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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.
We're talking about seller financing, but the other side of that is the note. So when you get used to looking at notes and deciding what makes it valuable or not, then your mind starts to connect these two things so they're not two separate worlds. Right? They're two sides of the same coin. Like, okay.
Dawn:This note is valuable. Okay. If I did owner terms kinda this way, then I'd have a valuable note, or this note isn't worth very much or nothing. Okay. Then I won't do seller financing that way.
Dawn:Right? We need to be the midwives when these little notes are being born that... Which is the point at which the terms are being inked and agreed upon in contract. Welcome to Property and Paper Live. My name is Dawn Rickabaugh, and I'm your host.
Dawn:And I'm the owner of notequeen.com. I'm also a licensed agent in Nevada, and I do seller financing note consultations nationwide. And, these are our monthly calls for property and paper live. It's the third Tuesday of every month at noon Pacific. If you're listening to this on YouTube or somewhere, go ahead and join us live.
Dawn:If you come over to noqueen.com and you sign up to subscribe to my list or if you go to propertyandpaper.com, that's a direct sign up for these mastermind calls so that you can participate live. On the first Tuesday of the month, still at noon Pacific, is the beginner course. I switched that from this sort of deeper, more advanced mastermind that we do with Property Paper Live. On the first Tuesday, we're doing what I'm calling landlord liberation, the tax exit playbook, basically, for tired landlords. That's more of our beginner class.
Dawn:Because my target market is people who have owned their properties free and clear. There's a lot of older people that they've built up small portfolios of rental properties, mostly free and clear, and they're at the point where they need to figure out what to do with it, and they're not about to send the IRS a third of the sale price at close. They've probably done that once or twice and said, yeah. That's enough for me. So they're looking at other options besides just keeping grinding and grinding as a landlord year after year after year.
Dawn:So... And, I'm also available for one on one consultations. If you are a landlord and you have maybe just one property and you and you wanna sell it to your tenant, just one hour with me will pretty much set you up. If you should do what you're thinking based on your your short and long term goals and then how to do it. Right.
Dawn:And if you wanna retain me for the whole transaction, that's beyond that. But most people, whether you're a tired landlord or you're thinking of buying your first note or you're buying a property with owner financing for the first time, that one hour will go a long ways to making or saving you thousands of dollars. So welcome here. And to start off, I just wanna remind everyone, if you've got a question or a story that you wanna share, please put something in the chat so that we know to come back to that. We were talking just before we started the recording to Jay and his friend Tim over there in Georgia.
Dawn:I asked them to remind me to just come on for a few minutes and talk about their situation there. So what I'm gonna do first is just... Several times a month, I get emails of, hey. Here's this note. Here's that note.
Dawn:Do you wanna make a bid on it? And a lot of times, I'll make a bid and nothing happens. But, like, then a year later, they said, hey. The broker brings... The person who brought me the deal said, hey.
Dawn:They just, decided they're willing to accept my quote. Can you reprice this, and can we do it? And then I take a deeper look at it. So I just figure it can't hurt, you know, when we're talking about seller financing. But the other side of that is the note.
Dawn:So when you get used to looking at notes and deciding what makes it valuable or not, then your mind starts to connect these two things so they're not two separate worlds. Right? They're two sides of the same coin. Like, okay. This note is valuable.
Dawn:Okay. If I did owner terms kinda this way, then I'd have a valuable note, or this note isn't worth very much or nothing. Okay. Then I won't do seller financing that way. Right?
Dawn:We need to be the midwives when these little notes are being born that which is the point at which the terms are being inked and agreed upon in contract. Right? We need to be at that point to affect the value of the note in the secondary market, which just means if you create a note and someone wants to buy it from you, they're the secondary market. You're the primary market because you made the note. You carried paper on your own property, and whoever wants to buy it from you is on the secondary note market.
Dawn:Right? They're just taking it by assignment of deed of trust or assignment of mortgage. So let me share my screen. So this is an example of things that will hit my inbox. A little place in Texas.
Dawn:If you're going, I wonder what kind of information I would... Should send over to someone that I wanna quote a note. And, Eric, are you still on here somewhere? Because, a time or two ago, we were talking about a couple note deals that he had possibly going down, and I guess we never really followed up. But I thought of you a couple times, Eric, about wondering if you wanted to revisit that or throw out an offer to them.
Dawn:But, anyway, once you get the information on the note from this amount of information right here, I can quickly decide if it's something I want to make an offer on, whether full or a partial, and subject, of course, to more information, subject to due diligence. Right? So this is all I need. Here's the sold property information, the collateral for the note. Right?
