Chris Miles (00:00):
Hello, my fellow Ripplers! This is Chris Miles. Your Cash Flow Expert and Anti-Financial Advisor. Welcome you out for a wonderful show. A show that’s for you. And it’s about you guys. It’s about those of you that want to work. You don’t want to work so hard because you’ve been working your tail off. You want to work because you want to not because you have to. To have that freedom. That prosperity. That cash flow. Today! Not working 30 or 40 years and saving forever and hope that someday you might have a retirement, but you want that freedom right now. So you’re gonna be able to live a life to do what you love. To be with those you love. Whenever the heck you feel like it. But on top of that, as a Rippler, you actually want to create a ripple effect in the lives of others too. Not just your family and generations beyond you, which is awesome, but for everybody you come in contact with to enrich your community and make things better.
Chris Miles (00:55):
And guys, I appreciate you guys that have been sharing this show, creating a ripple effect that way, because as we can be able to do this for other people, man, this just gets bigger and bigger. And I appreciate you guys allowing me to create a ripple effect through you and an essence, creating through others as well. Thank you again for tuning in for joining us and for following us too.
Chris Miles (01:13):
Here’s a quick reminder. Go to our website, MoneyRipples.com. You can check out the blogs that have the videos of these shows as well as the free book Beyond Rice & Beans, Seven Secrets to Free Up Cash Today. That you can download for free right now to be able to find more money today. So check it out.
Chris Miles (01:28):
Alright! So I’ve got a special guest today. You guys have had, you know, we’ve had repeat guests. So one of our biggest repeat guest we’ve had on the show is Jorge Newberry. You guys know from like American Homeowner Preservation, things like that. Well, we’ve got a special guests here with one of his partners, someone that he actually worked with in a company called PreREO. This guy’s name is Barry Owens. He’s the president of PreREO. He’s a 30 year mortgage industry veteran. He believes that PreREO provides an incredible opportunity for bringing no holders and community investors together to mitigate losses, to lenders and accelerate returns for investors. Basically creating a huge win-win for everybody. His unique background experience creating and executing a variety problem solving solutions, positioned to successfully and build the infrastructure to handle the varying and specific needs of no buyers and sellers. Prior to joining his PreReo, Barry worked in leadership roles, such as [inaudible]. So Barry, welcome to our show!
Barry Owens (02:19):
Thank you very much, Chris. Happy to be here.
Chris Miles (02:22):
Yeah. So tell us like first and foremost, like how’d you even go this route because many people go in like the banking industries and things like that, but I know a deal with Reos or Real Estate Owned Properties, right? Like dealing with these, it’s a very specific niche. How’d you get there?
Barry Owens (02:37):
Yeah. It is a well known, but also hidden niche, right? The people that are in it know it very well. You know, they’ve learned a lot through it and they’ve made a lot of money through it, but it is also very quiet because it’s not very traditional.
Chris Miles (02:51):
Yeah.
Barry Owens (02:52):
I very connected to the bank, you know, having the right contacts, having the right introductions, having access to the products is really the key in it. So yes, it is a very niche driven market where, you know, knowing the right individuals, having the right contacts, whether that be at the lending institutions, institutions like ours that can actually provide the product is a very strategic advantage to participate.
Chris Miles (03:18):
Yeah. Now this is a very synergistic business that goes along with American homeowner preservation. I can see it. It makes perfect sense while you guys are connected. Tell us, for those listeners that don’t even know what REOS are. Right. Give us a brief introduction about what they are and that sort of thing.
Barry Owens (03:32):
Yeah. So REO, it’s a bank acronym for Real Estate Owned. Basically it’s a property that either an investor or banking institution has foreclosed on and taken back into inventory. It did not sell it forclosue sales. So now it’s going to be brought back in marketed for sale by the institution. They sometimes use third parties to sell it for them, but yeah. And then basically owned asset that’s an REO or you’ll sometimes hear it referred to as an OREO, Other Real Estate Owned.
Chris Miles (04:02):
Absolutely. And this is key because I know from last recession, when people I knew that were dealing with Oreos connection is everything like it’s not about who has the most money, because you can sometimes offer less money and still get an offer accepted if you have the right relationships with these banks, with these institutions. Correct?
