residential back flip

Residential Back FlipTM

Mentor Financial Group


By Wall Street JournalBestselling Author

Peter Conti andJerry Norton

Mentor Financial Group

Birth of the “Back FlipTM”Quick FlipFix and FlipCommercial Back FlipTM


About This Training1. Three Types of Residential Flips2. Understanding Instruments and Lending Practices3. Residential Back FlipsTM Undressed4. Understanding Bank Troubles5. Structuring a Residential Back FlipTM Phase 16. Structuring a Residential Back FlipTM Phase 27. Finding Residential Back FlipTM Deals8. Getting Paid on a Residential Back FlipTM

9. Making Connections and Building Credibility10.Residential Back FlipTM Partnership Program

Importance of FOCUS

Focus is the key togreat success;more than effort,experience, oreven natural talent!

80/20 Rule

20%20%

80%80%

80%80%

20%20%

Actions Results

Overview Flipping Houses• Short-term Strategy• Learn How to Earn Massive Income

First• Huge Opportunity

4 Truths About Flipping Houses

1. Quality not Quantity Principal2. Go Big or Go Home Principal3. Dog-Eat-Dog Principal4. 1% Principal Vs. 100% Devil

Why Most People FailFlipping Houses

• Can’t Find Deals• Lack Knowledge on how to Structure Deals• Lack Capital• Mental Roadblocks• Unable to Operate Under Pressure

Who is This Program For?

• Go-Getters• Serious Investors• Move Quickly• Adapt to Changes in Marketplace

Section 1:3 Types of Residential Flips

3 Types of Residential Flips

1. Quick Flip2. Fix and Flip3. Back FlipTM

Quick Flip

• Get Under Contract• Find a New Buyer to Flip it to (Mark-

up)• No Improvements

3 Ways to Structure a Quick Flip1. Buy and Re-Sell

– Execute a contract to buy and then executea new contract to sell to a new buyer

2. Assignment– Execute a contract to buy and then assign all

rights and interests of the contract to a 3rd

party3. Option Agreement

– Execute an option to buy and then assign orre-sell to a new buyer

Quick Flip Case Study #59Listed $45,000 REOValue fixed up = $135,000Buy Price = $45,000Wholesale = $55,000Profit = $10,000!!

Keys to Quick Flipping

• Buy Low, Sell a Little Higher• Find Deals• Find Buyers• Average Profits $3,000 - $10,000

Quick Flipping With Peter/Jerry

• Access Training• Quick Flip Deals to Us!• Follow Guidelines


1. Wholesale2. Fix and Flip3. Back FlipTM

Fix and Flip

• Buy a Distressed Property• Make Improvements• Flip it to a Retail Buyer

Working Today

• Market to the Right Buyer– Livable Condition Home Buyer– Perfect Condition Home Buyer

• Ideal Price Range $100k - $600k

Fix and Flip Case Study #17

1500 Sqft 3 Bdrm, 2 Ba Finished

Basement 1 Car Garage

Buy = $115kRehab = $31kSold it = $215kProfit $51,000!!

Fix and Flip Case Study #17

Keys to Fix and Flip

• Buy Low, Sell High• Find Deals• Manage Rehabs• Find Buyers• Average Profits $25,000 - $50,000

Fix and Flip With Peter/Jerry

• Access Training• Partner and Fix and Flip Deals to Us!• Follow Guidelines


1. Wholesale2. Fix and Flip3. Back Flip

• Buy Note at a Discount• Sell it Back to Owner (Mark-up)

• No Improvements• No Finding a Buyer• Big Profits


• 3rd Party Investor Comes in (YOU)• Current Lender Sells Note to You (Short

Pay)• You Work a New Deal with Owner

(Profit)• Owner Immediately Refinances with

New Lender and Pays You Off

Back Flip Strategy

Current Loan = $1.2mmCMV = $1mmNote Purchase = $700kSale Back = $800kProfit = $100k

Case Study

Keys to Back Flip

• Find Home Owners with JumboLoans that Are Upside Down ButWant to Keep their Property

• Average Profits $60,000 - $80,000

Back Flipping With Peter/Jerry

• Access Training• Get Paid to Bring Deals to Us!• Follow Guidelines

Section 2:Understanding Instruments

and Lending Practices

Understanding Instruments

In order to successfully understandand perform residential back flips TM, itis imperative that you understand theinstruments used in real estate,banking and lending.

Key Terms and Definitions• Restructure/Work-out: Reorganizing a owner’s

loan or debt structure on a property• Short Pay: When a lender accepts a discount on

the principal balance owed on a loan• Write-Off: When a lender books a loss from a

short pay on the balance sheet• Non-Performing Asset: A property that is in

default (not paying)

Key Terms and Definitions• Net Present Value (NPV): Analysis a bank uses

to determine a short pay based on futureliquidation value

• Current Market Value (CMV): Value of a propertybased on current performance

• Loan-to-Value (LTV): A percentage of the value alender is willing to lend against

Definitions of Instruments

• Deed: written document which transferstitle (ownership) or an interest in realproperty

• Mortgage: pledges the property ascollateral to guarantee repayment of theloan

• Promissory Note: Promise to pay a certainamount by a certain time

Definitions of Instruments• Collateral: A form of security to the lender in

case the borrower fails to pay back the loan.The House is offered to secure a loan andbecomes subject to seizure on default.Unsecured Loan: monetary loans that areNOT secured against the borrower's assets

• Secured Loan: In the event that the borrowerdefaults, the creditor takes possession of theasset used as collateral and may sell it toregain some or all of the amount originallylent to the borrower

Definitions of Instruments• Recourse Loan: a loan in which the borrower

is personally liable for the debt in the eventthat the collateral pledged to secure the loanis inadequate to repay a defaulted loan

• Non-Recourse Loan: If the borrower defaults,the lender can seize the collateral, but cannotseek out the borrower for any furthercompensation, even if the collateral does notcover the full value of the defaulted amount.This is one instance where the borrower doesnot have personal liability for the loan.

Recourse basically means that the lendercan come after you (has recourse againstyou) if your house sold at auction orthrough a short sale for less than theamount owed the lender. If you borrowed$350,000 to buy your home and it sold atauction for $200,000 there is a deficiencyof $150,000. That lender can haverecourse against you for that amount.

Recourse Mortgage State

In a non-recourse mortgage state,borrowers are not held personally liable formore than the home’s value at the timethat the loan is repaid. The lender mayrecoup some of its loss throughforeclosure. However, the lender may notsue the borrower for additional funds. Ifthe foreclosure sale does not generateenough money to satisfy the loan, thelender must accept the loss.

Non-Recourse Mortgage State

AlaskaArizonaCaliforniaConnecticutFloridaIdahoMinnesotaNorth CarolinaNorth DakotaTexasUtahWashington

List of Non-Recourse States

There is no “moral hazard” in defaultingOwners View Point:• “Since the bank isn’t coming after me

personally for any deficiency, it is an easydecision to default if it makes the most sensefor me financially.”

Bank’s View Point:• “Since we can’t go after the borrower for any

deficiency, let’s try and get the most we canfor the property.”

Non-Recourse State:What Does this Mean?

Definitions of Instruments• Pay-Off Statement: A statement prepared

by a lender showing the remaining terms andloan balance on a mortgage.

• Re-Conveyance A document issued by theholder of a mortgage indicating that theborrower is released from the mortgage debt.The deed of re-conveyance transfers the titleof the property back to the borrower. It ismost commonly issued when a mortgage hasbeen paid in full.