Dawn:So what's the address? They usually give me the whole address. I guess you can withhold it if you want, but when you have trusted relationships with people... And you know what? You really can't be a jerk in this industry because at the end of the day, it's a pretty small industry, and word gets around if you keep your word, if you screw someone over.
Dawn:Anyway, I get the whole address so that I can look it up online. I use PropertyRadar. A lot of people use title companies or PropStream or different things like that to pull up the information on an address, the property value, what type of property it is, when was the value established in July '25, how was it established? Just guessing. He looked on Zillow.
Dawn:Not sure. Sometimes it's appraisal. Sometimes it's recent sale. Are there any other liens on the property? No.
Dawn:Is the property owner occupied? Yes. It's really pretty simple what you have to have to collect to pass along. What's the the lot size, the plot size? K?
Dawn:Six sixty... 6,600. The square footage of the building, a 32. Other property details, none. Then here's the sale information.
Dawn:And, basically... So there's just these different sections. It's easier to see now. Right? We have the sold property information, the sale information, and how the note was created and the info there, and then the borrower information.
Dawn:So three different segments. So down... We're we're in the sale information, the date of the sale, 12/01/2015. So, wow, that is eleven years ago. The sales price, 85,000.
Dawn:That's why they just guessed, you know, up here. Like I said, probably just looked online, pulled the number up, and they put $5,000 down. So in my mind, I'm going, 5,000 divided by 85,000. Okay. It was a 6% down.
Dawn:Not a really high down payment. Right? For for owner occupied single family, you want to usually see 10% minimum down. But since this has a eleven year pay history, all of this isn't quite as important now because they've built up a lot of equity in the property. Mainly since when you're buying a note, you're buying the payment stream, the annuity.
Dawn:You're buying an annuity from someone who originated a seller carry note instead of buying an annuity from an insurance company. Okay? So the juice is in the payment stream happening unless you're trying to own the property and you want to foreclose on it and get it if you can. Most people buy notes for the income, and the more stable the income, the better in general. Right?
Dawn:So even though this was 6% down, I will go, well, they've paid a lot of years on time. Well, we'll see if they did. Do you have a title policy? Yes. So what title policy am I usually thinking here?
Dawn:What what what title policy will I wanna see?
Robin:Well, you you wanna see the lender's policy. That's probably just the title policy for the the borrower. Right. I think that's where people get confused.
Dawn:Yes. And so for sure, they're gonna have a owner's title policy if they closed, you know, through a closing attorney or a title company. This person, because I know these people, it means that there's a lender title policy too, that there was a dual policy issued. And if there isn't, most of the time, not all of the time, most of the time, they have to buy one. I want a lender's title policy to ensure the loan is lien position.
Dawn:So a lot of attorneys or title companies will tell sellers when they carry paper. Well, since it's a seller carry deal, you don't need a lender's title policy. And maybe they don't, but if they wanna sell the loan, sell the note, whoever's buying it's gonna want it. And it's a heck of a lot cheaper at the time that it's a dual policy, you know, buying the owners and the lenders at the same time. So it's always good just to get it.
Dawn:Just get a dual policy. It just saves a step or two and a and a few $100 down the road. Here's note information this should be. Okay? Did you use an attorney or title company to close?
Dawn:Yes. Okay. Great. So we've got sold property information. This is collateral.
Dawn:This is about the sale. And now here's about the note. I lied. There's four sections. The original note amount was, obviously, if the down payment was 5,000 and and the sales price was 85, it tracks.
Dawn:And I always do the math. If I cannot recreate whatever I see in the email on my phone, because I'm ancient like that. I just rather you... Than the fancy spreadsheet. I like...
Dawn:I just pull this up because I've been doing business on a $6 app since 2009. Right? So I'll just do it. If I cannot recreate what's on the paper, I feel like I've wasted my time and somebody's being sloppy and making me do their work. So before you submit a note to anybody, make sure you can recreate the numbers and that they make sense.
Dawn:Don't have a 85 sales price, a 5,000 down payment, and then say that the first note, original note amount was 78. I'm like, what? Or do the math yourself. Like, put it in. Okay.
Dawn:$80,000. It's in first position. The interest rate was nine. We're gonna put that in. Original length.
Dawn:Wow. Not $2.40, $2.37. So just shy of twenty years. Oh, they modified it, so it's not working. But, anyway, you get the point.
