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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.
Being in a bad place and because we didn't have to discount these remaining 17 payments, she got the full weight of that. So you can say that it's not a terrible discount. This is a very fair option for someone who just had a critical moment, they needed an infusion of cash to save their house, stabilize, they had to move their business so everything was all jumbly for them at the same time. So they can stabilize and then when we're done collecting our twenty eighth payment, then she gets to, you know, collect all these payments and still have that $15.73, almost $1,600 coming in per month, and that will really help them at that point. Right?
Dawn:And if anything goes wrong and she needs more money, more disasters happen, then she can always say, can you buy the last 17 payments? And, of course, I will be happy to work something out. Welcome to Property and Paper Live. This is July 7. We're glad to have you here. I'm Dawn Rickabaugh of notequeen.com and, landlord liberation and all sorts of, wonderful things that have to do with real estate, seller financing, and note investing. And a lot of times lately, I've been talking about buying with owner financing, selling with owner financing, And we've sort of woven in master leasing quite a bit because I really think it's a powerful strategy, and it's kind of that gateway drug, if you will, to owner financing. But it's a way it's a relatively low risk way to get your foot in the door. And so I've I mentioned on a podcast that I did recently with Lindsey Jensen. We're kinda teaming up, and I'm really excited.
Dawn:She's just so wonderful. And, but she's never bought a note before in all the things that she's done. And she's been educating and selling courses on master leasing, professional landlording. What's that Guy? Her mentor.
Dawn:Everybody knows the old guy's name.
Dave:The guy from Colorado Springs?
Dawn:Yeah.
Dave:Dave Dave.
Dawn:Yeah. Dave Toney. And so we have different backgrounds, and we've done a lot of similar things. But, anyway, I think it's worth checking that out. You should go over, to her you know, I have the Note Queen brand.
Dawn:She has Clever Kitty, and it's both were sort of nicknames that other people gave to us that we just adopted to see what would happen. But it's cleverkittyinvesting.com. And I think, there's a rare opportunity to join her community for right now. It's at a discounted price. It may it may not last forever, but a one time fee gets you in for a lifetime.
Dawn:And, I'm part of her community as well. So it's it's really feeling good. So, anyway, that all that to say is that I haven't just talked about a note in a long time. So I thought I would bring up one, that was earlier this year. A lot of people are like, okay.
Dawn:Partials, partials, partials. I hear about it, but, yes, you can't get enough examples of of how it works and how to structure something. So I thought I would just do a little see, this was a real live deal that happened. Okay. So this was a church, and now this was in North Carolina, or was it South Carolina?
Dawn:Pretty sure it was North Carolina. It was a church slash kind of, like, convenience store blend. Like, half of the building was a church, and then the other half was a little, a little country store as you were. And it looked previously, they had had gas tanks on it. Okay?
Dawn:Used to be, used as a gas station a while ago. It's been many years. And and so this gal had been renting it. She kinda had a lease option, so to speak. She had a lease option.
Dawn:She was running her, she's doing some the store and some fried chicken and some other things or something she was selling, out of that. And the church decided to say and she ran she and her husband ran into some trouble just financially, and they needed a lump sum to catch up. They were behind on their mortgage payments on their house, and they're just really stressed. So they needed they needed in that range of 25,000 to 35,000 was what they were hoping for. So the way this deal came together is that lady who became the note holder that is the one that I bought the partial from, she exercised a lease option price.
Dawn:Her option strike price was 100 and yeah. I wanna say it was, like, $1.15, her option price, but she didn't have the money to exercise the option. So at the same time that she they went into escrow and kinda did a a double. Right? So she exercised exercised the option at $1.15 and then sold it immediately to the church part of the building, and they bought they came in with 215 with a 130 down, which it got rid of the, you know, the $1.15 purchase price, and it gave her, after closing cost, you know, probably she walked away with $10.
Dawn:Let's call it 5,000 in closing cost. So she exercised her option, immediately sold it for a 100,000 more on terms to this church. So the sales price to the church was 215,000. The down payment the church made was 130,000. That's a very abundant minded church.
Dawn:Right? Lots of good tithes and offerings coming in there. But what they got was a 0% interest rate. But it's a very short term, and it's it's kind of wonky the way they did it. I think the lawyer that put it together in this small town probably wasn't that familiar with these of, you know, putting a promissory note together.
Dawn:So, but the payment that they all agreed to was $15.73 $0.07. And then if always on a financial calculator, if you put in four numbers, you can solve for the fifth. So in real time, this is what this note looked like. Okay. So the sales price was $2.15.