Definitions of Instruments• Default: The failure to promptly pay interest or

principal when due.• Technical Default: A deficiency in a loan

agreement that arises from a failure to upholdsome other aspect of the loan terms.

• Strategic Default: A deliberate default by aborrower as a financial strategy and notinvoluntarily or due to hardship.

Definitions of Instruments• Arms Length: A transaction in which the buyers

and sellers of a product act independently andhave no relationship to each other.

• Insolvency: When an individual can no longermeet its financial obligations with its lender asdebts become due

• Jumbo Loan: A mortgage with a loan amountexceeding the conforming loan limits set byfederal regulators on an annual basis, andtherefore, not eligible to be purchased,guaranteed or securitized by Fannie Mae orFreddie Mac.

Also referred to as "Jumbo Mortgage".• Investopedia explains Jumbo Loan

Jumbo loans are often securitized by institutionsother than Fannie Mae or Freddie Mac. Thesesecurities carry more credit risk than thoseissued by Fannie Mae or Freddie Mac, andtherefore, trade at a yield premium whichtranslates into slightly higher interestrates. However, in recent years the spread ininterest rates between jumbo and conventionalmortgages has been reduced.

Definitions of Instruments• Cancellation of Debt (COD) When a creditor

forgives a debt without requiringconsideration in return. The amount of debtthat is forgiven by cancellation of debt isconsidered income to the debtor and must bereported as a result. In most cases, it istaxable as ordinary income and is known ascancellation-of-debt (COD) income.

Junior Liens: Refers to the priority ofpayment if a property must be liquidated tosatisfy the debts against it. The firstrecorded lien or mortgage will be paid firstout of sale proceeds, up to the entireamount of the debt. If there is any moneyremaining, junior lien holders will be paidin full in the order of their priority until themoney runs out

Definitions of Instruments

Understanding a Mortgage• You apply for a mortgage loan to buy a home.

Lenders include banks, credit unions, andmortgage bankers.

• Lender approves your mortgage and funds theloan. If the lender is a bank or credit union, thefunds for the loan come from their deposits. If thelender is a mortgage banker that has no accessto deposits, it accesses money to fund the loanfrom a credit line and then "warehouses" yourloan for up to 60 days before selling it tosecondary market investors, which can be FannieMae, Freddie Mac or other financial institutions.

Understanding a Mortgage• Your lender sells your mortgage to a secondary

market investor that packages it together withhundreds of other loans and resells the packageas an investment vehicle to Wall Street.

• In the meantime, you make your regular monthlymortgage payment to your original lender orperhaps to another institution to which your loanwas sold that “services” your loan. As a servicer,it earns a fee for collecting your payments,handling questions or problems with your loan,and managing reporting and year-end paperwork.It does not own your loan.

Understanding a Mortgage

• Back to the secondary market…Fannie Maeand Freddie Mac guarantee the mortgage-backed securities and agree to buy them backfrom the Wall Street investors if the mortgagesdefault. They make money by assessing a feefor this guarantee.

Understanding a Mortgage*Some specialized mortgages are keptby the bank in its portfolio and are notsold to investors. They are typically non-conforming loans that don’t meet theguidelines to sell on the secondarymarket. Examples include: jumbo loansand home equity loans.

Understanding Jumbo Loan• Fannie and Freddie set a limit on the

maximum dollar value of any mortgage whichthey will purchase from an individual lender.

• Conforming Loan Limit: The limit on the size ofa mortgage which Fannie and Freddie willpurchase and/or guarantee. The conformingloan limit is set annually by federal regulatorsand varies based on county.

Non-Conforming Vs. ConformingConforming:• Sold to secondary market with pool of

other loans in a package.• Cannot “1 off” or negotiate a single loanNon-Conforming:• Portfolio loans not sold to secondary

market• Can be separately negotiated and sold

Understanding Jumbo Loan• Jumbo Loan (Non-Conforming):• For loans higher then the conforming limit

requirements of Freddie and Fannie• The loan size limit is based on the original

principal amount of the loan NOT the saleprice of the property

• Higher Risk: Considered riskier thanconforming loans (high-end homes that areoften harder to sell). Lenders charge higherinterest rates and require higher downpayments

“Across the United States, the largest increasein foreclosures and delinquencies, comparedwith 2008 levels, is with "jumbo" mortgages -loans too large to be insured by Fannie Maeand Freddie Mac…Foreclosures on jumboloans are up 579 percent since 2008, greaterthan any other form of loan, according to areport last month by Lender ProcessingServices, Inc.”

(The U.S Foreclosure Crisis, Tim Reid, Reuters)

Jumbo Loans in the News

Section 3:Residential Back FlipTM

Undressed

The Problem• Upside Down (owe more than it’s

worth)• Loss of Equity• High Monthly Payments• Wants to Keep Property

Options• Do Nothing• Can’t Refi (Upside Down)• Loan Modification• Throw in the Towel (Foreclose)• Short Sale• Sell and Write a Big Check

The Opportunity• Help Owner Keep Property• Help Owner Restructure (Lower) Debt• Lower Monthly Payments• Help Owner Create Equity• Not Damage Owner’s Credit or help

get it repaired if it is damaged

Another Option– Short Pay• Lender Accepts a Discounted Payoff in

Exchange for CashExample:• Owner Owes $700,000• Current Value $600,000• Bank Agrees to a Short Pay of $420,000

Option 1: Discount to OwnerWhy can’t the owner receive the discount?Option 1: Owner Pays Cash• Realty #1: Most don’t have cash• Reality #2: Current Lender not Willing• Reality #3: Current Lender will 1099

Owner for Deficiency– Owner Now Must Report as Income on tax

return called Cancellation of Debt (COD)

Example – Discount to Owner

• Owner Owes $700,000• Current Value $600,000• Bank Discounts Owner to $420,000• Owner pays off loan for $420,000• Deficiency of $280,000 in Tax Liability• Owner receives a 1099 for $$280,000

Option 2: Discount to OwnerWhy Not Get a New Lender to Finance theDiscount with a New Loan?

• Reality #1: New Lender Not Willing to Financea Discounted Loan from Current Lender

• Reality #2: It Would Be a Purchase Loan withTypically 20% Down Payment

The Solution

ResidentialBack FlipTM

• 3rd Party Investor Comes in (YOU)• Current Lender Sells Note to You (Short Pay)

– Settlement of debt not a discount to owner• As the new lender, you restructure the debt

with the owner– Lower the amount owed on the note for

more then you acquired if for.• You help owner refinance with a new Lender• You realize a profit from the difference of the

note purchase and refi

The Solution – “Back Flip”

Example• Owner Owes $2mm• Current Market Value $1.5mm1). Current Lender Agrees to Short Pay

of $1mm2). You Pay Cash ($1mm) to Take Out

Current Lender

Example3). You Restructure (Modify) the Amount

Owed with the Owner to $1.2mm4). Owner Refinances and Pays You Off

$1.2mm5). You Earn $200,000 Profit!

Example

$2,000,000 Loan

Example

$2,000,000 Loan

$1,500,000 CMV

Example

$2,000,000 Loan

$1,500,000 CMV

$1,000,000 Note Buy

Example

$2,000,000 Loan

$1,500,000 CMV

$1,000,000 Note Buy$1,200,000 Back Flip

Example

$2,000,000 Loan

$1,500,000 CMV

$1,000,000 Note Buy$1,200,000 Back Flip

$200,000Profit !

Bridging the Gap

Current Lender New Lender

Bridge Loan

Bridging the Gap

Current Lender New Lender

Bridge

Short Pay $1mm Refi $1.2mm

Profit $200k

• You Provide Cash for Short Pay• Existing Loan Satisfied• Owner Keeps Property• Debt Lowered From $2mm to $1.2mm• No Deficiency Created

Problem Solved

And For Providing the Solution…

You Make$200,000!!

