Archive for April, 2008
Am I Too Soft On Collections?
Posted by: | CommentsIf you have had tenants or worked with people who are in perilous financial straights, you might have heard some real fish stories in your day about why people can’t pay their bills.
Recently, I have been working with a family who bought a home from me (exercising their lease option) and I had the pleasure of financing their closing costs for them – about $6,000 owed to me.
This was an unsecured note (as required by the lender) based on the sellers’ good name and intentions. Although I knew it was risky, I needed to front the cash to get the closing to go through. I thought I had a decent chance of repayment due to their excellent on-time rental payment history.
To buckle them in a little tighter on the note, though, I also secured the note against their two vehicles. These cars were junkers to be sure and already had notes on them (probably for more than they were worth) but I wanted these buyers to FEEL like I had a little more leverage on them.
After about a year of paying their $100/month obligation, payments started to get spotty. I kept in touch with the debtors over time trying to work out payment plans (going down to $25/month instead of $100), but they plead off citing medical bills, the teenage pregnancy of one of their children, the retirement of their two oldest family members (it’s a multi-generational family living in the house) and a number of other financial woes.
I left them alone for a while and recently got in touch again because I thought it might be tax refund time and they would probably be getting some money back from the government which they could send on to me.
Here are some of their replies…. Now as you read ask yourself, "What are the attitudes these people are displaying?" "What would you estimate their level of wealth to be currently and in the future?"
EMILY’S ORIGINAL COLLECTION LETTER:
Hi Carol and Karen,
Happy Spring! We haven’t talked in a while, but I wanted to see where you were with your financials right now. I don’t think I’ve gotten a payment from you for over a year. You last asked for a little extra time to get back on your feet. I thought with the tax return season upon us, I should check to see if we can get back on track with payments on your $6,000 note.
Obviously, the longer it goes, the more interest accrues. If you could give me an update, that would be great!
Emily
DEBTOR REPLY #1:
(Note – This is not edited/truncated in anyway)
the amount owed is $3400 not $6000, you cannot accrue interest on this contract the solution was
that you hold the title on the chevy venture. The total amount to be paid back to you is $3400 which will be paid in increments of $25.00 a month beginning on the 16th of the month. This is within keeping the original agreement which is null & void with the submission of the title.
OK – I don’t understand a few things in this letter…
- How she got the balance down to $3400
- Why she thinks that the $25/month payment was in keeping with the original agreement.
- Why I can’t accrue interest, etc.
Clearly there is confusion, so I tried to clear it up, and still be nice. I’m not coming down too hard on these people because I don’t want to file a judgement against them because I don’t think they have any assets. I think the only way they will pay is if they WANT to pay me, which is why I’m trying to be nice.
Emily’s Reply #1:
Hi guys,
Sounds like there was some confusion on both ends here.
I have attached a copy of the note so we can both refer to the terms we agreed on 3 years ago… I know it was a long time ago.
You’re right, the principal at that time was not $6,000 it was $5233 and you have made $1330 in payments toward the principal. The monthly payments are supposed to be $99.29.
However, you have not made a payment since August of 2007 and late fees and interest continue to accrue even though your vehicles as well as your personal promise are operating as security for the note.
I am willing to forgive some of these charges if we can get the payments coming in on track again.
Let me know what you’d like to work out. 
Thanks,
Emily
DEBTOR REPLY #2:
Hi Emily,
You say there seems to be some confusion of what is owed on the loan. There is on your end.
Originally when you loaned the money it was $5233.00. The first month after the house was purchased You were charging us rent and your were no longer owed rent due to the purchase of the home. You in turn stated you would subtract the amount of rent from the loan which was$1086 dollars. and making the first due date of the loan 1/15/06 in the amount of $100.00. Adding this Amount subtracted $1600.00 for 1 year four months and the partial payment of $25.00 in August 2007 comes to $2522. !
And you are not a financial institution. This amount will be paid and no more than the amount originally owed. You are not a bank and either are we. We never were well off if we were we would not have needed your assistance to begin with. We will make the attempt to pay this balance of $2522 and no more than this amount owed. YOU WERE SENT THE TITLES TO THE SAID VEHICLES .You can add on as much as you like but you will only recieved what is owed. I have other bills and just like you or maybe you are in a better position to pay yours. Maybe money is not object to you but its a survival on our end. Maybe you are hard up for extra cash and harrassing us is a way to scare us into paying you more than you are entitled? Nothing has changed from last year I still work and my parents are retired and we try to maintain a home for the childern. We offered a payment arrangement and its up to you to except it or not… Its up to you?