Dawn:By the way, people think I'm very archaic and die like a dinosaur, and I kind of am because I still use a financial calculator like this. Everyone's got their their fancy spreadsheets now, but I don't know. I still really like this. And sometimes those spreadsheets don't have the nuances that you need because I've tried a lot to get AI to help me with those and have other people help me, and they still aren't gonna function like this. So I'm not giving up my HP 10 b two anytime soon.
Dawn:$2.15 sales price minus a 130 down payment, And you'll notice none of this includes closing costs, sellers closing costs, or buyers closing costs. So we put 85,000 right here in present value, which also could be loan amount. Right? And what interest rate what do we say it was? 0%.
Dawn:So those of you who say that you can't get good interest rates, it's happening all the time. This is the second note. This is the second, situation this year where I've seen 0% financing. Right? The the gal, she got her price.
Dawn:She got some cash to walk away, and she solved her problem for a while. Then that $10 ran out, and she needed more money. Okay? So then and then we said the payment was $15.73 $0.07, I think. And so we solve yes.
Dawn:I guess I remembered right. So this is the note that we have. And, I guess she would I can't remember, actually. I didn't write that down how far she was in it. And someone else brought me this deal.
Dawn:And so in this and, you know, everybody a lot of people out there wanna broker notes and everything like that, and it's great. It would be great for you to learn as much as you can and act as if you're buying the note because what actually happened in this situation is the person was not very, let's say I don't know. May maybe they didn't have good rapport. Maybe their people skills weren't great. This deal almost fell apart when I just asked, can I go after it myself?
Dawn:So when he got out of the way, he took less of a of a broker's fee or a finder's fee than he expected, but we did get the deal done because he was gonna lose it for us. So she was like, oh, thank god. You know, she was just about ready to throw her hands in the air, didn't know what she was gonna do. She was so frustrated. So once we got to talking on the phone, I think we had paperwork exchange.
Dawn:She had money in her pocket probably within seven days in this case, because the money's already sitting in my account. Technically, we tried to go through that same attorney that handled the real estate closing, but they were they're like, nope. We don't deal with that stuff. They were like, no. We will not touch that.
Dawn:And I was like, is it okay if I explain? Because it's actually technically safer. Nope. We just don't do that. So I said, we're gonna have to close this outside of escrow if you if you're good with that.
Dawn:And she goes, I just need the money by this weekend. We're coming up on three months late on our mortgage and all this stuff. And I said, okay. You here's all the documents that you need to sign and notarize, and you need to FedEx them to me. And I made out this really particular email with highlights and everything.
Dawn:And I got the package, she'd missed one thing. And I'm like, oh, no. I said, I'm so sorry. I I have to have I have to have everything that I said in the email before I can wire you the money. It's just office policy.
Dawn:Right? Company policy. So she ran she had to drive, like, an hour to the FedEx. So she got it together. I don't know how they worked it out with their work schedules and all that, but they ended up FedExing it me to the very next day.
Dawn:And, actually, just to help them out because I felt really comfortable with the deal after I'd talked to the borrowers, and I really, you know, check this out. And I said, look. If you will take a picture of everything you're as you're putting it in the FedEx envelope, let me see it so I can read it really well. Show me the thing. And I actually made it.
Dawn:So even though I didn't really receive it, I I made it so that they would get the money on that Friday because they really make getting it that weekend would mean all the difference to them. So I'm just like, okay. So that that was our trade. So how did it work? So what do you think?
Dawn:Am I as an investor or or my partner on this? Would would you if you were buying this, would you accept a 0% return? This is the face rate on the note. If you're gonna buy the note, does that mean you're gonna get 0%? Now come on.
Dave:Depend on the discount.
Dawn:No. What what kind of yield? Okay. You've got something that's sold for $2.15, but it was owner carry at 0%, and it's like a corner on a corner in the country kinda little thing. You know?
Dawn:It's an hour away from a larger city. What kinda yield would you want just from an underwriting standpoint? I'm just curious. What what would you guys throw out?
Dave:I I like I like the the collateral, you know, the equity. So, you know, I personally, I'd be happy at at 10%.
Dawn:Okay. Let's see what would happen. I'm gonna just put that. 10% is what Dave would need. And she's she doesn't wanna sell the whole note because every note every payment of $15.73 that she sells, she's gonna take a discount on it.
Dawn:So she goes, I just need I think she ended up with 28,000, and I gave the guy who he he didn't really wasn't helpful in really closing it, but he brought me the lead. So he got a couple thousand dollars, and I could make that work. She just needs $30,000. So if Dave brings in 30 and then I gotta make some money. So I'm gonna make Dave bring in Dave, you bring in 4,000.