Outstanding debt $2,700,000Current Market Value $2,300,000Note Purchase Price $1,552,500Owner Exit $1,725,000 (75% LTV)

Case Study #26

$172,500Profit !

Outstanding debt $1,485,000Current Market Value $950,000Note Purchase Price $680,000(owner contributed $100,000)Owner Exit $760,000 (80% LTV)

Case Study #17

$76,000Profit !

Outstanding debt $920,000 (3 liens)Current Market Value $850,000Note Purchase Price $573,000Owner Exit $637,000 (75% LTV)

Case Study #12

$64,000Profit !

Section 4:Understanding Bank Troubles

2 Basic Departments

• Performing Assets– Good loans

• Non-Performing Assets– Called “Special Asset Group” (SAG)– Loans in default

Definition of Non-Performing

What Constitutes “Non-Performing?”• Late on payments (default)• Balloon is past due• Upside down (Negative Equity)

Negative Equity!

• Extremely high-risk loans• Technically an upside down loan is in

default• This means that it should be moved to the

SAG and dealt with

Why Banks are Willing to Sell theNote at a Huge Discount

It’s Important to Understand What isHappening With Banks and Loans inOur Current Market

Bank Trouble – Texas Ratio• Measure of a bank’s credit troubles. Higher

the ratio, the more severe the credittroubles.

• Calculated by dividing the value of the non-performing assets by the sum of its capital.

• Banks tend to fail when this ratio reaches1:1, or 100%.

Balancing Act – Cash Vrs CapitalWhat to Do with Non-Performing Assets?

• If Bank Sells Property on a Short Payoff itMust “Write-off” the Loss on the Books(Take the Hit Now)

• At the Same Time, the Banks Need Cashto Meet Reserve Requirements!

How Banks Determinethe Short Pay Price

Net Present Value Analysis (NPV)• Process to Determine the Liquidation

Value of the Asset.

Simple Definition -Net PresentValue

The Bank Looks at the Property in Defaultand Asks:“If it takes 6-12 months to foreclose andwe factor legal fees, management fees,maintenance fees, unpaid taxes, brokerfees, decline in market, etc., how muchwill we net at the end of the day?”

Example: Net Present Value

• Debt Owed = $750,000• Current Value = $500,000• Net Present Value = $400,000• Bank Price Willing to Accept on Short

Pay = $400,000

Perfect Storm

• Can’t “Kick the Can Down the Road”Any Longer

• Banks ready to do the capital write-offs

• Banks need cash to stay afloat

Key to Getting a Good Deal

• The closer to foreclosure, the less thebank is willing to take on a shortpay…

• They’ve already absorbed all of theloss!

Jumbo Loans in the News

• High risk loans• Banks do not want to foreclose• see download articles

Section 5:Structuring a


Phase 1- Agreement with Owner

2 Phases to Structuringa Residential Back FlipTM

Phase 1: Contract with Owner• “Does it Have Legs”• Determine if Ready to Move to Phase 2• Goal: Signed Agreement with OwnerPhase 2: Fund and Close the Deal• Get Bank to Accept Note Buy Price• Goal: Offer Accepted/Exit Approved/ Fund

and Close the Deal

Phase 1: Contract with Owner

• Step 1: Pre-Qualify the Deal• Step 2: Establish Current Market Value

(CMV)• Step 3: Determine Buy Price• Step 4: Qualify Owner for Exit• Step 5: Owner Signed Documents

Step 1: Pre-Qualify the DealFive Things to Pre-Qualify a Deal:

1. Verify its Upside Down2. Make sure it’s a Jumbo Loan3. Confirm no Junior Liens4. Find out if it’s a Personal Residence5. Find out If Current or Behind on Payments

• The key to buying the note from the lenderis establishing negative equity andtechnical default

Rule of Thumb:The Less Upside Down, The Less Likelythe Bank will Sell us the Note at aDiscount

1). Upside Down

• Under $500,000 loan– 20% Negative Equity

• $500k -$1mm loan– 15% Negative Equity

• Over $1mm– 10% Negative Equity

Rule for Negative Equity

Upside Down – Example #1

Rule: $500k and Under - $20%• Current Loan = $475,000• $475,000 x .80 = $380,000

• As long as CMV is $380,000 or less =ideal deal


Rule: $500k - $1mm - $15%• Current Loan = $875,000• $875,000 x .85 = $744,000

• As long as CMV is $744,000 or less =ideal deal


Rule: $1mm and Up - 10%• Current Loan = $1,350,000• $1,350,000 x .90 = $1,215,000

• As long as CMV is $1,215,000 or less =ideal deal

2). Verify Jumbo Loan**Back Flip Only Works if Loan is a Non-

Conforming Loan (Jumbo Loan)• Determine Jumbo Loan Limit in Your Target

Market– Regulated and Adjusted Each Year in Oct.

Currently Min. Loan Amount is $417,000unless indicated differently

– See download – Conforming Loan Limitsby County

Determining a Jumbo Loan• NOT determined by purchase price of

the home• NOT determined by current jumbo loan

limit• Jumbo loan is based on the origination

of the loan

Example - Jumbo Loan• Purchase price of home = $800,000• 20% down payment, Loan for $640,000• Date of Purchase = 2004• 2004 Conforming Loan limit = $600,000• Today’s Conforming Loan Limit = $700,000

Can we do a back flip?

Check for Jumbo Loan

Does Fannie or Freddie own my loan?

Freddie Mac:• https://ww3.freddiemac.com/corporate/

Fannie Mae:• http://loanlookup.fanniemae.com/loanlook

up/

3). Junior Liens

• Are There Junior Liens?• What are the Amounts and Lien Priorities?• Are the Junior Lien holders the Same

Lender as the 1st Lien Holder• Junior liens May Disqualify the Deal

• 1st Lien: $500,000 B of A• 2nd Lien: $150,000 B of A• Total Debt = $650,000 B of A

• Since the 1st and 2nd are the same lenderit’s considered all 1 loan and 1 total debt.

Example: Junior Same as 1st

Problem #1: Junior LiensGetting Multiple Workouts is Very Difficult• 1st Lien $500,000 B of A• 2nd Lien $150,000 Chase• Total Debt = $650,000• CMA = $550,000• Note Buy = $350,000

• Both Lenders have to agree to a total of$350,000 in short pay

Problem #2: Junior LiensThe 1st lien has priority (independent of thejunior liens) and only looks at it’s equityposition.

• 1st Lien $500,000 B of A• 2nd Lien $150,000 Chase• CMA = $550,000• Note Buy = $350,000

• The 1st lien is not going to discount morebecause of the 2nd

If Different Lenders - More Difficult:• 2 or more lenders to workout instead of 1• 1st lien doesn’t care about junior liens

– In the event of default, 1st lien gets madewhole before junior liens

• If Same Lenders – Considered 1 workoutnot 2 and can be done

Realities of Junior Liens

4). Personal Residence

• What if the Property is Not the Owner’sPersonal Residence?– Considered an Investment Property

(rental, vacation home, 2nd home, etc)• Can we do a Back Flip?