Barry Owens (04:22):
Correct. And a lot of, again, it goes back to my earlier comment on, you know, as you said, the relationship as you become a repeat buyer that gives you a lot of credibility with these investors that we know you’re going to keep coming back, purchasing more product. So yeah, you kind of do get bulk discount mentality going, you know, when you’re a repeat buyer, it definitely builds your credibility.
Chris Miles (04:43):
That’s absolutely true. And so give us an example, like what does it like to buy a property through you guys? Like, you know, give us example so maybe, cause obviously you buy a whole portfolio of these things, right? Do you sell these by the portfolio or do you sell the individual properties, like piece them off? How do you do it?
Barry Owens (05:00):
Typically they’re going to be pieced off. Now we do have buyers that will buy multiple properties at the same time, but they might not all close on the same day, but we might have three, four or five, six deals going with them at any given time. But we do sell these, you know, basically individual properties in our note, which is the preREO market, which is really what, you know, our website, preREO is focused on is selling the notes of the foreclosure properties. They’re not REO yet. They’re preREO. We’re selling them out instead of the actual physical property, which is the discerning difference between the preREO and the REO.
Chris Miles (05:39):
And why would they want the preREO versus the REO
Speaker 3 (05:44):
Opportunities. The program that we created historically owning a vacant note, a property note, and the property is vacant. It’s a very costly endeavor. You have lawn care, snow removal, vandalism, all those factors. And plus you’re paying interest. You’ve got all these things, plus you’re completing a foreclosure. So it’s basically a dead money asset, which is why people are frowned upon the past. What we’ve done with preREO is create a program and we have the complete infrastructure to handhold people through this entire process, through the turning networks that we have and the servicing that we have with AHP backing us. And you know, those pileated ponies where we can handhold somebody through the entire process. And the key here is the receiver. When you can get a receiver appointed and people oftentimes get nervous on receiver, that’s expensive and doesn’t need to be because our receiver can be any person that can’t be an entity, but it can be any person.
Speaker 3 (06:48):
So as an example, if you have a local real estate agent that you work with, or, you know, we also have a vast network, we could introduce you to as well, you have a contractor or you know, that real estate agent whomever you would choose. You can have that person appointed as the receiver by the court, take possession of the property of this vacant property, which you’ve purchased at a great price because of the fact that again, historically vacant notes are not something that people go after a whole lot, but we’ve been able to bring this entire segment of the market and put it in front of investors and the network and the supporting network with the receiver. So that receiver now has the power of the court to go in and take possession of the property. Re-key the property, the buyer of the note, you know, the preREO partner, they can go in, take possession, do the necessary repairs, if any, that are required to a property, put a renter in it while the foreclosure action is going. So now you’ve turned that, you know what used to be a dead money asset into an income producing asset while you complete the foreclosure. And then once you complete the foreclosure, then you have that REO that we talked about earlier. Now, what do you want to do with it? Are you a buy and hold strategy? Or I just want rental income? Are you a flipper? You know, Hey, let me take my profits now. But you have a multitude of strategies that, you know, will be completely up to you once that process is done.
Chris Miles (08:26):
So walk us through like sample deal. Like what may one of the investors that have gone and purchased one of these properties, walk us through like what the process was like and the numbers too. Like how did those numbers work out for them?
Speaker 3 (08:37):
Yeah. So to give you an example and I can’t really get into the specific numbers, but I will lay it out. So one of our initial customers, it’s been a longer term customer of AHP. They purchased a couple of the notes a few months ago, you know, as we were rolling up the program. They just paid off their first note and they are back and they have numerous offers now on other properties. So the return was obviously significant enough for them. Honestly, I don’t even know what their return was. They paid us off. Now they’re back putting in offers on other properties. So, but as like hypothetical numbers, you know, one of the samples that we use is that, and this is a good example. It’ll set the table. So for, to do round numbers, we typically sell the properties at 75% of value. So what that means, if you went to a realtor.com, you would see a property at $133,000 value, we will sell it for a hundred thousand. The note for a hundred thousand dollars preREO will fund 75% of that. The investor would need to come to the table with $25,000 to fund it. They’re part of the participation agreement, right? I have.
