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Show Summary
In this conversation, Jay Redding shares his extensive experience in note investing, focusing on the creation and management of seller-financed notes. He discusses the importance of understanding the market, the process of creating notes, legal considerations, and exit strategies. Redding emphasizes the potential for wealth creation through strategic note management and the importance of building relationships within the real estate community.
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Investor Fuel Show Transcript:
Jay Redding (00:00)
many investors, particularly wholesalers, house flippers, those house buyers, They oftentimes look at seller financing as being the last resort and they’re really missing a ton of money when they view that.Exiting via seller financing needs to be part of your normal exit strategy. It shouldn’t be like a last resort. It should be part of your overall policy of how you’re trying to exit
Dylan Silver (01:59)
Hey folks, welcome back to the show. Today’s guest, Jay Redding, has over 20 years of experience, including over 100 flips, a rental portfolio, tax liens, private lending, self-directed IRAs, and mortgage note investing. He now focuses on teaching investors how to structure installment sales that pay, create sellable notes, and allow them to recapitalize without going back to the grind. You can find him at CassidyInvestments.com.Jay, thanks for taking the time today.
Jay Redding (02:30)
Thank you, Dylan I appreciate the opportunity. I’ve been looking forward to this discussion. This should be good.Dylan Silver (02:36)
You know, and I mentioned to you before hopping on here, I want to get into notes and I’ve had a number of different people in the note space on the show talk about, you know, what notes are able to do. But I want to talk today about how to create a note and then also, you know, logistically and on a granular level, the steps that people need to take. And I’d like to start off really with what is the segment that thatbest applies for notes. Is it distressed sellers? Is it folks that have listed a home for high days on market? Where can you find a good opportunity to create a note?
Jay Redding (03:13)
Here’s what I would tell you. ⁓ Many house buyers out there don’t have a problem getting into the deal. There’s people that talk all over about it.Exiting via seller financing needs to be part of your normal exit strategy. It shouldn’t be like a last resort. It should be part of your overall policy of how you’re trying to exit homes. Because what happens so often is that
many investors, particularly I’m saying wholesalers, house flippers, those house buyers, I’ll just group them all together as far as house buyers. They oftentimes look at seller financing as being the last resort and they’re really missing a ton of money when they view that.
The markets that we find that are the best for seller financing is your working class neighborhoods. Now, depending upon what part of the country that you’re in, that’s a different dollar. I’m based out of the Midwest, I’m based out of Indiana. Most of the stuff when we’re talking working class, we’re talking 180 to 150,000. That’s a working class home neighborhood. That is perfect.
The thing that you have to remember when you’re doing seller financing or private financing like this for long term, you’re essentially filling the gap that the banks are leaving behind. So wherever the banks aren’t, that’s where it fits for what we’re doing. So you’re looking for individuals. The buyers are essentially going to be individuals that they come up short.
Okay for the bank financing they they make good income they have good down payments but they don’t check all the blocks for Fannie and Freddie to be able to sell that loan on this on the on Wall Street.
we come out we have more flexibility to create terms all right yes the terms are going to be higher the interest rates are going to be higher because they are a higher risk but you have to document that they’ve got the income to handle it all right they have large down payments.
All right, and as a result, you could put together a note that will perform exceedingly well. ⁓ We’ve worked very heavily in working with house buyers who work in the Latino community, quite honestly. And part of that is because they’re hardworking individuals, they’re honest individuals.
The culture is used to going one-on-one type of individual type of investing. And many of them don’t trust banks. Okay. For whatever reasons. Okay. It’s just part of the culture. And we have found our greatest success in working with those house buyers that have realtors that are deeply tied into the Latino community. They tend to bring
large down payments. When I say large down payments, I’m talking at least 10 % or greater. We see 10, 15, as high as 25 % not uncommon in this type of environment. the interest rates typically are 10 to 12%. That is as far as the note face interest rate.