– YES

Non-Owner Occupant

• Higher Risk• Reality – Banks willing to Discount• First thing an Owner Defaults onCHALLENGE – exit is tougher• Harder to get a refi on an investment

property then it is on a personal residence

5). Current or Behind

Two Types of Clients for a RBF:

1. Good Credit Owners (GCO)2. Bad Credit Owners (BCO)

Good Credit Owners (GCO)• Current on Payments• Good Credit (680+)• Immediately Qualify for an Exit Refi• DO NOT Want to Damage Their Credit

Bad Credit Owners (BCO)

• Behind on Payments–not in redemption or REO

• Credit Damaged (under 680)• Need 6-12 months to fix credit in

order to qualify for an exit refinance


• Step 1: Pre-Qualify the Deal• Step 2: Establish Current Market Value• Step 3: Determine Buy Price• Step 4: Qualify Owner for Exit• Step 5: Owner Signed Documents

Step 2: Establish CMVCMV is determined by obtaining a currentappraisal

• “Standard” Current Market Appraisal– Meets all the requirements– Find a local certified FHA appraiser in your

market (not a national company)• Done for MFG Capital Group• **Remember - Owner pays for it!

• Can we use the original appraisal for therefi?

• Unfortunately – NO for 2 reasons:1.The take-out lender doing the refi has to

order their own2.Better to have the appraisal in name of

MFG when making offer to the bank

Re-Use the Appraisal?


• Step 1: Pre-Qualify the Deal• Step 2: Establish Current Market Value• Step 3: Determine Buy Price• Step 4: Qualify Owner for Exit• Step 5: Owner Signed Documents

Step 3: Determine Buy Price

Step 1: Determine Back Flip Price• Reduced Amount Owner to Pay Back

Step 2: Calculate Profit• How Much Money We Make on the Deal

Step 3: Calculate Note Buy Price• Price We Pay to Buy Note from Lender

Step 3: Determine Buy PriceStep 1: Back Flip Price• CMV x ELTV = Back Flip Price

Step 2: Profit• Back Flip Price less then $600k x 15%• Back Flip Price more then $600k x 10%

Step 3: Note Buy Price• Back Flip Price – Profit = Note Buy

ELTV is Determined by the Exit Lenderand risk of borrower

Good Credit Owner Average 70 – 80%• GCO Default Rule: 75% LTVBad Credit Owner Average 50 – 70%• BCO Default Rule: 65% LTVInvestment Property Average 60-70%• Investment Property Default Rule: 65%

Determining ELTV

Determining ProfitProfit is Calculated by Taking aPercentage of the Back Flip Price

Rule:• Under $600,000 = 15%• Over $600,000 = 10%• Min Profit = $50,000

Buy Price Formula

(CMV x ELTV) – Profit =Note Buy Price

Example: Buy Price Formula(CMV x ELTV) – Profit = Note Buy Price

Good Credit Owner (GCO)CMV = $525,000

ELTV = 75%Profit 15%

What is Note Buy Price?

Example Answers: Answers(CMV x ELTV) – Profit = Note Buy Price

Step 1: Determine Back Flip Price$525,000 x .75 = $393,750 Back Flip PriceStep 2: Calculate Profit$393,750 x .15 = $59,000 ProfitCalculate Note Buy Price$393,750 - $59,000 = $334,750 Note Buy Price

Breakout Session: Buy Price

(CMV x ELTV) – Profit = Note Buy Price

Bad Credit Owner (BCO)CMV = $815,000



Breakout Session: Answers(CMV x ELTV) – Profit = Note Buy Price

Step 1: Determine Back Flip Price$815,000 x .65 = $530,000 Back Flip PriceStep 2: Calculate Profit$530,000 x .15 = $80,000 ProfitCalculate Note Buy Price$530,000 - $80,000 = $450,000 Note Buy Price

Breakout Session: Buy Price

(CMV x ELTV) – Profit = Note Buy Price

Investment PropertyCMV = $3,000,000




Step 1: Determine Back Flip Price$3,000,000 x .65 = $1,950,000 Back Flip PriceStep 2: Calculate Profit$1,950,000 x .10 = $195,000 ProfitCalculate Note Buy Price$1,950,000 - $195,000 = $1,755,000 Note Buy

Breakout Session: Buy Price(CMV x ELTV) – Profit = Note Buy Price

Bad Credit Owner (BCO)CMV = $400,000

ELTV = 65%Profit $50,000



Step 1: Determine Back Flip Price$400,000 x .65 = $260,000 Back Flip PriceStep 2: Calculate Profit$50,000 = Minimum ProfitCalculate Note Buy Price$260,000 - $50,000 = $210,000 Note Buy Price

Instant Deal Analyzer



(CMV)• Step 3: Determine Buy Price• Step 4: Qualify Owner for Exit• Step 5: Owner Signed Documents

Step 4: Qualify for Exit

Rule:Never Buy the Note Without First Havingthe Exit Plan in Place

• Exit differs depending on whether theowner is a GCO or BCO…

1. Pre-Approved: Based on Assumptions2. Fully Approved: Based on Hard Data3. Loan Commitment: Appraisal Done,

Passed Underwriting, Ready to Close

Three Types of “Approval”

Exit for GCO:GCO Qualifies Immediately for Exit Refi• Exit Lender Must be in Place Prior to

Funding on Note Purchase• Exit Takes Place within 30 Days of Note

Purchase• Owner Doesn’t Make Any Payments on

Bridge Loan

Exit for BCO:• Due to Damaged Credit, BCO Does NOT

Qualify Immediately for Exit Refi• BCO Needs 6-12 Months to Repair Credit• BCO Must Carry a Hard Money Loan with

Private Investor for 6-12 Months Until Refi

Due Diligence

Two Things that determine whether anowner will qualify immediately (GCO) orwill need up to 1 year (BCO):

1.Credit2.Debt-to-Income

Credit

• Needs to be current (min 30 days old)• GCO – Qualify Immediately for Refi (680+)• BCO – Qualify for Refi in 6-12 Months (-680)

– No BK, foreclosures, etc

Debt-to-Income• Purpose: Verify Owner can support the loan

given his/her current income/expenses

• Determining the DTI:–GCO: Based on New Exit Loan–BCO: Based on Temporary Bridge Loan

Exit Loan Calculator• Online calculator tool• Not a pre-approval• Purpose – determine if owner will qualify

for a refi loan based on standardconvention lending requirements

Owner must print report and give to MFGagent (required for deal genie)

Using the Exit Loan Calculator• ExitLoanCalculator.com• OWNER – fills out• Reasons to not qualify for exit:

– DTI doesn’t meet conventionalguidelines

– Bankruptcy, foreclosures – past 3 years– Credit – below 680 – BCO

Goal - Exit Loan Calculator• Weed out deals that won’t qualify for exit

before spending time and energy goingafter it!

Steps:1.Give owner link (ExitLoanCalculator.com)2.Owner fills out and submits3.Owner prints and provides copy to you

Getting the Exit• Later, once a deal is accepted, we will

spend the time with a lender getting a pre-approval with a lender prior to closing onthe note purchase.

• See example



(CMV)• Step 3: Determine Buy Price• Step 4: Owner Can Qualify for a Refi• Step 5: Owner Signed Documents

5 Requirements From Owner toMake the Offer

1. Acknowledgement Letter2. Copy Mortgage Statement3. 3rd Party Authorization Letter4. Bank Notice Letter (performing Loans

only)5. Qualified Written Request Letter

1). Acknowledge Letter

Acknowledgement of Note PurchaseTransaction

• Discloses the follow:• Our intent to make a profit• No guarantees• Fees (once accepted offer)• See example

2). Mortgage Statement• Most recent statement• Important information for other docs• Gives us a starting point

3 Letters from Owner to BankAddressed from Owner to the bank:

• 3rd Party Authorization Letter• Bank Notice Letter• Qualified Written Request

3). 3rd Party Authorization Letter

• Letter from Owner to Bank• Owner gives permission for the bank to

talk to MFG• Privacy requirement when bank sells a

loan on a “one-off” basis

• Letter from Owner to Bank• Puts the Bank on Notice that the loan is in

technical default• Owner is exploring options• Requests that the notice be put in the

borrower’s file (includes appraisal)

4). Bank Notice Letter

5). Qualified Written RequestLetter

Letter from Owner to BankPurpose:• Discover who REALLY owns the loan• Find out - Is the bank just the Servicer?• Find out - Is the loan even negotiable?• Find out – Who the real Decision Maker is

Who Sends Letters and Where?Student to help owner send the 3 letters.