Chris Miles (09:58):
So to be clear, they’re not buying the full hundred thousand of the note. You guys are partnering together, you’re putting up 75% of money. They’re putting up 25% of that net price. Right? Yeah.
Barry Owens (10:10):
Correct. And they need to have some money in the back for rehab. And the legal costs, that will incur. We estimate it’s about $25,000 or so, you have to get the receiver appointed. And obviously that number can vary, you know, on a palatial estate, you know, $3 million estate, your numbers are going to escalate, but yeah, $25,000 repair and legal expenses to pay the $2,000 for the program fee. And you give the 12% return to preREO on the money based on how long you hold that money. And then we will do it for up to three years, you can pay us off in two weeks as well, if that would be your choice. And typically what we would see, the one analysis that we ran in that case after the repairs are done, the property is worth $79,000, your net, after all the costs, after the participation fee, after the 12% annualized return, if you sell it in a year, you’re looking at a $39,000 return. So these numbers can be very lucrative in a very short period of time.
Chris Miles (11:26):
Yeah. So let me walk back just so people can kind of get a visual because it’s always easier to do this, and I know that they can reach out to you guys and see some of the stuff too. So in this example, somebody puts $25,000 down, right? That’s their investment into that out of the hundred thousands of 25% they put in, like you said, about another 25,000 repairs, right? So they’re at about 50,000 bucks. Plus like you said, there’s about $2,000 program fee. You mentioned like, and this is a key one I wanted to focus too. So because you’re coming in with the 75,000, right? They’re paying you essentially like 12% a year or 1% a month. Right?
Barry Owens (12:03):
Correct.
Chris Miles (12:04):
On that money. So, and we’re saying this over how long? A period of time?
Barry Owens (12:09):
The example that I just gave was a one year, but we worked through the notes, but we have people that pay us off in three months, depending on where it’s at in the foreclosure. So the timelines on these varys greatly.
Chris Miles (12:23):
Yeah. It can vary greatly depending on the speed, but even if it took a full year, which is a decent amount of time, right? That’s like, you know, 9,000 bucks to come out of pocket. So they might’ve come out of pocket a little over 60 grand. Correct? In that example.
Barry Owens (12:36):
Yeah. Depending on how you want to play that out. Yeah. For they would liquidate the investment. Yes, totally. Yes.
Chris Miles (12:42):
But then, like you said, after they liquidate, what’s the return on that, that, in that example,
Barry Owens (12:47):
Well, on that example would be $39,000 is the profit in the spreads and looking at
Chris Miles (12:55):
That’s a huge profit for a short period of time.
Speaker 3 (12:58):
It is a very significant profit, which is, you know, we have just really got the program running, just started adding a bunch of properties to it. Like I said, we’ve only had a couple of test samples, or test cases that I could talk about and have gone through, but it’s already proven to be a lucrative, as I stated, people aren’t going to come back investors, aren’t going to come back to a program where they didn’t make money. So we are already seeing the repeat investors on these, which is fantastic. I mean, that’s, what’s gonna make, you know, the model thrive. We want to see the investors do well. And we’re partnered in this, you know, we have a vested interest in this doing well.
Chris Miles (13:37):
Right. This is kind of a done with you deal. Right. It’s definitely not done for you. There’s definitely a lot of your own involvement in this, but there’s definitely a place where you guys are really, truly partnering together for these deals, right?
Barry Owens (13:50):
Yeah, absolutely. Not only with our money, but with our resources. It was through legal and AHP servicing and all of the support mechanisms that we have in our, you know, internal staff to walk people through issues and, you know, educate them as we go. So yeah, it’s definitely not, you know, here write a check and then you’re on your own. There’s a support mechanism through our process.
Chris Miles (14:13):
That’s right. And that’s the kind of the cool thing. And everybody listening, I want them to really understand the difference here is that there is a difference between passive investing and active investing. And we’ve mentioned this on the show several times, right? I mean, passive investing is you turn it over. You’re really not doing a whole lot. Right. Even if you buy a turnkey property, you know, even though you have somebody that helps you buy a rental property, that’s I would call it a partially passive investment. Right. Because there’s some work upfront, but once he got it going, then it’s mostly passive. Well, this one’s definitely more on the active side, but as you go up through those ranks, the potential for returns is much bigger. There’s also more time involvement in this, but still, I mean, you took that say you took that same again, we’re rounding down to 60,000 bucks, right.