Dylan Silver (07:02)
Okay.Jay Redding (07:22)
they typically pay them off early. That’s what they basically do. So these individuals are contractors, you’re gig workers, all right, they’re 1099 type of workers, but they work hard, they make a good income, and we have found that model has worked exceedingly well, exceedingly well.Dylan Silver (07:45)
What kind of rates can you put onto these notes where you’re at? is it tied to what the rates for mortgages are? Or because these are outside of the traditional banking system, is it, hey, we’re providing you this service, but you really can’t be looking and comparing it with the rates that are available through your bank?Jay Redding (08:07)
Great question. Number one, you need to be aware of what your state’s usury laws are. That’s the first thing. Every state’s a little bit different. Pennsylvania is one that’s a little odd in that respect. But as long as you know what the usury laws are, you’re certainly not going to go beyond that. where we’re at right now,at six and half seven percent as far as a bank loan okay five to six points all right above that is not uncommon typically if you’re looking to sell this note down the road it’s going to be somewhere in the ten to twelve percent range that’s what you’re looking at in that hundred to a hundred and fifty thousand price range now if you’re looking at 250
300,000 if that’s your working class neighborhood for where you’re located then that’s going to be a little lower. That’s going to be probably in the nine to 11. If you’re looking like on the coast, east and west coast, then you’re probably looking at nine to ten. Okay, just because unless a larger dollars that are involved in there. So that’s that would be my guidance.
Dylan Silver (09:17)
Now, when we talk about the process of creating these notes, and I do want to dive into the weeds here, because I’ve had a lot of people talk to me about, let’s make a seller finance offer on a home that’s been sitting on market. we were talking prior to this about having this as an exit strategy. it’s going to be different depending on where you’re at. What’s the process on a granular level of creating a note?Jay Redding (09:23)
Sure.Dylan Silver (09:44)
Let’s say in the case where there’s no pre-existing, there’s no liens on the home.Jay Redding (09:49)
Sure. Okay. All right. So you own the property for Inclair. We’ll just use that as an example. Okay. And you want to sell it via seller financing. So it’s very, very simple, very straightforward. A couple of things you need to do, particularly if you’re unless particularly, I’ll say this, I don’t speak Spanish.So ⁓ particularly if you’re looking at the Latino community, you need to have a step-by-step process already written out.
how highlighted so when the home is shown, they know what that step-by-step process looks like. For us, what we basically do, we do it in both English and Spanish. Thank you for Google Translate. ⁓ But we map out, okay, the first thing that they’re going to do is when we show them the home, we’re gonna ask them some general questions. ⁓
and we’re doing kind of a pre-qualifying type of thing is what we’re doing. All right. How do they make their income? You need to know how they make their income. Can it be documented? Okay. If they’re an all cash business, they need to be running all that cash through the bank so it can be documented. It’s got to be third party documented. That’s the critical part that you need to think of. All right. Are they a business owner? All right.
Do they have their ITIA number or do they have a social security number? We don’t work with anybody unless they have at least an ITIA number so that they’re in the process of being a citizen or they already have their social security number. And then, say we always ask, how much do you have as a down payment?
When we’re I’m to backtrack just a second when you’re marketing when you’re putting stuff out there We mark it on Facebook marketplace when we’ve done our own seller finance Facebook marketplace Zillow, know all of that type of stuff and we also reach out to a Latino
⁓ Realtor or someone who has strong connections in the Latino community and we allow them to market it as a pocket listing. So we will say we will pay you 3%. You’re not getting both sides. We’re paying you to go find us someone and to bring it to us and we give them the guidelines of what we’re looking for. So they know as well.
So you’ve got multiple people working with you, developing relationships with realtors to help bring those leads in. Facebook Marketplace, one of the first line that we put in there. We say, ⁓ seller financing available to ⁓ deserving or qualified buyer with large down. That’s key.
Qualified seller financing or private financing. I don’t say seller. Excuse me. I said private private financing available to qualified buyer with large down When you get those questions in the first thing they’re gonna do is like what’s a large down? Well the question you answer the question with a question. All right. Well, how much do you have is put down? All right, and We will not work with anyone unless they have at least a 10 % All right to put down
and the reason being, so if you’re looking at $150,000 home, all right, they need to bring $15,000 to the table at a minimum. Most of the time, we’re looking at 20 to 20, somewhere between 20 and 25, okay? That right there weeds out all of the tire kickers, okay? We’ve all seen that no down, no credit check, all right, that’s a recipe for disaster. Don’t do that.
