GUESTS: Eddie Speed & Joe Varnadore
Since 1980, W. Eddie Speed has dedicated his professional life to the seller financing and non-performing note industry. Over the years, he has introduced innovative ideas and strategies that have positively impacted the way the industry operates today. Eddie is the founder of NoteSchool which trains people how to buy performing and non-performing mortgage notes. He is also the owner and president of Colonial Funding Group LLC, which acquires and brokers discounted real estate secured notes. He has also launched NotesDirect.com, which makes buying notes as easy as ordering on Amazon.
Joe Varnadore invested in his first property at the age of 19, and knows the importance of using creative financing to make deals work. He has created and brokered more than $30 million in note transactions on residential and commercial properties. As an author, speaker, and trainer for the past 25 years, he believes that there has never been a greater opportunity for real estate investors to use non-performing notes to acquire properties.
Here at NSTV, we’re committed to searching out the most impactful news stories affecting real estate and note investing. More importantly, we discuss what’s behind the headlines. You’re definitely not going to hear these news items on the nightly news. And we have some very important updates for you today as we wrap up December and 2021.
You’ll often hear Eddie Speed say. “I don’t have a crystal ball, but I do have a rearview mirror.” That’s why one of the best ways to tell what’s in the future is to look at what we’ve learned from the past. Those who ignore the past are doomed to repeat it. Many investors learned some tough lessons in the housing crash of 2008, while the smart ones made out like a bandit during the great transfer of wealth. That was a time when millions of homeowners were underwater and home prices crashed. It was a time when nonperforming loans were a great way for investors to make huge profits.
One of the many weird things about today’s market is that we’ve never seen so many nonperforming loans during a real estate market that is red-hot. This market is unlike any other in Eddie’s 41-year career. By putting a two-year ban on defaults, evictions, and foreclosures, homes that normally would have hit the market are still owned by the delinquent homeowners. But how long until the wave of shadow inventory hits the market? That’s just one of the many topics Eddie Speed and Joe Varnadore will be discussing in today’s final 2021 episode of NoteSchool TV.
By the way, on our final episode, we want to say a special thank you to all our faithful listeners in the NoteSchool community who subscribe to our channel, ring the bell, and keep us on the air. Here’s to a healthy and prosperous 2022. Happy New Year!
3:00 | Joe introduces Eddie Speed. He mentions that people tend to read the headline but not what’s behind the headline, where the real story is often buried. He says, “We do monthly updates to find voids in the market.”
5:10 | People think the rental property business is owned by huge companies, but they only own a fraction of the 23 million rental “doors.” About 85% (17 million) are owned by small time “amateur” landlords who own 1 to 10 properties. Right now, they are probably the most unhappy property owners in real estate. Average time to rehab a rental property is 147 days, and profit margins are shrinking. Burned out landlords are a prime target to sell their properties using seller financing with monthly payments that replace their rent checks.
10:50 | Aggressive “stated income” loans for rental property shows that the riskiest loan you can make on a property is to a landlord, not a homeowner.
13:00 | Majority of Americans are struggling with housing payments. Nearly 7 out of 10 have had to make sacrifices to continue paying their mortgage. They’re having to take second jobs, eating fewer meals, etc. If new mortgage rates go up 1%, there will be 20% fewer potential buyers who can qualify—another void that investors can fill.
15:40 | According to Mortgage Monitor, more loans are moving to delinquent status. Because of the virus, there were no evictions or foreclosures for 2 years. This has caused a pent-up inventory of about 3 million delinquent loans. This has opened up the old game of buying nonperforming notes. Eddie says this is the first time in his career that he has ever bought delinquent notes in a hot real estate market. Forbearance plans have also ticked up. Many distressed homebuyers will lose their homes in the next 9 months.
21:00 | FHA releases report on nonperforming loan sales. About half a million were delinquent before the virus started. They have an average loan-to-value ratio of 91%. So far, only about 130K NPLs have been sold out of about 3 million. So many more are coming.
22:45 | November shows highest inflation rate in 40 years. The Federal reserve forecast 3 interest rate hikes in 2022 to fight inflation.
24:50 | Don’t expect home prices to fall. Average median home price today is 354K. We have a shortage of listings, so prices have surged. Many experts are not addressing the real estate default situation in China which could affect us here.
27:30 | Today’s sponsor is NoteSchool’s upcoming 1-day “Gold In Notes” class. The class covers key topics such as: How to raise capital, defer taxes, create notes, wholesaling notes, how to create partials, make money from nonperforming notes, and much more!
29:10 | Homeowners are sitting on record equity. There is a record $9.4 trillion in tappable home equity collectively, which is an average of $178K per borrower. So prices probably won’t drop as badly in 2008 when so many homeowners were underwater.
31:00 | They discuss which states had the biggest gains in home values. California, Washington, and Idaho had highest gains. Eddie says this is the craziest market he has been through in 41 years. This market, unlike others, has put no pressure on homeowners who have fallen behind.
33:48 | Evergrande and Shimao (Chinese developers) slide into default while some ratings agencies keep quiet. This is likely to affect the West coast the most where there is more Chinese investment money being spent.
37:45 | Eddie wraps up the broadcast by saying it’s been quite a year! He says to look forward to more nonperforming loans in the months ahead which is a huge opportunity for entrepreneurial note investors.