Dawn:Cut out I'll of my 4,000. I'll cover due diligence and all of that. Then I'm gonna give 2,000 to the guy that brought me the deal. The note seller's gonna walk away with $28. So let's see how many payments he needs to buy.
Dawn:Well, then let's look at this number. Right? See, if I'm going to service the note, which I do on nonconsumer, right, non owner occupied, I'm gonna want a little bit of a servicing spread. So just for kicks and giggles, I'm just gonna put in a flat 100. So I'm gonna take a $100 of what Dave would get.
Dawn:Okay. If he puts up 34,000 against the property worth at the very like, right, that someone paid $2.15 for and a 130,000 down, that's huge. That's what is that? 60% down or something? And at 10%, how many payments would he need?
Dawn:He'd only need 26 payments. So I'm gonna round up to that, and I'm gonna go, okay. He'll get almost at 11% yield. But now let's look at this. Right?
Dawn:Amortization. So I don't know if you can see this, but here, for tying up it's just a little over two years. Right? For tying up 34,000, Dave's gonna make 4,300 in interest. Is that still because of the fast amortization, do you see?
Dawn:It's how fast the principal's changing here. Right? The, amount that goes to principal, the very first payment is $11.66. Okay. So I'm gonna put that well, I'll do it right here instead of my little calculator.
Dawn:I don't know. So let's say 4,300 divided by 3,400,000, I mean. I don't know. Am I doing it wrong? The the cash on oh, I'm not doing it by year.
Dawn:So 4,300. I'm trying to do just cash on cash. Like, compare contrast to an interest only loan just for kicks and giggles, just for a place to figure it out. 4,300 divided by what did we say, two years, approximately. So $21.50 a year divided by 34,000.
Dawn:So it's about a 6% yield overall, I think. Am I am I right about that? But it's really secure. So right? It's a very secure deal.
Dawn:It's a quick payback. And even though you got your your 10%, really, the cash on cash for the equivalent of an interest only deal is about 6%, probably a little more. What is that okay with you, Dave?
Dave:I would probably want a smaller pay. I don't I don't want the full payment. I don't want it to pay off that fast.
Dawn:Yeah. So that's the problem is it's going to pay off that fast because I can't make it stretch longer than than the term that we're actually buying. Right?
Dave:Right. Or or it would be okay, but I don't want the full payment, which would therefore raise my yield. But I'm not sure how you'd pull that off.
Dawn:No. Because so what if I say, okay, Dave. You're only gonna get a thousand dollars of the payment, and you let's leave your yield right there. You're only gonna be 20 bring 23,000 to the table, and I need 34. So you're 10 you're $11,000 short from what makes this deal work.
Dave:So why do I have to be fully fully amortized? Why don't I get part of the payment and you keep part of it?
Dawn:Well, I would be keeping part of the payment, but it doesn't solve my problem. If I'm trying like, in if the in this case, I'm not bringing any money to table. I'm just having an investor bring it all because there's so much room in investment to value. So the note's fully amortizing. The note's the way the note is.
Dawn:I can't change the way the note is. And if I amortize you and there's a balance due to you longer than when the if I only buy 26 payments and then I still owe you money because I took the money you know, I took $600 a month. I'm gonna owe you a balance at the end, and that does that does not that's no. That's getting your getting your weight over your skis. So so I we did bring in 34,000.
Dawn:And what did we do again? Oops. 34,000 goes here. It was the $15.70 $14.73 $0.07 to the investor. So like I have said, when there's a short amortization, you have to have a higher yield to to compensate for the and it looks like, wow.
Dawn:That's such a high yield, but it has to be worth the time to do the deal. Right? So in this case, I think we did buy 28 payments. So this was actually the yield to the investor. And in this case, they got 7,200 for tying up 34,000.
Dawn:And, you know, so, yeah, a lot of it was principal, but it still made it worth it. Right? For a couple years to make a very risk free asset. So that's what we ended up doing. And then she still had a remaining I wanna say she was still gonna have, the note seller.
Dawn:Right? So, basically, what I did is, I borrowed 34,000 from the investor. They got, like, a 1616.6% return. They got and I kept a 100. I got 4,000 up front minus due diligence and some closing costs.
Dawn:Right? This is just what I do, guys. It's like it's not super oh, we and we we bought 28 of the payments, and I want to say that the the seller would still have something like $17.17 payments remaining. So if we say what she would still have is let's get this back on there, put the get it back to the full payment. So her $15.73 times, what'd I say?
Dawn:17 or something. She was still gonna get $26,008.07 42. 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.