Dylan Silver (13:49)
15.Jay Redding (14:11)
Okay, you’re looking for people who have large downs, who have skin in the game, and they want to live in the home. So ⁓ that’s how you attract them. All right, but then once you got them coming in, we do the preliminary on the phone, then we will take them through an underwriting process. We use a couple RMLOs and we reassure them.that this is not a government agency. What we are essentially doing is documenting their income to make sure that they can afford the payment of the home. All right? Because as soon as you hire something out, the biggest fear they are, this may be a government thing or something like that. I we’re the private lender. We are the lenders. OK? But I need to verify. I don’t know you. I need to verify that you can afford the payment. And I need to document that you can do that. OK?
Dylan Silver (14:53)
Yeah.Jay Redding (15:45)
And we really have had very little pushback on that once they understand. We use, I’ll give two resources. use calltheunderwriter.com. We use him and then also Madison Management Services. That’s another resource that you can use. They’re both our MLOs and you, they will, you’re going to give them the terms. All right. They’re going to collect the information from the potential buyer. All right.⁓ At this point, they have put a down payment, thousand or two thousand as a down payment. We’ve signed the purchase agreement, all that type of stuff that’s already done. We’re into the underwriting stage. A couple of things that’s really important that you understand on the underwriting aspect. ⁓ The RMLO is not, it’s not their responsibility to determine whether it is a go or no go. You are the lender.
It’s your responsibility. So you need to have a pretty good idea of what you will accept and what you won’t accept. In the underwriting process, there is a form that’s called a 10-08. ⁓ That is the final summary. Make sure that you always ask your RMLO before you’re gonna say yay or nay that you get a copy of that 10-08 form. It’s a Fanny Freddie form, that’s what it is.
that on that form, that’s going to tell you what they do, how long they’ve been doing it, how many kids they have, what their credit score is. If they have a credit score, credit score is just one item in many of things that we look at. ⁓ So we do not base anything, because most of these people don’t have a credit score, to be honest. ⁓ It documents their income and how long that they’ve been on there and then what their total debt to income is.
Dylan Silver (17:21)
Yeah.Jay Redding (17:34)
That’s the critical point. Dodd-Frank doesn’t say anything about what the limits are as far as debt to income. Now, I will tell you from our many years of self-managing our own rental portfolio, if you’ve got a total debt to income of 50%, the chances that that loan’s going to perform are exceedingly small.we really look at 40 between no greater than 40 to 45 percent depending upon what the situation we prefer 40. Okay.
Dylan Silver (18:06)
Nowin these cases, you’re talking about people that don’t have credit in many cases, but they’ll have debt. So what is that debt going to constitute? Is that going to be consumer debt? Is that going to be auto loans?
Jay Redding (18:13)
Correct.It could
be, it could be, it could be any of those. It could, it could be credit card debt. You know, you’re going to, they’re going to pull, they’re going to pull that data. All right. If they’ve got credit cards, it’s going to pull what their monthly payment is on their credit cards. If they got a car loan, quite honestly, most of these people deal all in cash. So very few of them typically have a car loan. Okay. It’s typically cash. Okay. Is how they, how they operate.
All right, so we’re just looking at, okay, we’re looking at what’s the total debt to income ratio. Is that acceptable? Or do they look to be stable individuals? How long have they been in their job? How long have they been in the industry? Many of these people are business owners, okay? They’re independent contractors. Have they been doing this for a long time? Have we gotten the last two to three years tax returns to see? I mean, if they’re a smart business owner, they’re going to have a ton of write-offs, okay? All right, so that is, you know, it’s
hard for a business owner to get along with a bank because if you’re a smart business owner, you’re to take as many write-offs as you possibly can and show us a little of income. We get that. We understand that.
Dylan Silver (19:18)
I’m gonna have to this here.Now, once you’ve identified, you know, good buyer, you’ve gone through the RMLO underwritten them, right? And so they’ve got the money to the table, they’re bringing that, you know, 10 % down. At that point, you’ve got to create the note, right? What’s the process like of creating the note? Let’s use Indiana as an example, because I’m sure it could be different depending on where you’re
Jay Redding (19:42)
Great.Okay, sure.
All right, you’re going to, wherever you’re at, you need to go and talk to an attorney, okay, and you need to get it templated. Okay, if you’re looking at doing this for down the road,
All right, you’re going to want it to be templated for the laws of that particular state. Okay, we have templates for Michigan, we have templates for Indiana because we’ve originated in both. We do most of our origination in Indiana, but it needs to be legal from the state as well as federal statutes. Now, some things that you’re going to want to have in there. number one, you’re going to have the interest rate. You need to make sure that there’s also a default interest rate. If the interest rate is 10%,
And I would typically put the default interest rate anywhere between two to four points higher than what the normal interest rate is. All right, so if you’re going to 10, sure.