Dawn:Right? So the original note. What was the original note? That's weird. Oh, because originally, it was $7.23, and then they had to modify it.
Dawn:I guess probably they had to come down on payment for some reason. Date of the first payment, 02/01/2018. Alright. Now what do you have to... That's since the modification.
Dawn:So you're going, okay. Does 2018 and '20... What happened for three years? You know? So you know there's a story building up here, and you're gonna always wanna check the math and read the documents yourself the whole way through.
Dawn:Read the whole note. Read the whole mortgage interest instrument. You have to not be afraid to just read things and start to get familiar so that you understand them yourself. Original length, two thirty seven. Number of payments made, 90 have been made since the modification, and there's a 147 payments remaining.
Dawn:So I'm gonna go one forty seven. I guess I should probably be using the calculator you guys can see. 147. The monthly payments are $5.20. The interest rate's that.
Dawn:And, yeah, that pretty close track. So just to bring this up, 147. That's n. That's the number of payments to be received on this paper. I'm just taking it because I haven't seen the whole modification and all that.
Dawn:These two numbers on the right are always negative numbers for... Of how I do it. You can do it how... Different ways. But the left three are always positive numbers, and the right two are always negative numbers just because that's how I got used to it.
Dawn:Interest rate is nine. So the present value of this payment stream should be the UPB, the unpaid principal balance. So let's see if that's pretty darn close to what they said. Pretty darn close to the note balance at this point has gone from 80,000 down to 46,000 and change. So we're pretty close there.
Dawn:So that's okay for now. Next payment due, 08/01/2025. So either this was a mistake or they're running behind. And if so, I'd wanna know. What I kinda think is they forgot to change this number because they originally sent this note to me last year.
Dawn:So I wanna say they just forgot. You know, they just copied and pasted some things over. Those are things I would check. Are all of the payments on time? Yes.
Dawn:So that doesn't make sense that they're saying that we're running a year behind. Right? Is there any balloon? No balloon? And that's...
Dawn:This feature value here is showing that, you know, it's a fully amortized payment stream. The borrower information, it's private individual. They give the names. Did you pull a credit score at the sale? No.
Dawn:So when they originated this loan and sold it to these people, they didn't pull a credit score. A lot of times, they will have already gotten a credit score from these people because when someone gets a note, a lot of times the first thing they do is send it to a institutional buyer who always pulls credit before they'll quote anything. Right? And so they, a lot of times, will like, oh, well, they won't buy it because the credit's not good, but we know what it is now. And so sometimes it will be in here, and then, they'll tell me what the borrower employment is.
Dawn:Or in this case, they sent it in a separate part of the email, but I wanna say the... They... They're on pensions and disability and Social Security or different things like that. I don't think they're actively employed if I... If my memory serves me on this one.
Dawn:So, basically, let's just assume... The first thing I'm going to do... I mean, there's a lot of moving pieces to it, but let's say it really is worth 126,000. And I'll probably forget these numbers that I wrote in here, so I'm gonna write them down real quick. Okay.
Dawn:My first thing is underwriting because the final payer on the note, it's fine if that annuity's coming in month after month after month. But if it stops coming in, who's gonna pay off my investment? What? What or who? If the borrower quits making the payment, who's gonna make sure I get my money back?
Jay:Only you can do that. You have to go to the floor plans on it.
Dawn:Yep. The house. The collateral itself is going to pay me. Okay? And so that's why before you get all excited about your yield and how much you're gonna make, you you gotta do the risk assessment first.
Dawn:What's my maximum investment to value? Like, if you were making a loan against the property worth $1.26, and, of course, I would get paid for my own BPO, my own broker price opinion, to make sure it really is worth this or hopefully more even. Okay? If you were making a loan, how much money would you loan? Are you at 50¢, 65¢ on the dollar, 80¢, 90¢?
Dawn:Who who would make a loan against this, and what's the most you would? Do you have a policy, Robin? You've done a lot of stuff, I know, for sure.
Robin:Well, I I kinda like to look, it's not just numbers for me. I like to look at the neighborhood and and see, is this a declining neighborhood, or or is it... You know? And then I kinda make a decision from there. But assuming it's an okay neighborhood and everything, I'm fairly conservative.
Robin:I mean, you know, 75%, just kinda typical. Nothing special.
Dawn:Yeah. Okay. That... That's a reasonable kinda typical number. So the most that you're going to loan against it is 75% of the value of the collateral.
