Subscribe
Share
Share
Embed
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.
Colonial America from the sixteen hundreds to the seventeen hundreds was informal seller financing. This is where it becomes clearly documented in The US. Early American settlers relied heavily on informal private agreements because banks didn't exist in any meaningful way. Land was often acquired by promising future crops, labor or installment payments. In plain English that I can't speak, seller financing wasn't creative.
Dawn:It was basically the default. In the eighteen hundreds and early nineteen hundreds, it was a dominant private lending era before modern banking and government programs. Most real estate financing was private seller carry backs, individuals or local associations. There was no federal mortgage system before the nineteen thirties. Loans were short term, negotiated and often required refinancing or payoff balloons like it's typical for someone to have a five year balloon if they don't wanna go long term.
Dawn:This is the era where seller financing was not just common, it was mainstream real estate practice. Okay. Well, here we are. My name is Dawn Rickabaugh. This is Property and Paper Live.
Dawn:We are, represented or notequeen.com is sponsoring this episode of property and paper live. Feel free to go over and sign up, for the newsletter and just to keep in touch. If you want to participate in these calls live, ask your own questions, bring up your own situationships that you have going on. Just go you don't even have to sign up for the newsletter. Well, you probably get it anyway, but you can go over to property and paper live.
Dawn:I probably what do I email? Maybe maybe six times a month, something like that, depending on what's going on. So it's not a ton, but it's a way to connect to this conversation if you're sort of wondering who is this person? What is this concept? Is it real?
Dawn:Is it legal? You know, you gotta hang around a little bit and listen to it before you can kinda get a feel for it, before you spend a bunch of money. Just hang around these calls. So, anyway, today, I promised to talk about landlords. I think the exact subject line was something like, is it too good to be true?
Dawn:Can a tired landlord, usually 60 and above, who own their property free and clear or nearly so, is it really possible for them to double their net income if they take a what we would call maybe a creative or unconventional exit, the internal revenue service calls it the installment sale. It's part of the tax code. It's not something that I made up by far. And, the answer is yes. And I have seen it happen, many times with my clients, that have consulted with me.
Dawn:They they wanna sell their their property to their tenant, and they wanna do it the right way. And or they're sitting on the market one price reduction after another, and they get an offer asking for owner financing. They then they find someone like me. And they'll say, what is this, and is it good, and how do I make it better than what even it seems like? So this is especially for you if you're a tired landlord.
Dawn:Now a lot of you and I'm gonna talk directly to you like you're all in that age range, and you're all in that situation. You know? You're you're 67. You're still getting on the roof. You and your wife talk about selling, oh, every few months or so.
Dawn:Well, for sure, this spring. Okay. Well, then your CPA gives you what you'd pay in capital gains and depreciation recapture, and you're like, maybe next year. And you're still taking 2AM phone calls and a 10PM text about the water heater. Okay?
Dawn:And so it just keeps going and going. You're sick of the pitches. You don't wanna get rich quick scheme. You just want something solid. Your financial adviser trying to sell you annuities.
Dawn:Well, guess what? You can create your own annuity, your own real estate annuity, and in many times, you can double your net income. And it does sound crazy, but but it's true. But you gotta do it the right way because it's no good getting all that fat cash flow if you're just gonna set yourself up for a headache that you didn't see coming down the road. So someone like me and people on this call who have been in the note business, which is yeah.
Dawn:If you're a landlord, you never even heard of a note, and you're not sure you even want one. But if you do seller financing, you're gonna be holding one and carrying one. And guess what? Somebody might wanna buy that note. So you need to know what those buyers of that note would like to pay.
Dawn:Right? So if you or your heirs ever decide to sell the notes, don't you want to get the best price you can for it? Okay? So that's where understanding the secondary market, that people who are basically private Fannie Mae's and private Freddy's depending on gender. I'm a private Fannie.
Dawn:I identify as a private Fannie. Maybe David relates to being a private Freddie. I would say he probably is a private Freddie, you know, on the inside. He didn't say it out loud, but I know who he is. Oh, shoot.
Dawn:Anyway, so that's what we're gonna talk about, and I do have numbers I can take from someone who's on the call, or I can, bring up some numbers that are very close just out of my head, very close to what I've done in the past, and helped many people through. So we can do it either way. But before I launch into that sort of monologue, I'd like to, Anthony and David both have raised their hands as they want to bring up something. So the people that are here live, you guys get front and center. So, Anthony, you're on.
Dawn:So tell us what's going on in your world.