Karen
Emily’s Notes:
- I have no recollection of verbally crediting them for a month’s payment of $1000+ toward this note. My records do not reflect it, but she is ADAMANT about it, so I may eventually forgive it to keep the peace. However, that’s not our only issue here.
- She notes that neither of us is a bank. Perfectly true, perfectly irrelevant.
- She notes that we have title to the car. Yes – but that’s not turning into cash for me, is it?
- She suggests that I am harassing her for funds. 2 emails in 1 year is not what I would consider harassment. Especially when I was trying to be very nice in the emails.
Let’s see how the saga continues…
Emily’s Reply #2:
Hi Karen,
I would love to speak to you on the phone about this. Please give me a call at xxx-xxx-xxx between 12-8PM Eastern Time. Or I’d be happy to call you if you’d give me a good time and number to reach you. I’m also happy to talk with your whole family if you’d like. It seems like I am making you upset and that is not at all my intention.
I don’t remember the $1086 being credited to you, but I am willing to be convinced…. According to my records your last rent payment was $1045 on 10/3/2007 and the sale of the home took place on 11/22/2005. The payments I added up to total $1300 do include the $25 payment made on 8/3/2007, but don’t include the late fees that were included with the money you sent because those aren’t credited toward paying off the principal, under the terms of the note. So starting amount of $5233 – $1300 paid so far = $3933 still owing, plus interest and late fees. I am willing to discuss waiving the interest and late fees if we can get the payments back on track, here. Let’s figure out where we are and how we need to move forward to work this out! I am not trying to scare you or intimidate you. In fact, I am trying to be very nice, and working from my understanding after reading the documents we signed and looking at my records. I just thought that it would be good to touch base since we hadn’t talked in a while. Looking forward to catching up! Thanks! I am confident that we can come to an agreement we’re all happy with. My best to you and your family.
Emily Cressey
DEBTOR REPLY #3:
Hi Again Emily,
Just wanted to let you know I did receive your email and still its not accurate. The selling of the home took place on 11/10/05. The completed process was 11/16/05. You charged us for rent for november the amount was $1045.00 and you in turn told my mother you would apply this amount to the loan…. And now you are in denial …how is this working this issue out? I WORK DAYS AND I GO TO SCHOOL SO I AM NOT AVAILABLE TO TALK…I GET HOME LATE. I OFFERED A SOLUTION AND TALKING TO YOU ON THE PHONE WILL NOT MAKE THE DIFFERENCE BECAUSE IT SEEMS YOU BELIEVE YOU ARE RIGHT AND WE ARE WRONG.ITS UP TO YOU TO TAKE THE $25.00 PER MONTH ITS WHAT WE CAN AFFORD AND MY WALLET WILL NOT GROW EITHER WAY…..!
KAREN
Emily’s Reply #3:
Hi Karen,
Yes, that would be great if you could get back on track with the $25/month payments I would really appreciate it. Thanks and good luck with your classes!
Emily
Emily’s Notes:
At this point, she has refused to talk with me on the phone, and has offered to start making $25/month payments again. That’s more than I’ve been getting, so I’m trying to snap that offer up without arguing/confirming my position on the debt owed. Even if she only does pay $2500 more, that would be a lot more than I have collected thus far and more than I’m likely to see any time soon if I apply for and receive a judgement.
I’m probably being too soft on them, but my primary objective is to get more of what I’m owed, even if it’s not all.
This is the last email from our correspondence so far, so we’ll see if the $25/month payments resume on the 16th of the month, as she suggested….
How do you handle collections? Am I too hard, too soft or just right here?
Even with a judgement, I don’t know if I would be able to garnish wages or attach to an asset, so I’m willing to continue trying to work with them and bide my time. It’s a learning experience….
Emily
Popularity: 14% [?]
Who’s Making It in Land Development?
Posted by: | CommentsWhile land development is not an area of real estate that appeals to everyone, it’s one of the most lucrative (and potentially high risk) investment vehicles out there. Many of the land developers I know, including my Grandpa David Cunningham, my partner Rob Powell, Rob’s father-in-law David Karam, and my co-teacher for Team Gold Mine – Jeff Carter, have years of experience, scars from failure, and a bit of a cowboy or maverick attitude that allows them to keep moving forward even when success is not guaranteed.