Dawn:So we have that number Mhmm. No matter what. It doesn't matter what the yield says. That's first. Right?
Robin:Right.
Dawn:In the old days when I was coming out of being a nurse and coming into real estate and the private loan world starting in twenty o... Yeah. 2005, I guess. I finally hooked up with a company that did traditional real estate. They did investments, and they did a little bit of private originations, hard money loans.
Dawn:But back in that day, a typical hard money lender was 65%. That was just standard underwriting. These days, you've got people that are... They're so clamoring for yield. They're they're lending at eighty and ninety, and sometimes, I guess, with the right operator, 100% or 110 and all of that.
Dawn:So... But just standard. If you're gonna be standard, it would be probably 65 according to the old way people used to think when when I was coming on to the scene. But 75 is actually pretty conservative compared to a lot of things I've seen. So let's just go with that.
Dawn:So that number is the most I'd lend against this piece of property. That's also the most that I will invest against it. So that's not only my loan to value is 70%. My investment to value is 70%. Because if she was gonna buy this note, obviously, we know in this case, the balance of the notes about half of this.
Dawn:Right? So so we're good. But what if the note balance was, a 100 and... Doesn't matter what it was. What if the note balance was 150,000 and the property was worth 300?
Dawn:Or... Well, then the 70% would change. The point I'm trying to make here kinda clunkily is that this number doesn't change. Right? Even if you could get a higher yield or whatever, this is the most you're gonna risk against this collateral.
Dawn:Okay? So now we know we don't have to worry. We already figured that piece out. Now we're gonna go to the yield piece. So we can just...
Dawn:Oops. I don't wanna clear all.
Jay:While you're doing that, Mark said that he liked Robin's answer about being conservative and that it always depends. Yeah.
Dawn:It it does depend. I mean... And there's a lot of tools for us now too, right, to be able to have access to trends. Is this area trending up? What's it...
Dawn:Are we going up in this neighborhood? Are we going down? What are the demographics? How how saturated is the market? There's quite a few things.
Dawn:Now there's something called par... Parcel, p a r c l, like... And it shows motivated sellers, and you've got the guy, Nick Gurley, that created his, what's his service called? I use it, and I'm blanking out on it right
Jay:now. Reventure.
Dawn:Yeah. Thank you. Thank you. Reventure app. And so I will plug it in and just say, okay.
Dawn:What is this ZIP code looking like? You know, our our prices forecast to be up, down, sideways. I think you could even get, like, how many price reductions in that ZIP code have happened as a percentage of the overall inventory. There's a lot of info there that I like making part of my due diligence now. But, anyway, just assuming everything else is just peachy keen...
Dawn:I mean, you do have borrowers that aren't on active income, so I I think about that. Okay? Hopefully, their payments don't stop because who wants to foreclose on someone who's medical problems, older in a wheelchair or something like... You know, just just doesn't sound good. Doesn't taste good.
Dawn:That's why they probably... The original payment was probably $7.23, and they dropped it down because they wanted to make this person be able to afford their home at all costs. Right? So I'm guessing that's kinda what happened here. But I don't know.
Dawn:So let's see. Could I find someone who would take a 10% on this? A 140 payments at 10%. And if so, what would they what would they pay for it? Okay.
Dawn:They'd pay 43. This isn't what I would do because I always keep a piece of things. Like, I'll take a piece of the payment. Sometimes I put in money. Sometimes I earn money at the front and a piece of the action.
Dawn:Right? So I might say, hey. Let's $50 I'm gonna keep per month. But let's just say I'm gonna sell the whole note away, and I don't have to do all of that. Okay.
Dawn:If I know someone that will pay easily, happily make 10% on this deal, then I just have to go, well, how much do I wanna make?
Jay:Mhmm.
Dawn:Right? So then Right. It's not like I have a listing, and I'm gonna get my three or 6%. I have to take out what I'm gonna make, what I think will still be a reasonable offer. So if I say, oh, I only need to make 5,000 on this one or whatever, then that's the amount I will tell and maybe a little less because I'm gonna pay for two...
Dawn:Some due diligence. So I will say, hey. I'll pay $38.05. So I'll email back and say, hey. For a full $38.05, they'll take out what they wanna make and give that to the note holder, and they say yes or no, or there's some negotiation.
Dawn:Does that make sense? Yes. Okay. So that was just a little example that I wanted to go over just to have a little bit of juice, a little bit of training on every call that we do. Now thank you for engaging with my content.
Dawn: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. 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.
Dawn:See you next time. Take care everybody.