Dylan Silver (20:38)
Can you explain that for myself and our audience? What’s the difference betweenan interest rate and a default rate?
Jay Redding (20:43)
Okay, the note rate is just a standard principal and interest what everything is calculated on. Okay, as far as for a 30-year loan, you’re going to do a mortgage calculator and that’s going to spit out what the monthly principal and interest payment is. Okay, if they default, which essentially means if they default the terms of the note,then it goes to a higher interest rate. Same thing as if credit cards, all right, you see in your credit cards, you are paying 12 % and if you have a default interest rate at 28, okay, now you can’t go that high, all right, but it’s the same thing. That’s what it is. So you have default interest rate, all right, in there.
Dylan Silver (21:19)
Okay.Jay Redding (21:22)
We make our loans look very close to what Fannie and Freddie does so we have it so that the payment is due on the 1st. We give them a 15-day grace period. After that, there is a late fee. All right, and that late fee is 5 % of what the monthly payment is. ⁓ Monthly Prince 1 interest payment. Okay?Dylan Silver (21:42)
friend.Jay Redding (21:43)
You need to have documentation in there for we call it attorney collection clause. Your attorney will probably put that in standard. Essentially, it is the cost of collection, which includes if they default and I have to send a demand letter, I can collect the attorney fees, all of the late fees, all of the cost to send theprocessing, filing fees, all that type of stuff. That’s all collectible. ⁓ So you want to make sure that clause is in there. You also want to make sure that you put in, you want to escrow taxes and insurance. ⁓ And the reason being, and this is sometimes a little more difficult to communicate in the Latino community, we require that the borrower pays one year’s homeowners insurance upfront. ⁓
When we come to the closing table, they’ve already got a year’s worth of coverage already in place, all right? And then we escrow taxes and insurance. That essentially means their yearly taxes and the cost of the insurance is spread out over 12 months. And that is collected with the servicing company. We place all of our loans and we encourage…
Every investor that we’re working with that’s creating these, they place the loans with a licensed servicing company.
Dylan Silver (23:14)
Now with this servicingcompany, is this someone that the ⁓ buyer would go to make their payments to or is this something that really you’re setting up the note with?
Jay Redding (23:23)
Some can, but I would say you need to use your attorney to set up the note, okay, to create the note. Once it’s created, signed, then you’re going to board it with a licensed servicer. And there’s a whole ton of rules, all right, because now you’re a debt collector. You’re in the role of the bank, you’re a debt collector, so you have to follow all the debt collection rules. Sorry, I do not want to follow those rules.I don’t want to be, I shouldn’t say that. I do want to follow them, but I don’t want to be the one that’s having to do all that. Exactly. Okay. So we place it all with a licensed servicing company and that fee is included in the monthly payment. So you could put that in the loan. Also the underwriting, that’s the amount of money that is charged by say, call the underwriter to underwrite it.
Dylan Silver (23:56)
Yeah, yeah.Jay Redding (24:18)
that it can be placed into the closing fees as well, just like a regular loan. And there can be some attorney fees or attorney prep. That’s all part of the fees of the closing. that’s all, that’s just like a regular loan in that respect. But ours are a lot less expensive than what the banks are. It’s a lot cheaper. Okay.Dylan Silver (24:37)
Now once you have all this, you’ve got the servicing set up, you’ve reached out to the attorney, you’ve got the interest rate clear, you’ve got the rate, the default rate, when they’re gonna pay grace period, late fee, et cetera. At this point, do you have to record it with some type of body at the county level, at the town level, how does that work?Jay Redding (24:55)
Yes, the mortgage or the deed of trust is what is recorded. ⁓ Typically, we close through a title company. We encourage the people we work with to close with a title company. Some states, as an attorney, but they typically will handle that for us. I’ve done it myself before, but they will record it. The other important thing is that you provide both a owner’s title policy and a lender’s title policy.You pay for you as the seller pay for the owner’s title policy. That title policy essentially protects your borrow that you are transferring deed that is free and clear and you have insurance in place if something was missed somewhere in the last 30 or 50 years. It happens. Okay. So you’re protecting, you’re paying for that. You’re protecting your borrow. The borrower
the buyer of the property is paying for the lender policy. Now that’s the cheaper of the two. That protects you as the lender and then that transfers if you sell the loan that transfers and goes with the loan wherever it goes.