1. Fill out template letter (name, loan #, etc)2. Get owner to sign3. Call customer service and ask for fax

number to send a 3rd party authorizationletter or mail to customer service address

4. Mail as 3 separate letters

Next stepsAfter 3 letters mailed – Requirement tosubmit deal to Deal Genie

1). Upload copy of executed Bank NoticeLetter

2). Upload copy of executed 3rd PartyAuthorization Letter

3). Upload RESPONSE Letter from QWR(usually takes about 3 weeks)

Fees to Owner

Before Accepted Deal:• $400 AppraisalAfter Accepted Deal:• $3000 - $4,000 legal fees• $1,500 credit repair (optional)• $1,500 - $3,000 closing feesExit Fees:• $0 - $5,000 refinance fees

3 Ways to Pay for Misc Fees

1. Pay for out of pocket – NO!2. Out of Pocket from Owner at Closing3. Built into the Deal

– Must be subtracted from Buy Price– New Formula– CMV x ELTV – Profit – Fees = Buy Price

Breakout Session Misc Fees

• CMV x ELTV – Profit – Fees = Buy Price• CMV = $750,000• ELTV = 75%• Credit Repair = $1,500• Legal Fees = $4,000• Property Taxes = $6,500• Closing Fees = $1,500• Total Fees = $13,500

Breakout Session Answers

• CMV x ELTV – Profit – Fees = Buy Price• $750,000 x .75 = $562,500 sale back price• $562,500 - $84,000 = $478,500 gross buy• $478,500 - $13,500 (misc fees) =

$465,000 adjusted buy price

Owner Objections

• New Concept– Never heard of this strategy

• Skeptical– Unsure or uneasy

Focus on Benefits

1. Save hundreds of thousands ofdollars on your overall debt

2. Keep your property3. Not damage your credit or repair

your credit in 6-12 months

What are statistics of acceptance?–Differs every time based on location, risk

of borrower, size of loan, financials ofbank at the moment, negative equity, etc.

• Will the Bank Accept My Offer?–Who Knows, Who Cares – Just Submit

the Offer!

Acceptance Ratios

Gold Form Phase 1:• Cheat Sheet of all 5 steps• Fill out for each deal• Required info for deal submission• See download available

Residential Back FlipTM Gold Form

Section 6:Structuring a


Phase 2- Fund and Close the Deal

2 Phases to Structuringa Residential Back FlipTM

Phase 1: Contract with Owner• “Does it Have Legs”• Determine if Ready to Move to Phase 2• Goal: Signed Agreement with OwnerPhase 2: Fund and Close the Deal• Get Bank to Accept Note Buy Price• Goal: Offer Accepted/Exit Approved/

Fund and Close the Deal

Phase 2: Fund and Close the Deal

Step 6: Bank NegotiationsStep 7: Legal WorkStep 8: Exit ApprovalStep 9: Fund and CloseStep 10: Celebrate!

Step 6: Bank Negotiations

How it works…• You submit deal (Deal Genie)• Coach Assigned to you• We make offer/handle negotiations• No Cost to Owner

Making the Offer

Bank Offer Letter:• Property in negative equity• Property in technical/actual default• State balance owed, CMV, offer price• Include copy of appraisal• Goal – get the offer letter in the right

hands• See copy of letter

The Decision Maker

KEY – FIND THE DECISION MAKER!Who is it anyway?Non-Performing Loan Department• SAG• Loss Mitigation Department

Making the Offer

Two Ways to Get Offer in Front of theDecision Maker:

1.Front Door - Contact Bank Directly2.Back Door – Bank’s Appointed

Representative who Handles Foreclosures

1). Contact Bank Directly

• Call Customer Service or bank contact– Be ready with Loan #, Address, etc

• Locate SAG/Loss Mitigation Department• Get address, contact person, phone

number• Send offer letter

Script: Finding Decision Maker

“Hi my name is Jerry Norton and I am withMFG Capital Group, which is a notepurchasing investment group. We haveidentified a loan held by your bank that weare interested in purchasing. Can yourplease direct me to the special assetgroup or loss mitigation department?”

Script: Decision Maker…The property we’re interested in hasnegative equity and is in technical/actualdefault. I have a loan purchase offer letter,authorization letter from owner and currentappraisal I’d like to send to you for review.By the way, we pay cash and can close in30 days. What is the typical process andturnaround time for you to review anddetermine if the bank has an interest inselling us the debt…?”

• Foreclosure process varies state by state:– Mortgage state – judicial – attorney– Deed Trust – non-judicial – trustee

• Back door = attorney or trustee for thebank (direct connection)

2). Bank’s Appointed Rep

Back Door Approach• Contact the Rep for the bank who handles

the foreclosures.• Usually only a few firms cover an entire

region or county• Bank’s representative has direct access to

the decision maker at the bank• Talk to a real attorney or trustee (not admin)

Golden Question…

Which firm is _____(name ofBank) using to handle theirforeclosures in _____(county ofyour subject property)?

• Google• Real estate agent• Title Officer• Short Sale Expert• Auction List• County Foreclosure Publications

Finding Bank’s Rep

Incentive for Rep to Help• What is the incentive for the foreclosure

representative?• Rep will first see if bank will pay him to

handle our note sale– If paying job, rep will work it– If bank will not pay, no incentive from

rep.– Follow up and ask for bank contact

person

Script: Bank’s Counsel

“Hi my name is Jerry Norton and I am withMFG Capital Group, which is a notepurchasing investment group in thegreater ________(name of target market)area. I am in need of a foreclosureattorney. Can you please recommend meto one of your top-producing attorneys?”

Script: Bank’s Counsel• “Hi my name is Jerry Norton and I am with

MFG Capital Group, which is a notepurchasing investment group. Wespecialize in purchasing Jumbo Loans inthe greater _____(name of area) and fromtime to time we need assistance withforeclosing on a loan. Is this somethingyou can assist me with…?

Script: Bank’s Counsel…Great! By the way, while I’m talking toyou, we have identified a loan held by________(name of Bank) located in_______(city/county) that we areinterested in purchasing and we’re havinga hard time contacting the right decisionmaker at the bank. I know you representthat bank and was wondering if you couldassist me in presenting our offer…?

Script: Bank Counsel - YES(if answer is yes)…Fantastic! I have a notepurchase offer letter, authorization letterfrom the owner and a current appraisalthat I will send you to present to the bank.In your experience, what is the typicalprocess and turnaround time for the bankto review and determine if they have aninterest in selling us the loan…?

Script: Bank Counsel - NO(if answer is no)…ok, well I can certainlyunderstand your time is valuable. Whatwould be really helpful is if you gave methe contact info at the bank. You see, Ihave a note purchase offer letter,authorization letter from the owner and acurrent appraisal that I would like to sendto the right contact person. Thanks you!