Jeff Carter, who lived in California when he got going, started his real estate development career with rehabbing and doing condo conversions on small duplexes and four-plexes and often making a few hundred thousand a pop on those little projects. Then he broke out of the mold and spent several years developing a large parcel of land in Oregon (which he found while he was on vacation there).
After making over $1 Mil on that project (sweet!) he and his wife decided they could leave their W-2 jobs and go into real estate full time instead. They moved to Colorado where they work with other friends of mine, Susan and Stephen Wilklow, developing property in Winter Park, CO.
One of their current projects is a mixed-use retail/luxury condo facility right in the middle of downtown Winter Park. They’ve got retail space to lease on the street level, and luxury condos for vacationing skiers on the upper levels.
Can Anyone Get Started In Land Development?
Armed with Jeff’s expertise and my organizational skills, we are leading Team Gold Mine, a group of Mentor Financial Group, LLC students committed to learning and DOING commercial land development, through their first land development projects. Our goal is to make a million dollars in profit with the team.
As far as I know, this is one of the few (only?) mentorship programs available for people getting started in land development.
Team Gold Mine has been in operation for about half a year, looking for the right deal – our target acquisition is land for sale for $1 Million or less that can be used for residential development.
After a slow start due to having too many people on the team, Team Gold Mine has thinned its ranks and really hit its stride. We now have not one, but four deals that we’re actively working on:
- Under contract – a 38-home site in Canyon City, CO. They’re now working with an architect and an engineer getting ready to take this project through city planning.
- Possible Joint Venture Opportunity with an established builder/developer on bank-owned (REO) land that’s already entitled… also in Canyon City, CO. Team Gold Mine would be coming in with private financing to make this work for the builder who can’t get funding.
- Penn State – a beautiful forested 214 acre site suitable for 5-10 acre home sites to be built. This one was found through a referral from another Mentor Financial Group student – Patty Smith – who lives in the area and has had this property under option for a few years.
- One of our team members, Yoko who also lives in California, has been working on a deal in Craig, CO for some time and is getting ready to submit her next LOI to the seller out there, after some good negotiations and coaching already.
It’s exciting to see this group of absolutely new investors tackling these exciting land development projects.
They are minimizing risk by writing up contracts that allow them to delay actually closing on (buying) the properties until they’ve gone through the necessary approval process with the local government. But there are still some fixed costs involved in having soil tests, engineers, land surveys and other things necessary to bring them through the land entitlement process. All told, they’ll probably have to invest $20-$40K in research and preparation to determine whether the project is a ft.
Their next big step will be raising private funds for these deals. Once they master that, there’s no telling how far they’ll go!
Stay tuned for more updates on the progress of Team Gold Mine and the Land Development Challenge!
Popularity: 11% [?]
Ben Stein Says You Can Time The Stock Market
Posted by: | CommentsSo, I recently posted about my investigation into whether "technical analysis" could be applied to the real estate investment market. One of the things that I decided to do as a part of my investigation was to learn more about what technical analysis is, and how it is being used (Successfully or not?) in its other fields of application, including the stock market.
I went to the local library in search of some books I could understand, and came up with Ben Stein and Phil DeMuth’s, "Yes, You can Time The Market." A fun, short read it proposes that SHORT TERM (day trading) market timing with technical analysis is NOT something they recommend or encourage, but LONG TERM investment performance (over a 5 year time horizon or longer…) will improve when market-timing figures are utilized.
Ben Stein Says YES to Timing the Stock Market with Technical Analysis!
They look at 4 primary variables:
- Price of the stock
- P/E ratio of the stock
- Dividend Yield and
- Tobin’s Q (This is a variable that essentially measures "replacement cost" of the company’s assets and is thus a very fundamental analysis of a given company’s value)
The authors use these variables to determine whether or not stocks are currently priced "cheap" or not.
For example, with the price of stocks, they used a 15-year trailing average (the average price of the stock for the last 15 years) and graphed it against the current price of the stock. When today’s price was HIGHER than the 15-year average, they said the stock was over-priced. When today’s price of the stock was LOWER than the 15-year average, they said the stock was under-priced and represented a buying opportunity.
Over time, the authors found, that stock portfolio performance could be significantly increased (on the order of 40% better returns than a dollar-cost-averaging approach) when market timing was used.
Points To Consider When Considering This Investment Strategy:
- The authors used the ENTIRE history of the stock market in the 20th century to run their numbers, not "just since the crash of the 1920’s which is the starting point for many stock market researchers.
- The authors used the S&P 500 to run their figures, running numbers based on the idea of investing once per year in a mutual fund, or investing in a lump sum.