Dylan Silver (26:06)
Now,At what point in time would, and this is gonna vary by state, in Texas you can separate the, I believe it’s the deed from the mortgage, right? Would the buyer take possession of title, quote unquote, when they sign these documents or when they’ve paid off the seller finance, you the mortgage, right?
Jay Redding (26:29)
Okay, this is a note in mortgage or note in deed and trust. ⁓ In Texas, it’s a deed of trust state. ⁓ In this type of scenario, what we’re talking about, the deed is transferred at the closing, so they own the property. This is different than a contract for deed. ⁓land contract, depending on what parts of the con parts, it’s called different things in different parts of the country. ⁓ We, I’m not anti-lain contracts. All right. But typically if we’re going to buy that note down the road, we’re going to require you to convert it over to a note in a mortgage versus a land contract. and the reason being it’s our
From our business standpoint, it streamlines everything. Land contracts are cumbersome to work with because now I’m in the chain of title, okay, on that property, whereas otherwise I’m just the lender.
Dylan Silver (27:31)
The three things that stick out to me in this process, of course, you wanna know on a granular level everything that we just discussed, right? And more so. But if you have an attorney who understands ⁓ note creation, if you have a title company that is experienced and will record it properly, and then if you have a servicing company that can handle being a debt collector, right? Then this takes ⁓ a lot of the granular knowledge.Jay Redding (27:38)
Sure, sure.Bye.
Dylan Silver (28:00)
out of it and allows you to focus on underwriting them, know, higher level activities. Is that is that generally true, right? If you have those three people in place?Jay Redding (28:05)
Exactly. Absolutely.Absolutely. I will tell you, you can manage 50 notes for five to six rentals that you manage.
Dylan Silver (28:18)
When we talk about what happens next, right? So I’ve heard a number of different things now, and I’ve heard, okay, so you’ve got the note in place, you’ve got the buyer, and the servicing company’s handling the monthly payments. You could sell the note, you could hold the note. Are those the two strategies? Are there anything else that investors could do? And then also, when would it make sense to sell versus to hold?Jay Redding (28:21)
Yeah.Sure, great question. You have multiple exit strategies with a note. Way more exit strategies than you do with a rental or a house itself.
With the note, particularly if you’re a house buyer that’s buying a number of houses every month, you’re wholesaling or you’re doing some fix and flips, you’re selling out five, six, seven, eight deals a month, something like that, one or two of these a month will go a long ways in creating massive wealth for you for down the road. It’s not every deal that you have to put towards this. So that’s the first thing that you need to understand. But once the note is ⁓ created, it’s placed with the servicing company,
we like to see it season six months. ⁓ If we’re working with you on a continual basis, once we get comfortable with all your systems and processes and how you’re underwriting those types of things, we’ll buy it a little sooner than six months. You can recapitalize. If you’re getting the large down payment, say 15%, that is not unreasonable that you see that on a routine basis.
Say you’re getting 15 % down, you’re getting 20, 25,000. You let it season for six months with the servicing company. All the payments have come on time. the other thing, you might want to put them on ACH as well. So it’s an automatic pull that comes out of their checking account. It makes it so much easier across the board. And everything is running as it should in that. You can sell, we encourage you to sell a partial.
All right. What’s called a partial, which is nothing more than a certain number of payments for a certain amount of money. The people that we work with, we talk to them about, you’ve got funds into this. If you’ve done your flip right or you’re doing your house, your wholesaling right, or your wholesaling out or selling out to an, an investor or selling out to a homeowner. Okay. You should be all in at 70 % or less. That’s been a rule for umpteen years.
Okay, if you’re not, your margins are in trouble. Okay, you’re probably not going to survive long term. I’m being bold in that respect, but I’ve seen it happen over and over over the years. So you should be all in at 70 % or less.
when we come in and buy a partial, we are not going to spend any more money than what 70 % of what the value of that asset is. And that’s part of our due diligence that we make sure that you haven’t oversold the property. Some people get a little too aggressive. All right. They think because you’ve got your sale not on terms, you can ask a higher premium on the pricing of the home.