Getting a “Maybe”• Bank does their own appraisal• Bank wants to review default risk of

borrower:– Owner Has Less Then 3 Months of

Current Monthly Payments Cash onHand in Reserve

– Owner’s Current DTI is higher then 30

Once offer accepted – Need Attorney• Engagement letter (between Atty and MFG)Attorney Responsibilities:• Review loan docs• Draft Note Purchase Agreement and

assignment of Mortgage, other docs• Create new loan restructure between MFG

and owner• Organize title work/closing/escrow

Step 2: Legal Work

• Attorney fees average $3,000 - $4,000depending on scope and nature of work

• Paid at closing• Fees disclosed on settlement statement

Fees

Three Types of “Approval”1.Pre-Approved: Based on Assumptions2.Fully Approved: Based on Hard Data3.Loan Commitment: Appraisal Done,

Passed Underwriting, Ready to Close

Step 3: Exit Approval

Pre-Approval:• Once GCO signs Acknowledge letter and

agrees to move forwardFully Approved:• Once lender accepts offerLoan Commitment:• Prior to closing on the note purchase

GCO Exit Process

Getting Owner Exit Financing6 Steps to Getting an Exit Loan1. Identify Lender2. Get Owner Fully Approved3. Order Appraisal4. Send File to Underwriting5. Get Loan Commitment6. Schedule Closing on Refi

1. Verify BCO can qualify for exit in 12 months2. Close on the note purchase3. BCO carries hard money loan while

repairing credit4. Once credit repaired, BCO (now a GCO)

gets an exit loan and pays off hard moneyloan

BCO Exit Process

Pre-Approval:• Once GCO signs Acknowledge letter and

agrees to move forward• Exit lender must verify BCO can qualify for

an exit loan within 12 months• Exit lender gives us a pre-approval in

writing stating conditions to qualify(required prior to closing on the notepurchase)

BCO Exit Process

• Do you have a refinance program for loansat $________ (sale back price)

• What is your LTV?• What is the min. Credit Score required?• What is your DTI requirement?• Do you have a Note Seasoning

Requirement?• How Quickly Can You Fully Approve

Someone?

Pre-Qualify Exit Lender

Finding Exit LendersStart Building a List of Exit Lenders inYour Target Market

Ideal Exit Lender:• Local Bank Aggressively LendingReferrals:• Owner Referral• Attorney Referral• Other Investor Referrals• Jerry/Peter Network

MFG Preferred Vendor

Brent AdamsSr. Loan OfficerNMLS# 881044

Vantage Point BankMember FDIC

(657) 203-0716 [email protected]

Once we have a signed note purchaseagreement, schedule closing for 30 days

What happens during 30 days?• Title work, note purchase paperwork• Loan commitment on refi scheduled2 Closings• Typically 5-10 days apart

Step 9: Fund and Close GCO

GCO 2 Closings

• Closing #1 – Fund Note Purchase– Receive Assignment of Mortgage

• Closing #2 – Close on Refi– Provide Exit Lender with Payoff

Statement

Example: GCO 2 Closings1. Schedule Note Purchase Closing Monday2. Schedule Refinance Closing Friday3. Close on Note Purchase Monday for

$700k4. Receive Assignment of Mortgage5. Sign New Note with Owner6. Provide Payoff to Refi Lender of $800k7. Close on Refinance Friday for $800k8. Profit $100,000!!

Step 9: Fund and Close BCOOnce we have a signed note purchase

agreement, schedule closing for 30 daysWhat happens during 30 days?• Title work, note purchase paperwork

BCO 2 Closings

• Closing #1 – Fund Note Purchase– Receive Assignment of Mortgage– Owner starts hard money loan

• Closing #2 – Close on Refi– Within 12 months owner repairs credit– Provide Exit Lender with Payoff

Statement

Example: BCO 2 Closings1. Schedule Note Purchase Closing2. Close on Note Purchase Monday for

$700k3. Sign New Note with Owner (hard money

loan)4. Owner Repairs Credit in 6 Months5. Provide Payoff to Refi Lender of $800k6. Close on Refinance for $800k7. Profit $100,000!!

• Cash your check• Fire your boss• Go out to dinner, have a party• Submit more deals• Repeat process

Step 5: Celebrate

• Cheat Sheet of all 10 steps• Fill out for each deal• See download available

Residential Back FlipTM Gold Form

Section 7:Finding Deals

• Remember 80/20 Rule• Consistency• Build a Pipeline

Rules for Lead Generation

Step 1:Locate the High-End Markets in YourArea (City and/or County)– Refer to List of Conforming Loan Limits

(available as a Download)– Chose County near you above the

$412k limit– Consult a Real Estate Agent

Define Your Target Market

• Does it Have to Be Local?• NO – you can do residential back flips

remotely• Must be good at phone/email communication• Does help to meet in person

Define Your Target Market

5 Things an Owner Does When UpsideDown:

1.Does Nothing2.Contacts Current Lender Directly3.Contacts Loan Broker4.Hires Real Estate Broker5.Hires Attorney

Owner Upside Down Now What?

1. Contact Owners Directly2. Mortgage Brokers/Lenders3. Real Estate Agents4. Bankers5. Real Estate Attorneys6. Title/Escrow Officers

Top 6 Sources to Find Deals

Advertise Directly to OwnersTop 3 Methods:• Direct Mailing• Advertise Print Media• Social Media (facebook)

Source #1: Owners

Direct Mailing• Numbers Game: 1% Response Rate• Contact a List Broker

– Loans Over $500k in Specific Zip Code• Mailing House

– Provide Mailing Piece• See Mailer – Available as a Download

Decide which Media Outlet:• Find Out Circulation• City, County, Metropolitan• Cost Varies Significantly• Decide Size of Ad• Cost Varies Significantly

Advertise Print Media

Do you own a home with a mortgageover ______________ that is upsidedown? Call now to learn how todrastically lower your mortgage andkeep your property. Damaged creditok! Not a short sale or loanmodification. Call Now! 888-888-888

Low Cost Media Ad

Attention Friends:Do you own a home with a mortgage over$500,000 that is upside down? Messagemy inbox and I’ll show you how todrastically lower your mortgage and keepyour property even if you have damagedcredit! This is not a short sale or loanmodification.

Social Media

Explain Clearly the Back Flip Model• Practice• Follow Role Play with Owner Script

– See Available as Download• Use Gold Form

– See Available as Download

Pitching to the Owner

• Established Contacts• Understands Market/Industry• Has Clients Upside Down• Great Bird Dogs (Access to Loans that

Don’t Sell)• Possible Resource for Exit Refi

Source #2: Mortgage Brokers

Finding Exit LendersStart Building a List of Exit Lenders inYour Target Market

Ideal Exit Lender:• Local Bank Aggressively LendingReferrals:• Owner Referral• Attorney Referral• Other Investor Referrals• Jerry/Peter Network

“Hi _________ (Lender), My name is___________(your name) and I am with MFGCapital Group. We are a note purchasinginvestment group and I’m looking for abroker/lender who can assist me withfinancing my clients. Do you have a minute?Great! Let me give you an overview of whatwe do. We specialize in purchasing upsidedown jumbo loans for 60-65% of CMV andthen re-structure the debt to the owner at 75%of CMV...

Mortgage Broker Script

Mortgage Broker Script…Depending on their credit, we can carrythe loan for up to 1 year but our goal is toget the owner to refinance at 75% LTV assoon as possible, which is where youcome in. You come highly recommendedto me and I want to find out if you have arefinance program for a loan at$_________ (sale back price)…?

…Ok, great! I have to tell you that we only buynotes that have a strong certainty of qualifyingfor an exit loan. If the borrower is strong, westrive to refi out within 30 days of acquiringthe note. If their credit is damaged, they mustbe able to qualify within 1 year. I would like tobe able to send my clients to you to get pre-approved? Is this something you’d beinterested in doing with us…?


