.
Dawn:Stew, though.
Ken:So He's gonna pay all that, but he's gonna get it all back at the end of the year.
Dawn:At the end
Ken:the year. And he owns the building. And he owns the building.
Dawn:Right. Yep. That that seems like a great idea. And what's what's your underlying payment on that to your your the person you got seller financing from three years ago?
Ken:I didn't get on the on the seller. Oops. That that one building I'm talking about, that has no loan on it currently.
Dawn:Oh, oh, got it. Okay. It's Oh, fantastic. I mean, yeah, you're you're locking in you're locking in, you know, without a big marketing thing, getting on the MLS, and just sitting there, and then waiting producing all the fine tools and doing one price reduction after another. Here you got Right.
Dawn:You know, you got it built in. And, you know, at this point, you're not afraid if you have to if you have to take it back. But if these people
Ken:Right.
Dawn:They've been your tenants already, you know, like, they're they're
Ken:They'll be fine. They're they're they've got a good business in there. Yeah. Yeah. They fixed it up really nice.
Ken:And, you know, he's about I think he's around 50 years old. His wife is also helping him with the business, and they live right down the street, basically, from the business.
Dawn:Yeah. So so
Ken:I think it's just it's just a win win for everybody. And like you said, if I had to take it back and they give me, you know, roughly a $100,000 down, I'll be more than happy to take it back. I don't want it.
Dawn:But then I'll be more than happy. Look. $4.40 4,700 a month, and you you you defer a lot of capital gain and Right. Future recapture and all of that. And Yeah.
Dawn:That's that's a nice income. Like,
Ken:you can twenty minutes it's fifteen to twenty minutes from my house, so it's not gonna be a problem if I have to do something with it.
Dawn:Yeah. That's fantastic. So I just love it when, you know, when I can have more people talking about, this is what real people who own property actually do. You know? So in some circles, you feel like you're a leper or something because you start talking about owner financing, and people are like, oh, I know what I did.
Dawn:I went on MarketWatch, and I I was commenting on, what would you do? Blah blah blah blah. And I got so much hate. Even why would anybody do that? No one does that.
Dawn:And, you know, they could just take their money and they could put it in a blah blah blah blah. You know? And and I'm just like, woah. Woah. Woah, people.
Dawn:Woah. Yeah.
Ken:One thing on that, Don, is is that the reason people do it is because it's one word. Life situations put you in certain circumstances that you don't wanna deal with extra money to do this or that, or it's an inheritance and they just don't know. They don't care. There's a lot of situations where why would anyone do that? It's a great question, but it happens all the time just because of life.
Dawn:Well, you know what? There's a reason that there's over 33, I don't know, 33,000,000,000 in private owner carry.
Ken:Yeah.
Dawn:33,000,000,000. That means a lot of people have decided that So owner financing the installment sale is a really valid, exit strategy. So, you know, Ken, there there was, is there any value add on those, Ken? I think, Mark, do you wanna unmute if you can and just ask him yourself?
Mark:Yeah. I thought Ken, when he was first talking about it, was talking about selling a property. Now it sounds like you already sold it to the tenant.
Dawn:Well It
Ken:hasn't it hasn't been sold yet. It's gonna be sold hopefully in the next four months.
Mark:Okay. But you're selling it to the tenant. You already got the tenant as the buyer.
Ken:Correct.
Mark:That was what I was confused about.
Dawn:Okay. Yeah. And then in terms of value add, he said he he didn't really put much into it in terms of rehab or anything, but, he just but the positioning for the last three years made him a 300,000 in appreciation and equity over the last three years. 100,000 a year for just knowing how to position yourself, It's it's fantastic. And then but if you had to get a cash buyer who had to qualify for a 10% bank loan, you might not get that price.
Dawn:Right?
Ken:That's that's correct. But with with with the fact that the rents are so low, I believe it it would still be that price if the rents were brought up to where they should be. The reason they're not brought up is number one, it's a church, so I'm trying to give them a little bit of a break. That's number one. Love it.
Ken:And and the second thing is that the person who just moved in, I knew from the beginning that he wanted to buy it. So his rent was super low because of the fact I'm trying to help him out and that banks don't do those type of things. So I'm just trying to help everyone out because, again, I'm not trying to get rich here, basically. I've got enough money to live on and do whatever I wanna do the rest of my life. So now it's just a matter of trying to help somebody and help myself and help the grandkids and and just move on and stuff, you know.
Ken:I'm not looking for the very last dollar and stuff, on these transactions. Yeah.
Dawn:I love it. It's very fair fair minded, and it it keeps your life simple. Right? It's just easy, flowy downstream. Right?