Anthony:Well, thanks for having me. So I'm I'm out of I'm from Reno, and we've met before. But even now, I'm out of I'm I'm I've been to your classes in over downtown and stuff like So I've I've met you for a while. But and even though I've I've kind of been on the outskirts. But, anyhow, I'm currently in Arizona, and I'm looking at two different landlords.
Anthony:One is 73 and another is 92. The 73 year old has about 25 doors, and the 92 year old has about 11 doors. I'm looking at both of those portfolios. So I've already warmed up the first the 73 year old guy. I've I've warmed him up to sell our financing.
Anthony:I haven't really got down the road with a 92 year old. I just met her this week, and I'm gonna try to warm her up to it as well. But they both know that it's like time to get rid of it. How do I get rid of it all? And I was like, I'm like, I'm I'm here to provide solutions, you know, and and I think they both get a a sense of that.
Anthony:But, yeah, you know, where to go with that. I this can go in any number of ways. So Yeah. And, I mean, I'm I'm not that versed with the notes. Although, I do know, I did I've done a couple of inspections on the 73 year old's, properties.
Anthony:And on one of them, he's held for twenty seven years. So I I was talking to him about, what is that is I mean, eventually, and, the recapture tax, which kinda, I I mean, it's like, here's why you don't wanna sell it to me. You know? So, I mean and then then that's kinda why I'm here. It's like, what's my next pitch here?
Anthony:You know?
Dawn:Thank you, Anthony. Oh, what a rich, juicy situation. I really appreciate you bringing that to the table, man. I love cutting into this juicy steak. That's medium rare right there.
Dawn:So, first of all, would you please do me the favor? And for people listening, can you back up? Because there's a whole lot of goodness packed up in the I've been warming the seller up to seller financing. Please fill in the gaps. Like, how do you do that?
Dawn:How do you even talk to a seller? So please, you know, spill some of your genius out on that.
Anthony:Well, I mean, it's not necessarily genius, but, I mean, I've been on the I mean, I've I've had my own properties too, and I just still I have rentals now. But it's like, you know, at the end of the day, I mean, you're getting older. You don't want and you don't want the toilet call, and you don't and you don't want you you don't necessarily wanna chase you know, in the case of of the of the 73 year old, so you're chasing 25 different payments. So it's like, can I can give you one check, and then you don't have to deal with all those midnight calls and and and and the evictions and all of it? You just don't have to deal with
Dawn:it. And this 73 year old is managing 25 doors by himself.
Anthony:Yeah. Well, he's basically built it. So, I mean, the there's one that I looked at. It was originally four, and he squeaked in another two. You know?
Anthony:It's like and I thought I was looking at four. And then we get over there, he's got another two kind of rat hole, and then and then he's got a he he's got a he's got a travel trailer back and back. He's like, well, you could do this and that to that. And then and then there's a Konex box behind there, and it's like, well, this one's all wired and ready to go. It's like, he's he wants to keep going, and what I don't wanna do is take away his purpose either, though.
Anthony:You know? And it's like, well, I'm not gonna I'm not trying to bench you. I'm not trying to sit you on the bench, and you're out to pass you now. You know? So kinda got you got kinda gotta walk him into that too.
Anthony:It's like, well, if I can maybe I can find something for you to do. You know? I
Dawn:love that. So you you're you come because you you can understand the situation he's in. You you got a few more, you know, few few less laps on you around the sun, but, you can speak to them because you're one of them. Let's just say how how besides the let's chase one payment or you won't have to chase one payment instead of 25, how did you broach the concept of seller financing? Had this person heard of that before?
Anthony:You know, I I really, I don't I don't think so. I don't think I mean, he's really he's really into the world. It seems to me I mean, obviously, he's had the the one property for twenty seven years. So, I mean, he's just been kinda building on this stuff and not really thinking about it. And then I get his daughter is telling him he's gotta sell, and I think he has a younger wife.
Anthony:And she's like, you're have to get rid of this. And and he said, oh, I had open heart surgery, pulled up his shirt, and showed me. It's like, this was last year. It's like yeah. I mean, he said I mean but the thing is is I get it, though, too.
Anthony:I I don't want a bunch of properties either. I mean, at some point, I'd like to own or finance and back out too, but, I mean, here's my end, and here's his exit. And how how can we both make this thing work?
Dawn:Yeah. They are fantastic. So what does the guy need?
Anthony:Exactly. That's why I I don't know. Mean but the thing is is I haven't I don't have APODs. I've asked him. So, I mean, I really don't know what his income is, and I so I don't know what I mean, I know that they both both parties live in decent, they they live in pretty nice houses, you know, up in the hills kind of thing.
Anthony:But, I I don't know what their income level is, so I don't know what that threshold is. So, I mean, that's what I'm digging for.