…Great! Can I take a moment and ask yousome questions and go over the particulars ofa deal? (pre-qualify lender)…Before we go, Iwanted to ask you if you have any jumbo loanclients that are unable to refi due to beingupside down on their loans? Fantastic! I’d liketo set up a process where you send me leadsand every deal I can workout, you’ll be sure toget the exit refinance. I look forward to doinga lot of business together.”


• Well Established Contacts• Understands Market/Industry• Has Deals (listings)• Great Bird Dogs (Access to Deals

that Don’t Sell)

Source #3: Real Estate Agents

• Luxury Agents• Specialize in High End Markets• Have Clients that can’t sell (upside

down) and would stay if they knowabout a back flip

Ideal Agents

Agents gets paid on Note Purchase (not refi)at time of closing

Listing:• If the agent has a property listing, pay them

their expected commission (typically 3%)Referral:• If it’s just a referral, pay $5,000

General Rule for Paying Agents

• Option 1: Build The Fee Into the Deal.• Example:

–Buy Price is $500k–Broker Commission is 3% or $15,000–Adjust Buy Price to $485k and Add

$15k as a Cost to Fund Deal

Who Pays the Agent Fee?

• Option 2: Owner Pays Fee Directly• Example:

–Buy Price is $500k–Broker Commission is $5,000–Owner Pays $5k Commission Directly

to Broker for Bringing Us to the Table

Who Pays the Agent Fee?

• Always Paid on Settlement Statement atNote Purchase Closing

• Agent Decides How to Receive Payment– Option 1: Commission paid directly Agent

personally– Option 2: Commission paid to broker

(agent and broker split agreement)

How Does Agent Get paid?

• Locate Brokerage Firms in High-EndAreas– Call Office and Ask for Top Selling

Agent• Look up Listings of High End Homes

Finding Top Selling Agents

“Hello (Receptionist) , Nice to meetyou. My name is (Jerry Norton) andI’m looking for the top selling agent in thisoffice/area. I need an agent who is veryexperienced with luxury homes and has aproven track record. Can you pleaserecommend me to your top selling agent?”

Script – Real Estate Office

“Hello (Agent) , Nice to meet you, I’m(Jerry Norton) and I represent a privateinvestment group and I’d like to share withyou a program we have that allows upsidedown high-end homeowners to keep theirproperties and lower their overall debt andhow you can get paid for helping me putdeals together. Do you have a few minutesI could share this with you and see if it’s afit for us…?

Script – Agent Initial Contact

…Great! I’ve heard great things about youand you come highly recommended. Intoday’s lending climate, we’re finding a lotof banks are willing to sell their higher-endhome loans that are upside down at adiscount. Since we’re able to buy the loanat a discount, we’re are able to restructurea new loan with the home owner at amuch lower amount, saving themthousands…


…Let me give an example: Recently webought a loan at a discount on a housethat had a loan for $1.2mm. Because webought the loan at a deep discount, werestructured a new loan with the owner for$800,000. So she went from $1.2mmdown to $800k and she kept her house,didn’t damage her credit and lowered heroverall debt approximately $400,000…


…The reason for the call is because weoften work with luxury home realtors likeyourself who have clients that wouldgreatly benefit from our program. I’m sureyou’re wondering how you’re going to getpaid if we help an owner restructure hisdebt and keep his property. Well, restassured, we make sure that on every dealwe do, you get paid your expectedcommission…


…Is this something you’d like to look atcloser with me? Great! Let me go overbriefly our requirements to qualify for ourprogram. (review). Do you have anyclients right now that would be a goodcandidate for this program? Thank you foryour time and I’d like to follow up byemailing you a summary of what wediscussed today…”


Source #4 Bankers

• Holding Non-Conforming JumboLoans

• Have Upside Down Loans• Willing to Sell the Notes at a Discount

1. National: In almost every state (WellsFargo, Bank of America)

2. Regional: In a certain region, i.e.Midwest (PNC, Comerica)

3. Local: Only in a city or county.4. Credit Unions: owned/operated by its

owners

4 Types of Banks

Failing Banks• Google Search “Failed Banks” to Get a

List from FDIC• Need Cash!!Local Banks• Rule of Thumb – The more local the bank

the easier to contact a decision maker

Ideal Banks to Contact

Ideal Department

Special Asset Group (SAG) or LossMitigation Department

• Responsible for dealing with non-performing assets

• Decision maker for selling notes

“Hello Receptionist) , Nice to meet you,I’m (Jerry Norton) and I represent aprivate investment group. I’m hoping youcan help me. I’m looking for the SAG/LossMitigation Department that handles jumboloans. Can you please put me through?

Script – Banker Gate Keeper

“Hello Banker , Nice to meet you, I’m(Jerry Norton) and I represent a privateinvestment group. Do you have a fewminutes to talk? Great! I understand youhandle jumbo loans at the branch/bank, isthat correct? (yes) Ok, I’m hoping you canpoint me in the right direction. Myinvestment group specializes inpurchasing upside down residential jumboloans…

Script: Banker Initial Contact

…Who would be the right person for me toconnect with? (connection made). What wedo is purchase the note directly from thebank cashing you out. Then we establishnew terms with the owner. The benefit to youis we are easy to work with, can closequickly and we can help alleviate some ofyour upside down non-forming assets. Is thissomething you’d be interested in discussingfurther? (yes)…


…I can briefly review with you now the typesof assets that we typically purchase and thenI can also follow-up by emailing you anoverview. How does that sound? (reviewterms) What assets do you have right nowthat would be worth us taking a look at? Whoelse in your bank would you recommend Italk to about this?”


– Specialize in Workouts andRestructures

– Have Clients Right Now in Need of aBridge

Source # 5: Attorneys

• Step 1: Define Your Target Market(City, County, State)

• Step 2: Compile a List of AttorneysThat Specialize in real estateWorkouts/Restructures

Attorneys

Google Search in your Target Market:1.“Real Estate Attorneys” – compile list2.Refine Search: “Workout or Restructure

Real Estate Attorneys” – compile list

Compiling a List of Attorneys

1. From Compiled List, Visit Law Firm’sWebsite and Research Attorneys’ Bios1. Look for key words “workout” and

“restructure”2. Call Firm and Ask Receptionist For

Contact Info

Finding Attorneys That Specializein Workouts and Restructures

“Hello Receptionist) , Nice to meet you,I’m (Jerry Norton) and I’ve heard greatthings about your firm. I understand your firmhas attorneys that specialize in debtrestructuring and loan workouts, is thatcorrect? Great! Can you give me arecommendation and contact info for thevery best in your firm?”

Script – Attorney Gate Keeper

“Hello Attorney) , Nice to meet you, I’m(Jerry Norton) and I represent a privateinvestment group. Do you have a fewminutes to talk? Great! I’ve heard greatthings about your firm and you come highlyrecommended. I understand you specializein real estate workouts, is that correct? (yes)Ok, my investment group focuses onproviding bridge lending specifically onresidential jumbo loans…

Script – Attorney Initial Contact

…As I’m sure you know, we’re finding a lotof homeowners today are upside down andneed to restructure their existing debt inorder to survive. What we do is purchase thenote at a discount from the current lenderand then work out a new short-term notewith the owner…


…The reason for the call is because weprefer to work with owners who have high-level legal representation like yourself whoare good at negotiating and structuringdeals. Is bridge lending something thatwould provide a benefit to you and yourclients right now? (yes)...