- Since adherents to the proposed strategy would not be making monthly or annual stock market buys, and might in fact choose NOT to buy stock for several years running, appropriate places would need to be found to hold this money between buying opportunities. The authors proposed safe/liquid T-bills.
Overall, the approach they advocate is relatively simple to understand and while they do show their research methodology and delve into some fancy terms toward the end, the authors do a good job explaining everything and defining new terms so we can all follow along.
The reminder at the end is to plan to be in the stock market market long term, but don’t get fooled into buying each month or each year if you believe you are over-paying for stocks at that time. Buy when it makes sense and hold for the long run.
It’s a great read and I highly recommend it, especially for the die-hard Dollar-Cost-Averaging folks out there, of which I counted myself one before reading this book!
Emily
Popularity: 10% [?]
The Short-Sales Man!
Posted by: | CommentsHave you ever met someone who seems just like an ordinary nice guy at first and then you discover later that THIS DUDE HAS GOT IT GOIN’ ON!?
That was my experience recently when I had the privilege of sharing the stage at a Mentor Financial Group, LLC event here in Seattle recently. I was speaking on how to raise private money for investments, and Phil was talking about short sales.
He seemed like a regular guy… friendly but nervous about his talk, dropping his keys at one point under the table. I knew his rags-to-riches story that he’d one day been unable to turn up at a house showing because he’d run out of gas and had to call the investor he was bird-dogging for to come and bail him out. Now he was going to do a little talk here at the event about short sales since he had his mentor had put together a course on the topic.
Frankly, I was happy for him, but not all that impressed. After all, I was an experienced speaker, I had been on the circuit for years… I’d heard it all before. In fact, I’d tried short sales myself and wasn’t that impressed with the results – they seemed like a lot of work given the low hit-rate I’d had with getting the deals approved for a significant discount by the bank.
But… that all changed when Phil shared his numbers with me.
In the past five years Phil, and his mentor Tom, have done literally hundreds and hundreds of short sales. Phil is probably the number one short sale investor in his entire home state of Tennessee. Working full time, he thinks the average investor could get about 1 good short sale deal under contract every week. Since he’s now promoting his course, Phil works just an hour or two a day on his short sale business and does about 1 good short sale deal per month with an average profit of $30,000. He also takes realtor commissions of $10,000/month from other leads that he comes across through his marketing.
Phil only spends about $800/month on marketing. Can you even calculate the return on that? Phil has got this business down and it’s so, so cool to see his business model.
Why is Phil able to get these results when other short sale investors are running around like a chicken with their heads cut off, getting information from sellers to send to the bank and struggling to negotiate a reasonable discount with the bank?
Phil used to work like a dog like that, too… he had a secretary that did a bunch of work and spent a lot of time on a lot of short sales that didn’t pan out.
Now Phil has been able to replace his secretary with a simple but powerful software system, called ePartner(c) which does all his deal tracking for him and tells him exactly what to do next on each and every deal he’s got in the pipeline.
And he’s been able to eliminate the hassle of working on unproductive deals because he and his mentor have assembled a "Lender Database" which tells them exactly what lenders will and won’t take as their approved discount – at banks across the country.
Phil has got this down to a science and runs it like a business. He is just starting to work with people to mentor them and give them access to his proprietary software and lender database as well as coach them through the deals. Unlike so many other "gurus" out there, though… Phil’s not making a lot of money on the upfront sale. In fact, factoring in the time he’s spending with his students every week, he’s LOSING money compared to what he could be making if he dedicated that time to his investing.
The only way Phil is going to come out ahead on his coaching/mentoring services is if his students split there deals with him (they’re required to share 50% of their first $40K in profits). Phil is really putting his money where his mouth is on this, and he is absolutely convinced that anyone working with him, with this software and database system should be able to easily close on their first 2 deals (and $40K in profits) within 6 months of working with him.
Phil has really inspired me to get back into the short sale business, after shunning it for the last couple of years. In fact, I met with a local realtor on Friday and started calling wholesale investors around here who don’t have the time to do short sales in order to start drumming up these leads.
Phil – you and your short sale success are a true inspiration! I’m looking forward to working with you in the future and you really are the MAN when it comes to short sales!
Emily
P.S. I understand that MY mentor in real estate investing – Peter Conti at Mentor Financial Group, LLC – is so impressed by Phil and Tom’s ePartner software that they’ve actually licensed it so that ALL their Mentorship Students will have access to the software. They consider it a real added value and they are rolling it out next month!
Popularity: 16% [?]
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