Dawn:Okay. Yeah. So
Anthony:Actually, this one I'm sorry to interrupt.
Dawn:But Yeah. No.
Anthony:I mean, this one may need to be continued on a phone call or something to you personally at some at some point. I'm I'm right in the middle of of of of this, you know, meet getting to know him and meeting that or or the beginning of a negotiation, but, you know, I I'm here for another week, and then I come back home. I'd like to get something, you know, a little bit further down the road with this thing before I leave town. So
Dawn:Yeah. Well, that's fantastic. So so number one, to address the kind of conversations, it's finding out what their other competing strategy would be. If they took all cash and they were fine with the capital gains, what would they be doing with their money that is so big? Because, oh, well, I would be then then you know what you're competing with.
Dawn:I'm going to I'm gonna buy this other thing, or I'm going to invest do stock option option trading now, or I'm gonna stick it in a CD in the bank or in some treasuries or what so you need to know what what it is they need cash for or want cash for. If they're saying, oh, I'm gonna buy some treasuries, what are what are they at? Four and a half right now? What if you you know, what what's your best investment right now? And if I could match that, do you think and we could secure it by something.
Dawn:This is this is collateral. This is security that you know, mister seller. You know these these properties inside and out. And if I didn't pay you, you you know, you can create your own annuity here, right, that that pays you whatever the competing rate is, but hopefully in that four to 5% or less. Right?
Dawn:You get this back, and you know what to do with it. You throw it in the stock market or somewhere else, and that falls you don't get to decide when you get your money back or if you get your money back. Right? So, basically, like, what are your immediate cash needs? What are your immediate cash needs?
Dawn:And just curious. Oh, well, how much cash so how much cash do you need? Okay. What what are you gonna do with it? Just curious.
Dawn:You know? Well, I'm gonna do x y z. Okay. Well, if I could get you that or better, you think you could work with me on this? You know?
Dawn:Could I could you give me some time to get you paid? Because I'd like to give you full price, maybe more. But if you could make if you can make double what you think this whole lot is worth over the next fifteen years, yeah, he might still be alive. Well, he's gonna have a kid. Right?
Dawn:He's got a younger wife. You're gonna leave great income for your wife and any other beneficiaries. You know? What if you can make double over that time? I mean, would that be something you'd be interested in?
Dawn:And, I think you already have the nice, relaxed conversational tone, it sounds like, you know, with him. But, you gotta find out more information. You you've established some rapport. Now you need to know more. Okay.
Dawn:What are you thinking on price here? And if we didn't have commissions to pay, you know, how much money do you have coming in now? Here's what I think you'd have if we worked out a deal. Oh, do you wanna keep this one to yourself? Maybe I won't buy your whole portfolio because I see you enjoy this.
Dawn:It keeps him alive working his deals and and, you know, trumping about doing his business. Here's someone who's just salt of the this is so many American people, salt of the earth people. Head down, work hard, buy properties, pay them off, take care of them. They don't even really think about it. It's just here's the program.
Dawn:I got on this train, and I keep going. And, like, in this situation, nobody ever told them that the very a very common exit for those who know is to change real assets for paper assets. The asset is the cash flow. The rental property was the vehicle. But what they want is the cash flow, unless some people just like to work on them.
Dawn:Really, like, my my grandfather, him Bill having a third acre garden every year is what kept him alive. Even he was too sick to do anything else, he'd still crawl. Sometimes he had to crawl back from the garden because he, he got clear tuckered out, and he couldn't walk back. But every day, he's out in that garden and bringing back stuff to throw in my grandmother's sink, and she's like, oh, I gotta do something with this. Right?
Dawn:So, but mostly, the cash flow that gives someone effortless retirement income is the asset. So it's just talking them out of it has to be cash flow secured, well, from their rental as a landlord relationship, that they could still have that cash flow and better. And and it's your job, Anthony. Right? So how would you like it if you can have that same cash flow except I'll pay the insurance and the taxes and do all the maintenance for you?
Dawn:How about that? How about you just you just keep these rentals but just in a different relationship? And I'll take care of the parts you don't want, and you keep the parts you do want. That's a great solution. But, yeah, in terms of, like, dialing down and seeing what his overall portfolio really is, you can kinda you can kinda subdivide them like a sheepdog.
Dawn:These these sheep go in that pen. These go over here. These are in the middle. Could go either way. Yeah.
Dawn:We could work that out in a one on one consult if you wanted to
Anthony:Sure.
Dawn:Pound that over. So
Anthony:There there's a lot of moving parts. There's a lot to be
Dawn:talking about. There's a lot there's a lot of juice to harvest there because I
Anthony:Yeah.