Chris Miles (14:56):
But $60,000 and you put it with AHP, you know, very, very passive. Like you do nothing. You know, you let them do all the work, right. I mean, you might make 6,000 bucks or so in a year, you know, but in this example, you said, you can make over 30 because now you’re getting more involved. You’re become more of an active investor in this kind of thing. And I know there’s several of you that either one, you like note investing, which this is kind of up your alley anyways. Or two, you’re already trying to find ways to buy properties at a discount and trying to find ways to create leverage. And this is exactly the way to do leverage. And by the way, nice thing he has here too, is, you know, obviously this is private money. Well, I mean, you’re using like AHPS money, but you’re not actually, they’re not going and having to qualify for a bank loan, which could take weeks, Right?
Barry Owens (15:39):
Yes. Yeah. They’re the qualifier. If you’re coming to the table, you’re participating with us, you know, we ask you a couple of generic questions, but yeah, it’s very smooth, very easy process. It’s not something that you get back loaded with paperwork that you have to keep going back and forth with and keep coming up with documentation.
Chris Miles (15:59):
Right. You can get hung up on this or that. And the other that just becomes frustrating and extensive, you know, so we’re definitely not saying this is a recommendation. We’re definitely not saying this is risk-free or anything of that nature, but definitely this is an amazing option, you know, and especially where you, like you said, this is preREO. This is not like buying OREOs where I’ve seen a lot of people got burned the last recession buying OREOs, you know, outright, and then having huge tax bills left on them. Cause they’re out in Chicago or something, right. It’s not like that.
Speaker 3 (16:26):
Yeah. And we do the due diligence on them and we highly encourage everybody to do their own as well. But we will give you a broker price opinion, which is a third party, independent value of the property. And obviously you can go out to realtor.com or Zillow and look at some estimates, they’re both on rental incomes and property values. So you’re going to go into this with a lot of information, you know, to make it secure. And as you stated, yeah, there are people that have been burned tentatively on the REO market for one reason or the other. But there’s also a reason why there’s so many TV shows promoting these fix and flips, you know, in live scenarios because there is definitely a lucrative market out there for investors.
Chris Miles (17:10):
Absolutely. And especially, I know there’s a lot of people that listen to show that say, okay, Chris, I get how I can buy rental properties and whatnot, but is there anything I could do that could be more lucrative? That could be faster and accelerated. And I’m not telling people to just go and should I go for pie in the sky and swing for the fences, and they strike out and they lose money. That’s not what we’re talking about doing here, but definitely if they have their bandwidth to put a little time and effort into something, this could be a great opportunity for them.
Barry Owens (17:39):
Yeah, absolutely. And again, with the support mechanisms that are in place, you know, from a value, it, it gives a very high comfort level to everybody. We want to make sure that everybody’s very comfortable with what they’re investing in and how the process works. So we’re here, you know, a very supportive team behind it.
Chris Miles (17:57):
Well, Barry, that’s exciting stuff. I love it. Everybody, we’ll put in the show notes, the link. So you guys can go and find out more, but Barry, I appreciate your time. This is really cool stuff, a great niche and a great opportunity that even someone who’s got, like you said, maybe they got 50,000 or a hundred thousand bucks. This could be an amazing opportunity for them to take advantage of and really create some great returns. Whether they create a rental from it, whether they flip the property, whatever it might be. There’s some definite opportunity here for them.
Barry Owens (18:26):
Yeah. Absolutely. Looking forward to it. And I would greatly appreciate the time today, Chris.
Chris Miles (18:31):
Absolutely. Man, I really appreciate the opportunity to have you on as well. So, every definitely check it out. Like I say, go to the show notes, you’ll see a link there. You can go and learn more about what preREO does and really how you can become more involved and how you can even ask more questions. So everybody go check that out. And man, again, this show is all about how you take action. It’s not just about being a hearer of this podcast and the hearer the word, but a doer as well. So make sure you go check that out, learn more, especially this, some that really hit home for you, or this is something that you’re already trying to do. And this just gave you more, leverage, more opportunity, check them out. So everybody, I hope you make it a wonderful and prosperous week and we’ll see you later.