…Ok, you’ll find working with us that we’recreative at structuring deals that makesense, we’re easy to work with, and we canclose quickly. I can review with you now theterms we typically follow and then I can alsofollow-up by emailing you an overview. Howdoes that sound? (review terms) Whatclients are you currently working with thatwould be worth us taking a look at? By theway, what other attorneys in your firm wouldyou recommend I talk to?”


Source #6: Title/Escrow

Have strong connections with:• Jumbo Loan Borrowers• Real Estate Agents• Mortgage Brokers

“Scratch my back and I’ll scratch yours”• Title/Escrow Officer brings leads• You let them do the closing on the note

purchase and the refinance• Everyone wins!

Paying a Title/Escrow Officer

“Hello title/escrow) , Nice to meet you,I’m (Jerry Norton) and I represent aprivate investment group. Do you have afew minutes to talk? Great! I’ve heardgreat things about your firm and you comehighly recommended. I wanted to discussa way we might be able to work together.My investment group focuses on providingbridge lending specifically on residentialjumbo loans…

Script: Title/Escrow

…And I am looking for an experiencedescrow/title company that can handle mytransactions. With each of our deals thereare actually 2 closings. The 1st when wepurchase the loan and the 2nd when theborrower does a refinance. Is this an areayou can assist us with…?


…Great! Our ideal client is someone in anupside down Jumbo Loan. Since you areconnected with borrowers, real estateagents, mortgage brokers, etc., would youalso let me know if you come acrosssomeone that fits our program? Fantastic!Of course, we would expect you to handlethe closing transactions. Is there anyoneright now you can think of?”


• Simple Explanation of Back Flip• Example• Contact Info• See Available as Download

Summary Letter

Section 8:Getting Paid on a


Top 6 Ways to Get Paid1. Consulting Fee From Property Owner

3. Commission from Exit Lender (license)

2. Consulting Fee From Money Investor

4. Commission for Real Estate (license)

5. Profit From Buy and Sale Back to Owner

6. Spread on Interest Payments

• Structuring the Deal• Reduce Debt and Payments• Bringing Capital to the Deal

1. Consulting Fee From Owner

FrontEnd

BackEnd

Or

• Bringing Opportunity• Providing Due Diligence• Organizing/Managing the Deal

2. Consulting Fee From Investor

FrontEnd

BackEnd

Or

• Line up the exit financing and earn acommission from the lender.

• Typically 1-3 points• May need to be licensed

3. Commission From Exit Lender

BackEnd

• Listed Properties (short sales)• Typically 1-3%• Need to be licensed agent

4. Commission From Real Estate

FrontEnd

• Profit Earned From Mark-up• Paid at Time of Refi• Example:• Buy Price $500,000, Sale Back Price

$575,000. Profit Earned at Refi $75,000

5. Profit From Buyand Sale Back to Owner

BackEnd

• Remember: Profit not realized until exit• GCO: Refi happens immediately• BCO: Refi may take up to 1 year

GCO Vs. BCO

6. Spread on Interest PaymentsExample: 6 month Hard Money Loan at 13%• Note Purchase $500k• Back Flip Price is $580k• 1st lien for $500k direct with money investor

– Monthly payments of $5416• 2nd lien for $80k direct with you

– Monthly payments of $866

GCO:• Transactional Funding• Charges 1-3 points• Paid at Exit (Refi)• 30 days or lessBCO:• Hard money loan (10-15%, 0-5 points)• Money investor goes direct with borrower• You take a 2nd on the profit

Structuring Money

• Note Purchase $700,000• Money Investor Fee 2%• 7 Days Later Refi For $800,000• Money Investor get capital of $700,000• Money Investor gets 2% profit of $14,000• Net Profit to Back Flip Investor = $86,000

Example - Structuring Money

Section 9:Making Connections

and Building Credibility

Take Action!

“I would rather be sloppily successful thenperfectly mediocre”

• Don’t wait!• Get out there• Start talking to people• Talk to 10 people a day for 30 days

Benefits Vs. FeaturesFocus on Benefits not Features:

Features:• Buy your loan at a discount, reduce your

loan balance, get you an exitBenefits:

• You keep your property, reduce your debtby $500,000 and not damage your credit

WIIFM and WSGAT• First - Identify the Problem• 2nd - Provide the SolutionAlways Remember:• WIIFM: What’s In It For Me?• WSGAT: What’s So Good About That?

• Help people see the value in what we doand how it will help them.

• Explain Clearly the Back Flip Model– Simple/concise

• Practice and Follow Script• Always Remain in Control. You Are the

Point of Contact• Always Position Yourself as the Decision

Maker. Remember - You Are the LeadPerson

Remain in Control

“Example: “I represent a group of investorsthat purchase upside-down loans at adiscount…”

• Not – “Jerry and Peter are the ones withthe money, I can’t answer that question…”

• “My Private Investment Group Has StrictCriteria…”

• “My Investors Rely On Me to…”

Positioning

• Name: MFG Capital Group, LLC• Title: Independent Sales Associate• You Represent MFG• Paperwork in name of MFG• Independent Contractor Agreement

Partnership Program

Trust Builder Package

• Custom Website• Video Overview• FAQ• Case Studies• MFG Capital Group email

• No Independent Marketing efforts in theName of MFG Capital Group

• Protect the Integrity of the Brand• As a Trust Builder Package client – limited

license to use MFG name• Non Trust Builder clients – no license

Protecting the MFG Brand

• Up to you to help safe guard the brandidentity.

• Notify violators• See MFG Capital Group Copyright and

License Violation Letter

Student Police Force

• Builds Credibility• Shows You Have Access to Funds• Line of Credit

Credibility Letter

Section 10:Residential Back FlipTM

Bird-Dog Program

How to Earn $10,000 per Deal

Bird-Dog Program

• Purpose:• More deals to the closing• Utilize our contacts• Get you experience with the process• Teach you how to be 100% self sufficient

You are a Sales Agent of MFG CapitalGroup, LLC

• Represent MFG• Paperwork in name of MFG• Independent Contractor Agreement

Sales Agent

ResponsibilitiesYou:• Find back flip candidates• Complete Phase 1• Submit deal in the Deal GenieMFG:• Negotiate on Purchase• Attorney network (closing/restructure)• Funding (purchase and Refi)• Coach/Help/Support/Train you

5 Steps to Earning $10,000

• Step 1: Find and Pre-Qualify Owner• Step 2: Submit Deal• Step 3: MFG Coach Negotiates• Step 4: Fund and Close on Purchase• Step 5: Exit and Get Paid!

Step 1: Find & Pre-Qualify Owner

• Order Appraisal• Owner pulls credit• Pre-Approval letter from Exit lender• Signed Acknowledgement Letter

Step 2: Submit Deal

Deal Genie:• Sign and upload Independent Contractor

Agreement• Upload all required info• Once everything requested is complete,

click “submit deal”

Step 3: MFG Negotiates

• Once deal submitted:• Coach will contact you and take over• Begin process of note purchase• Work with owner on structure• Get to accepted offer

Step 4: Funding and Closing

• Once note purchase offer accepted:• Coach will engage attorney• Prepare for closing• Get funding ready• Get exit plan lined up

Step 5: Exit and Get Paid

• After closing and note purchase:• Engage owner in credit repair• Start refinance process• Close on refi• Realize profit and you get $10,000!!• Celebrate! (then do more deals)

Interested in EarningMore Then

$10,000 Per Deal?

Step It Up…

• Elite Group• Application Process• 3 Days live with Jerry/Peter• Deal splits 50/50

Fast Track

Become a “Flipping” ExpertQuick FlipsFix and FlipCommercial Back FlipTM