And you can a little, know, one or two points, three points above, it’s not that big a deal. Okay. But if you start getting over aggressive, yeah, that’s an issue because your market cops are not going to support what your pricing is. So be aware of that. You need to know what the market is.
But what’s gonna essentially happen, all right, you’re gonna get a 15 % say down payment, you’re going to say the payments are 1000 plus a month. All right, if you got that for six months, all right, now you’ve got 15,000 plus another six that’s come in, you’ve got 21th grand already, okay? We’ll come in and buy a partial.
Say we come in, say it’s a 240 month note, well, I’m going to just pull these numbers out of the air. I don’t know if they actually work or not, but it gives you as an example. We’ll come in and buy a 10 year partial. So we’re buying basically half of the note. All right. But for the half of the note, all right, you are going to get, you’re essentially going to get all your money back and make a little money now.
You’ve secured your sales price, you don’t have to take a discount on your sales price. Whereas if you sell the entire note, you’re going to sell that at a discount because all notes are sold at a discount on the secondary market. If you think your note is so good that you don’t need to do a discount, then go sell it on Wall Street and you’ll find that that’s not the case.
Okay if you have notes of that quality that will be great but that’s not typically the case.
Dylan Silver (33:07)
Now when you’re whenyou’re referring to discount, is it is it a discount from the the it’s not a discount from the price that you paid for it? What specifically is being discounted?
Jay Redding (33:17)
No,it’s a discount of the unpaid principal balance that’s on the loan. So say you sold a house for $120,000, you got $20,000 as a down payment. So the initial note is for $100,000. You season it for six months.
All right, we’re going to come in and probably, depending upon how well it’s written, we’re going to probably know 90, 92%. All right, so you’re going to take a seven or eight, maybe 10 % discount. It all depends. If you originated at 7%, you’re going to take a much greater discount because most investors are wanting at least a 10 % return on their money. Okay.
Dylan Silver (34:00)
Now,now how are investors? Is there a secondary market? Are you having to send out mail? How would you go about finding these notes? Is it much the same way you would find like a property hey, kind of, you know, whether it’s calling knocking letters, it could be a litany of different, you know, ⁓ lead sources.
Jay Redding (34:08)
Sure.There are lot of different ways in which you can find notes. ⁓ Friends of mine, that is exactly, they look for mom and pop notes. ⁓ Someone who has created a note in a mortgage, they’ve sold a property that they own and they basically have done it once or twice in their entire life and that’s it. That’s not our business model. We’re looking to work with people who are manufacturing notes on a routine basis.
We purchased about a million and a half dollars last year in notes for our area here. So we’re working with people who are creating notes on a regular basis. They are investors. They’re house buyers that buy on a routine basis. They’ve got the leads in. They’ve got the marketing. We’re acting as the bank on the back end to recapitalize them so they can recoup the money they’ve got into the deal and go do it again. That’s what we’re doing.
Now, if you have a note and you’re just wanting to sell it, there are different platforms that are out there that you can sell it on. ⁓ Paperstack, right, paper, and then it’s stac.com. That is a common site, all right, that people, that it’s kind of an exchange, all right, that you can post it on there. ⁓
We’ve purchased off of there before, but we tend to want to work directly with the individuals who are doing the manufacturing and developing a relationship and working at something with them directly so that we can buy on a routine basis. So they’re creating a note manufacturing business. We’re recapitalizing them, buying those so they can keep doing it again.
But the key thing here I want you to realize and for the ⁓ real estate investor is that when you sell a partial, you’re not discounting the price. You’re discounting the number of payments that you’re selling, the future payments, which you don’t have yet. We’re taking on that risk.
we’ll buy say 80 payments for 70,000 or 100 payments for 80,000. right, 80,000 gets you recapitalized and gives you an extra five or 10,000 maybe on top of what you’ve already made. All right, so typically those individuals have already recouped 80 to 90 % of what the sales price is that they sold on it. And then after
the partial has completed.
That note in a mortgage then is assigned back to them and how we conduct our parcels, how we buy parcels, it’s called a full collateral assignment. So you’re assigning that note, you’re assigning that mortgage over to us. We hold it and collect the debt for that certain period of time. Once it gets on that, say 100th or 100th payment, then it reverts back to you. Now, a couple of things is really important.
there’s another say 30, 40, 50 payments on the back end that you are going to be entitled to and the interest that’s on top of that. And you’re totally out of the deal. You got no money in the deal here. Okay. You’re all out. That’s all gravy with extra income. That’s going to end up giving you about a 30, anywhere between 20 and 40 % more payback than if you just sold the entire note upfront. Okay.