Dawn:It's just palpable how much opportunity and potential and a win win situation that could be created out of all this. So good job on that. That's that's pretty exciting. How did you initially start talking?
Anthony:I was I I actually, I went to a I went to a a University of Arizona football game, and the guy's out there, and we're looking for parking. And he was out there selling parking spaces in one of his rental units. Or so it's like and I I jumped out of the car. It's like, well, I know this whole game. I've been here, done that.
Anthony:So good job for you. And he's like, oh, really? And then he invites us to dinner. So, yeah, we're we're on pretty good terms. So yeah.
Anthony:It is. It's just a matter of figuring out what what he's comfortable with and then seeing if I can get some sort of rate that would make it worth it for myself, you know, monthly. And, obviously, not being from here, I'd have to build the team and pay them. And, I mean, there's it seems to me like the the 73 year old has quite a quite a lot of maintenance going on, and the 92 year old bought a little better, bought a little more expensive properties and not quite as much maintenance issues going on, but I'm jumping right in with both of them. So, yeah, I'd like to get something a little bit further down the road with them in the next week.
Dawn:Yeah. I mean, that just sounds super exciting. And on and that lady, she might say, well, shoot. I don't even buy green bananas. Right?
Dawn:But depending on if she if she has heirs and beneficiaries, I mean, most kids, they don't want their parents' rentals. Soon as they die, take that step up in basis, they're gonna sell. And that's why future generations don't keep wealth very long because all they wanna do is sell assets. Okay? They don't think of thinking of keeping them and using leverage and hard work and other things.
Dawn:They're gonna sell them, so why don't you just give them a a note stream that does doesn't come with any rental, you know, landlord management capabilities? So, it just depends. She she might say, okay. I might carry depends on how feisty she is and how healthy and robust. Right?
Dawn:She might say, well, I'll carry for five years. You can work with that, usually, if you get a good enough price. Now with with long term financing and good enough terms, doesn't even hardly matter the price you pay for something. Right? But if there's gonna be a five or seven or ten year call on it, then you need to think about price as well because how am I gonna refinance?
Dawn:Can I sell these to, you know, some of it to pay off the other ones free and clear? Whatever. You know? And even if the market goes down, the market might go up, may might stay sideways, and might go down. So you gotta be okay regardless as long as
Anthony:So, you know, another thing is to sorry to interrupt here, but, one one avenue that I think I'm gonna I I really think I'm gonna, pursue is, doing a master lease
Dawn:on
Anthony:all of them. And then, with a down payment with one maybe one property and then maybe pick the rest of them off as I see fit or do you know, what what I mean, pick them off and maybe refinance them or pick them off and sell sell them, that type of thing. But what I don't wanna do is I don't wanna create a note and I've that that's not solvable on secondary market, and then I've damaged them. So, you know, I'm trying to use some due care here too.
Dawn:Yeah. I love I love to hear those two things because I meant to bring up the master leasing. You're already on it. Because that's a nonthreatening less they're they still own the property. They feel you know, it's just a tiny move.
Dawn:But then they get used to you giving them payments, and then they're like, yeah. This guy's solid. So one by one, they might own or finance them to you straight. But that's yes. And I like you caring about, you know, what would they get on the secondary market if they sold this note?
Dawn:And that's depending on their situation, it could either make or break them. Right? Some people, it doesn't matter. It's a small part of their overall portfolio. If they had to take a discount, it doesn't change whether they're gonna eat, you know, or be able to pay their property taxes.
Dawn:Right? Mhmm. But some people, if if you can save them 10 or 50 or $100,000, that's gonna make all the difference in their world. So I really love where you're going with it, and I can see why you were a natural fit for showing up to my meetings. And I'm sorry I don't, I didn't remember that right off.
Dawn:That's what happens. That's what happens. I have post COVID brain, I think. So yeah, but I'm not getting older. I I've been always saying, I'm getting old, and then I go, that's not a very good thing to say.
Dawn:I think I'm gonna stop telling myself that because I actually, don't have bandwidth for for getting older. It, I got too much stuff to do. So, anyway, Anthony, thank you for bringing that up. This has been very rich. And, so this is probably where, we're gonna get cut off on the part that gets posted to YouTube and podcast.
Dawn:The rest of this juicy conversation that's now gonna go another thirty minutes is gonna be only in Citizens of the Realm, and, you'll be hearing more about that in a quick second. Alright. 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 and if you have a situation where you could use some one on one help, check out notequeendeepdive.com and schedule a private consultation.
Dawn: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.