Dawn:Downstream, you leave some meat on the bone for everybody, and you do well. You make you make money. Yeah. Lock in that 300,000 without pulling your lip over your forehead and dealing with all the stuff, and you give somebody a chance, you know, to to to be an owner instead of a renter. Yeah.
Dawn:Just taking everyone just taking a fair shake of the pie instead of one side trying to get everything. And, Gilbert and I, his name is not really Kenzie. That's his wife name. Gilbert's here, and we were just I was preaching on that. I said, you know, when any one part of the you know, tries to take more than their fair share, it it just it it always costs you somewhere.
Dawn:It always costs somewhere. Okay. Well, now that person didn't get money that would have, you know, kept them from going homeless down the road or buy you know, something like you know? And then paying your investors, you know, Gabriel here, and I'm just gonna brag on him a little bit, he could probably write whatever whatever, interest rate he wants on some of his, private money that he gets to do his real estate deals. But he gives him a fair rate because he's already doing really well on it.
Dawn:You know? He could probably tell him 6%, and they'd go, oh, wow. That's so cool. That's so so much more. But since he's, you know, has a he's just generous that way.
Dawn:And and, also, he he gets people that, trust him so he's got so much character equity that the people sometimes don't even record a security instrument when he when he gets on a finance. So he he doesn't need to do a first right of refusal. He doesn't need to do substitution or collateral because the people just trust him to pay the note. You know? So, just so you guys know what's possible out there.
Dawn:You know, it might seem like a unicorn, but people are people are doing it. And the way that you're thinking, Ken, I really love it. Okay. Oh, one more question. Gilbert asked.
Dawn:Gilbert, do you wanna unmute?
Gilbert:Good evening.
Dawn:Hi, Gilbert.
Gilbert:How you doing? Oh, my I just, was saying in terms of, you know, in that deal that I was talking about maybe doing the first and the second, I don't know if that buyer has the whole 10%, but sometimes, you know, you can maybe do 7% or something like that and then maybe take the difference and create a second note, you know, and and kinda keep that payment where it needs to be. But, you know, though, that that first, ratio in terms of, you know, loan to value, can look a little bit better in case you do need to to sell the note, and you can still do the deal that way. So that was just my comment that I made in the chat.
Dawn:Oh, you you were saying sometimes if they're short, the the down payment that you want, you can create a note for it? Yeah. Yeah. Yeah. And
Ken:I was just looking for skin in the game, basically, from the
Dawn:Right.
Ken:Borrower. I don't I don't wanna give a 100% financing. I mean, then that then there there's no incentive for them to keep the building up or do good things with it. And a $100,000 keeps them a little bit more, you know, in line with what they need to do.
Dawn:Yeah. I I mean, I think it's a good strategy. A lot of times people create a note for holding and a note for selling, and they break instead of doing a partial on one note, they'll, you know, break it up. There's so many ways to do it, and there's people on this call that can talk around that all day long, too. But, if I was buying the first note, I would still go, wait a minute.
Dawn:The the hard cash down payment's still kinda light. I know it my equity position's better, but it's, it doesn't make it would seem like, it wouldn't do as much for me as it might seem. When when there's, like, a a no money down deal, however it's structured or a low money down deal, yeah, if it walks like a duck, talks like a duck, it is a duck. You know? There's just no hard cash out of the buyer's pocket.
Dawn:You know? And that's happened before where people go, hey. You're still in this you still only have a 60% loan to value on this property. What do you care? Well, I care because I want someone to have skin in the game to keep my life simple.
Dawn:Keep my life simple. And, yeah, in fact, that came up on on a recent deal, and, the deal was pitched to me a certain way, got all the point, had had the money wired over and everything. And, there you go. I look at the settlement statement. I'm going, what?
Dawn:What? What? I you know? Like, I've been looking at these things for a while, and I'm like, oh, I'm confused. You know?
Dawn:But, oh, no. This was a equity holdback and all these things, and I go, no. No. No. No.
Dawn:No. No. I want to see some skin. You know, I want my pound of flesh from that, not to be gross, but, you know, from the buyer. And so we negotiated something where I felt he had to wire me some money on the side to do a prince a pretty significant principal pay down for me to go, okay.
Dawn:Go ahead and record it. We're fine. But, yeah, I don't like getting pitched a deal a certain way, and then at the last minute, like, it's different all of a sudden. It's like, no queen get grumpy. No queen start getting very Queenie and saying, oh, no.
Dawn:You don't. You know? You're gonna pay me. You want this deal to go there? Okay.