Dylan Silver (37:49)
Hmm.Jay Redding (37:51)
That’s how you develop wealth. That’s how you create long-term wealth. Yes, you have to sit and wait, but we try very hard to get the investor totally out of the deal. If they’ve done what we’ve guided them to do, we can typically get all their money out and get them a little extra money even as a smaller profit. They’re just not quite getting it all. If…the borrower pays off early, which many of these do, you’ve not sacrificed price. You’re still entitled to everything at the back end. Wherever we are on the partial amortization schedule, that’s what’s entitled to us and everything else is entitled to you on the back end. You’ve sacrificed nothing. The only risk that you’re taking is the future potential interest on top.
of what’s on the back end. You’re not risking any money now at all. So it’s a very safe play.
Dylan Silver (38:48)
As you’re talking and we’re getting really into all the aspects of acquiring, exiting and how we got, that’s exactly right. I feel like I now know how to do this. I’ve done three of them now in my head. I’m thinking about all the younger ⁓ first time buyers who are being turned away or they’re frustrated with the process. And as a realtor, I wouldn’t know how to go and find seller finance availableJay Redding (38:53)
You wanted weeds, we’re in the weeds!Dylan Silver (39:18)
homes or deals. You mentioned paper stack, ⁓ it would be a secondary market and Facebook I could look. Is there a way where regardless of what city I’m in, I could find deals that are available seller financing?Jay Redding (39:31)
Well, seller financing is just gonna be, I would say your best place is ⁓ looking at ⁓ Facebook Marketplace, to be honest. That’s where most of them get marketed, all right, as far as seller financing is concerned. Now, the paper stack, that is a note transaction platform, is what that is, okay? Yeah, that’s where notes are bought and sold.Dylan Silver (39:48)
Got it. Got it. So secondary.I got it. Well, I now feel like I know every aspect of it on some level. Like I said, I’ve got a confidence boost so I can now go talk with whoever I’m speaking with in the note buying space with a little bit more background knowledge, whether it’s someone who’s doing single family homes or larger notes. I definitely feel like myself and all of our audience members today are appreciative of your time today here, Jay. We are coming up on time here though.
Jay Redding (40:04)
There you go.Sure.
Dylan Silver (40:21)
Where can folks go to reach out to you or your team? ⁓ Maybe they would like some feedback based on something they’re doing or they’d like to take a look at ⁓ the deals that you have over there.Jay Redding (40:32)
Okay, sure. Two things that we really do here. The best place to go is just go to our website. It’s Cassidy, C-A-S-S-I-D-Y, investments.com. And you can sign up for two things. We have a bunch of free information on there to learn about notes and notes comparing to other types of investments as well. ⁓ but we…You can sign up for our quarterly newsletter. It’s where we keep people who are following along with us, some people who are private capital partners, those types of things. ⁓ Essentially, we send out a quarterly letter that covers what we’re doing within our businesses. Then once a month, which is typically the last Thursday of the month from 12 to 1 Eastern time, we
Host a note talks with Colin J and J Cosmos Center law. All right, and we work the business together and we spend that hour Showing deals that we’re working on or we’re evaluating. It’s a place to ask questions ⁓ Seller financing if you’ve got a deal that you want to get second eyes on and see what your what our thoughts are ⁓
That’s the place to come. All right. And it doesn’t matter what level we’ve got people at all different levels that’s in that group. And it’s become a really nice group that everyone shares ideas, chips in. All right. What about this? It’s just kind of a think tank is what it basically is for looking at notes and why this may be a good deal, why it may not. We’re not going to tell you whether to buy it or not, or this is what you should do. We’ll give you our thoughts and opinions and go from there and make your
your decisions in that respect. So and just for signing up for the newsletter you’ll get our book an introduction to note investing it’s called Be the Bank an Introduction to Note Investing and that’s a digital download that you can read. So that’s it.
Dylan Silver (42:24)
Jay, thank you so much for your time today. Thanks for coming on the show.Jay Redding (42:28)
Thanks, Dylan. I appreciate it. Good luck, everyone. Hopefully you can buy some notes from me down the road.
