1. What’s Working in Today’s Note World?
Gerald A Lemoine
President

2. How I got into Real Estate
Development in Steamboat Springs, CO late 1990’s
Bought undeveloped land
Improved roads and installed utilities
Sold 35 buildable lots in 18 months for $150k profit

3. Education Ward Hanigan foreclosure training 2003
Bruce Norris boot camp 2005
Weekend seminars
Jack Miller
Peter Fortunato
John Schaub
Dyches Boddiford
Gary Johnston & Clyde Wilson
Mike Cantu
Rick Harmon
Jack Shea

4. Some Thoughts on Note Investing
Contrary to popular belief, not all deals are winners
Think of portfolio as a mutual fund – basket of notes
Diversify – don’t put all your capital into one note
Don’t be afraid to make mistakes
If you’ve never lost money on a deal you’re probably not doing that many deals ( playing it safe)
Rare to make homerun on 1st, more likely on 2nds.
Be patient – pick the right time to pursue aggressive collection. Could be 3-4 years after purchase.

5. Recent transactions Purchase pool of 60 notes $4.9mm UPB for $500k
Purchase Perf CA 1st $225k UPB $390,000
Payoff on Phoenix 2nd for $117k Cost $18k Profit $99k
Payoff on Carlsbad 2nd for $152k Cost $72k Profit $80k
Payoff on Orange, CA note for $120k Cost $15k Profit $105k
Brokered pool of 20 notes – fee of $75,000
Payoff on San Marcos 2nd for $132k, Cost $75k Profit $57k
Payoff on LA 2nd for $160,000 Cost $90k Profit $70k

6. Las Vegas Life Estate

7. Las Vegas Life Estate Purchase Las Vegas house at receivership auction
Property value $210,000
Winning bid $40,700
Subject to Life Estate with 92 yo occupant
Offered $55,000 next day

8. Las Vegas Life Estate

9. San Diego foreclosure

10. San Diego foreclosure Property value $2,650,000
Senior mortgage $1,950,000
Purchased $100k JR lien for $35k (payoff $180k)
Judgement for $600k and IRS lien for $600k
Foreclosed on JR lien Oct 2016
Wait 120 days for IRS redemption period to expire
SR lien delinquent – Filed FC in Jan 2017

11. San Diego foreclosure

12. Partials - How can payments be split?
Time
Amount
Note should have fairly high yield to be feasible

13. Performing Monterey note – Improve yield
I/YR PV MT FV
Disc 60
12.0
150,000
1,500
15.5
132,000
12%
19.3
115,000
23%
 Sell partial
9.5
75,000
594
34.0
40,000
906
Total

14. Performing WI note – Re-capitalize

15. Where we’re finding notes?
Private individuals – mailed 5,000 letters
NOD list – Property Radar, County Records Research
Referrals
Hedge funds
Direct from small banks
Servicing companies – FCI Exchange
Websites – Loan MLS, Auction.com, Loanmarket.net
Buy & Hold note investor – We don’t sell much

16. Typical Outcomes
Performing on a temporary payment plan, usually interest only.
Performing on a permanent loan mod.
Performing on the original terms of the loan.
Short payoff
Full payoff
Foreclose and sell the property
Foreclose and keep the property as a rental “subject to” the existing 1st mortgage.
Owner signs Quit Claim deed to us for cash payment (Cash for keys)

17. Unfavorable Outcomes Lien strip in a Chapter 13 bankruptcy.
Wiped out by foreclosure of Senior lender
No collection activity due to negative equity or delinquent 1st (loan on hold)

18. Deals Gone Wrong Dayton, OH 1st mortgage
Purchased note for $12,750 in June 2010
Expenses of $26,400
Income of $13,000
Results in loss of $26,150
San Clemente, CA 2nd mortgage
Purchased note for $42,000
Expenses of $102,000
Sold property for $140,000 subject to 1st mtg
Loss of $4,000

19. Note Performance How do you know if an offer is good or not?
What is the real return for complex workouts?

20. Financial Calculator Calculate monthly payment at fixed rate
Solve for yield based on discounted purchase price
Solve for yield using IRR (Internal rate of return). Use for uneven cash flows.
HP10Bii Calculator for smart phone

21. Basic Payment Calculation
Borrower owes $100,000

22. Basic Payment Calculation
Monthly payment calculated at $600/month

23. Solve for Yield (I) Purchase $100k loan for $15k and negotiate
payment of $400/mo for 140 months.

24. Solve for Yield (I)
Yield to investor of 31%

25. Memphis 1st Mtg Details

26. Memphis 1st Mtg Cash Flow

27. Memphis 1st Mtg Cash Flow $494/mo

28. Memphis 1st Mtg Cash Flow $350/mo

29. Miami 2nd

30. Miami 2nd

31. Miami pay plan

32. Miami 2nd – 360 mo pay plan Total collected $193,120

33. Miami 2nd Why did I choose to buy this note? Pride of ownership
Upgraded property with pool and landscaping
Newer property built in 2004, original owner
Borrower had decent credit
Area with appreciating values
Other factors
Negative equity when note purchased

34. Make it Better? Sell a partial 8% interest rate
120 payments of $485/month
Purchase amount of $39,975

35. How can payments be split?
Time
Amount
Note should have fairly high yield to be feasible

36. Calculation of Partial

39. Tools

40. Gerald A Lemoine President Phone: 866-935-5211 Ext 8050
Fax:
Website:
Monthly Note meeting:
2nd Wednesday of every month, 6:30 PM
11088 Trask Ave, Garden Grove