Dawn:Here's jump, jump, jump, jump, jump, jump. Hey. Well, thanks. Is there anything more you wanted to say on Cam before we kinda move on?
Ken:No. That's it. That's it. Thank you.
Dawn:Okay. Thank you. Hey, Mike. Unmute or something.
Mike:Right.
Dawn:How's it going?
Mike:Hey. Good to see you, Dawn.
Dawn:Good to see you. It's been a minute.
Mike:Oh, not really. I've been following you in in secret.
Dawn:So well, I I get emails from you now because I'm part of your, your group. You that you're you're teaching about notes too and and mainly from the non the institutional side. Right?
Mike:Yes. Buying from banks. Yeah. Kinda retiring. We're kinda doing a lot of traveling.
Mike:And but, you know, my my son always talks about when he came to your first note event
Dawn:Oh. At the top. Yeah. And and
Mike:you brought him up. You're like, Jimmy Rasica as in Mike Garcia. Oh. Drag him up on stage. And oh god.
Mike:He still talks about that. He loved that.
Dawn:That that's great. He's still working with you in the business?
Mike:Yeah. Big time. And he goes, yeah. You know, Dawn, like, picked on me in in in their his first, note event that he spoke at, and it was really cool.
Dawn:He thought it was cool that I picked on him?
Mike:Yeah. Because, you know, it it was, a big part of his, like, oh my god. You I've been listening to my father talk about notes for twenty years. And then he actually had the, opportunity to speak at your event talking to strangers, and that was his first saying. And so thank you for that.
Mike:That was huge.
Dawn:Oh, what a what a nice thing to come on and say. Yeah. You know, while I have you live, I don't know if you're gonna say anything else, but, here's a question about, oh, Mark. Mark's part of your group too. Right?
Mike:Mark Pantek. I have known him for twenty years.
Dawn:Yeah. Yeah. Yeah.
Mike:Good to hear.
Dawn:Statute of limitations. What's your question, Mark? Can you unmute?
Mark:Sorry. Sorry. It took me a minute to unmute.
Dawn:Hey. Yeah. No problem.
Mark:So yeah. So I'm looking at some notes that, are past the ten years, but, I do know some other people or friends of mine, and they played the game where they got the, you know, the party to make that first payment and get it going. But these are some notes in Kentucky, and they're down where I can get them for about a thousand dollars. One of them is, like, on a house that's worth about $1.30. They the the old debt is about 22.
Mark:And so what I've done in the past working with somebody else is that one person was the note buyer, and I just, for years, door knocked and door knocked pre foreclosures and stuff like that. So I'm not officially, you know, in violation because I'm not on the note. And then, I just say to them, hey. I'm with a company that does data source resource and and looks like, you know, I don't know if I can help you or not, Don, but there might be a debt out there. And so, basically, sometimes we have the servicer contact them right before I happen to show up on the door.
Mark:And then I say, well, with your permission, I can go talk to the lender. I need your written permission. I'll see if I can negotiate something. And sometimes, you know, a $22,000 note, they say, well, we can come up with 5, but it's still good because it was nonperforming. So I'm just curious if you, Mike, anybody here with experienced people have dealt with anything like that at all.
Dawn:Well, from statute of limitations or just the tactic of of, just how you're you're you're playing. You're wearing different hats.
Mark:Well, some some people would just say, oh, the statute of limitations is gone, so it's bad paper. So I'm not even gonna mess with it. Too risky. Because they could just if they get an attorney, the attorney looks at that and says, well, you don't have to pay. And so other people have had it where and some attorneys too will say, well, it's past the statute of limitations.
Mark:I can't, you know, send a letter or do anything on this, but there are collection agencies that have a lot of skill with getting people to pay. So, you know, it sorta depends. And so, typically, I'm trying to still be fair with people, not just gouge them and offer them a good discount or do, a loan modification so they can come up with a couple thousand. We recoup our money, and they get a payment they can afford. So just any thoughts by you or anybody else on dealing with any kind of paper that's got past the statute of limitations, if you ever deal with that.
Dawn:Yeah. Please feel free. Anyone else my my yeah. I Yeah. I can speak on this.
Dawn:Yeah. Go ahead. Thank you for engaging with my content. If you'd like to hear the rest of the replay, please go over to citizensoftherealm.com and join our free community. If you'd like to participate live, be sure to subscribe at notequeen.com.
Dawn:And if you have a situation where you could use some one on one help, check out notequeendeepdive.com and schedule a private consultation. I guarantee that one hour with me will either make or save you thousands. Take this information and go out there and create financial solutions just one mom and pop to another. See you next time. Take care everybody.