At Evergreen Financial, we buy and sell mortgage notes for our clients.
Our clients are investors who invest in real estate, but are tired of the traditional risky and labor intensive flipping model or the single-digit returns from buying and holding which involves dealing with "tennants and toilets."
They want the best of both worlds: passive investment with double digit returns.
These are questions that investors typically ask us.
A note is the piece of paper that is the promise to repay a loan such as a 1st or 2nd mortgage. It is backed by the real estate. Notes that are non-performing, where borrowers have stopped paying, are purchased directly from banks or hedge funds. When you purchase a note, you become the bank.
Note investors have opportunities to purchase distressed assets and get better returns on investments than with other types of investments such as traditional IRAs, 401Ks, CDs, and mutual funds. Adding note investments to your portfolio increases your diversification while decreasing your exposure to volatile markets.
There is more inventory in notes than in traditional real estate. According to CoreLogic, "During the fourth quarter, the total number of mortgaged homes with negative equity hit 3.17 million, or 6.2% of all homes with a mortgage. Negative equity, often referred to as being "underwater" or "upside down," applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or both." Note investors see these underwater properties 6 to 12 months ahead of traditional real estate investors.
Note Investors get better pricing on distressed assets. Typically, non-performing loans are purchased at 30 to 40% of fair market value instead of the 80 to 85% that traditional investors pay once it hits the market as a Real Estate Owned (REO) or bank owned property that has gone to foreclosure.
At Evergreen Financial, it takes us between four and 12 months to turn over a note. There are four exit strategies:
Once you have determined how much you want to invest, we purchase notes for you. The purchase is made in both your name and ours, so that we can service them. We then do the work that needs to be done to make them profitable. On average, four to 12 months later, we sell the note.
The minimum investment is $100,000 and can be done through a self-direct IRA (SDIRA).
Once the note is sold, you are paid your profit. You can choose to either retake your principal and profit or re-invest it in another note.
When we are able to reach the homeowner, we offer the three solutions. All three are better than the bank's only option -- foreclosure and possibly a bankruptcy. We help people avoid bankruptcy by doing loan modifications, short sales and deed in lieu's. Foreclosure is the final resort only when we cannot reach the homeowners, usually because they have left the home.