Chris Sevney dives into the nitty-gritty of real estate investing with a lively Q&A session that’s bursting with insights! He tackles the importance of forced-placed insurance like it’s the hot topic of the day—because let’s face it, no one wants to get burned (pun intended) when their property goes up in flames! From answering questions about non-performing notes to shedding light on tricky borrower situations, he’s got a toolbox full of wisdom that’s perfect for anyone dealing with paper. Plus, he dishes out some state-by-state advice that’s as colorful as a box of crayons—Ohio, he warns, may not be the land of milk and honey, while Alabama's got some sweet investment prospects! So, grab your favorite snack, kick back, and join Chris as he spins tales and shares strategies for navigating the wild world of real estate with a smile.

Every investor has questions—whether it’s about non-performing notes, seller financing, foreclosure risks, or choosing the right markets. In this Q&A episode, we tackle five key questions from real investors on everything from force-placed insurance to the best (and worst) states to invest in. We break down strategies for managing distressed assets, securing your investments, and navigating complex real estate deals. If you’ve ever wondered how to mitigate risk, maximize returns, or handle tricky situations in note investing, this episode delivers practical insights you can apply right now.

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Welcome back everybody.

I am Chris Sevney, your host and today I want to spend some time doing a little Q and A.

So over the past few weeks we've had a bunch of questions come in and eventually, I don't know, maybe I'll start doing a live show with people come in and ask questions.

I do that with my membership group where every other week we have a call where it's basically ask away to help me answer the questions where people, you know, what they have going on in their portfolio at this moment or questions they have and we answer them.

Whether it's a question about attorneys, what they should do, what they're bid on a tape that came out, my opinions on it.

So these types of things we love to provide answering questions as we look to provide more information education for those who touch and deal anything with paper, whether note investing, seller financing or private lending.

So first question that came in was of a borrower who is not in escrow and they stopped paying insurance.

The servicer suggests that we put force place insurance on the property.

What are your thoughts?

So first let me dive into saying what first place insurance is.

So on a property, say it's a $200,000 property, typically you have your principal and interest payment and then the servicer who's the person who actually collects the payments will have an escrow which is meant to collect for taxes and insurance.

In this instance the loan docs probably a seller financing deal, not institutional paper.

Institutional meaning from banks.

They almost always require escrow seller financing.

Some people don't.

It really is depends.

If a loan was non performing in a period of time and it went back to reperforming, there may or may not be escrow.

So many different reasons why.

But let's boil it down.

You're owed, let's say you're owed $150,000 on a $200,000 property, that property burned down borrower would still owe you the money, but they probably don't own anything that you could recover from.

So you always want to make sure your property is insured so your service is correct.

You would want to get what's called a forced placed insurance, which is you're forcing insurance on the property.

It also goes by name lender placed insurance as well.

And typically you can get that up to the amount of the loan.

You don't have to do the entire home price, you could just do the amount of the loan and if the property will be destroyed, you just get paid off, you release the lien and that borrower Owns basically piece of property.

So let's use unfortunate incident will happen recently in California with wildfires.

Let's say you had a $200,000 house, no such thing in California and you're at 150.

Wildfire comes through, burns a house down.

The borrower had insurance, they would collect on that and pay you.

If you add insurance through lender place force placed, you would get paid whatever you insured it for which I always recommend be at least the loan balance.

Now if there's no insurance you get nothing.

So you can see why it's important to have insurance.

Now how do you get insurance?

Most servicing companies work with insurance companies that will they'll place it for you.

They'll charge you a small monthly fee to manage it.

But typically you can get it through your servicer.

We use Madison Management Services so you can get it through Madison Management or typical other services.

Or if you have a big portfolio, I recommend reaching out to an insurance company directly.

Avoid the middleman and just add loans as you buy them or sell them on and off the books.

So that is question number one.

Question number two is hey everyone.

So has anyone had any great success with buying non performing notes directly from lenders?

And doing a short sale is not an option.

Owners are deceased.

Ideally I want control of the asset.

So my plan would be to buy the note at a reduced rate if possible become the bank and foreclose or take control of the asset figure if anyone would be knowledgeable, it would definitely be this group.

Thank you, great question.

Now with what we do is we like to buy non performing loans and try and work something out with the seller and get them on a repayment plan.

But unfortunately that does occur for everybody.

And how do you deal with that?

Mitigate it?

Oh there's really no mitigation is unfortunately you're probably going to have to foreclose.

But before you do, possibly see if there's family members or if there's probate file with an estate that there's an executor or an administrator who might be able also work to sell that property.

So I'll use that example.

Previously a $200,000 home they owed 150,000.

Now in this instance the question is do you will you get the property back if you're allowed?

They said it was a short sale.

So we're going to flip the numbers of a $200,000 loan on $150,000 property.

So you're in control.

You'd probably buy that note for $100,000.

Rough numbers you owe 200 but it's only worth 150.

So you could try and sell it at a short sale for 130, 120,000, make a quick 20 grand.

Or you could go through the foreclosure process, but then you would control the house if you foreclose because most likely you would take it back and then you could do what you want with it.

Hold it as a rental, renovate it, sell it.

Options galore.

So plenty of options there.

But understand closing is not for the faint of hearted lengthy process.

It's a costly process.

If it's vacant, you may have to worry about squatters.

You're going to have to secure the property.

You're going to spend significant amount of money foreclosing on a property depending also on the state, whether it is judicial or non judicial, which we'll talk about a little bit.

Follow up questions.

Hope that answered.

Next question.

I'm trying to understand how to properly paper first or second mortgages at a short term high yield, low dollar amounts that are less than 50,000.

So far I'm finding the transactional costs proper paper, legal title, make this quote not worth doing.

On the other hand, I've encountered a fair number of people who do this over the course of my education.

So I guess it's all about the legal fee.

Any thoughts out there?

Great question.

If you typically look at banks and institutional companies, they will not originate anything under $75,000 and the reason being is the underwriting costs and fees.

Now if you're independent, working for yourself, that's just your own time.

But you may spend $500 to $1,000 to have the documents created by the attorney title appraisal.

The cost to underwrite a $50,000 loan is typically the same cost to underwrite a $500,000 loan.

An appraisal costs pretty much the same for the most part in everything else.

So that's where it does make it very challenging for a lot of people.

Don't want to get into that rat race.

Now the other component to it is let's say you're doing a private money loan to somebody $30,000 and it's 10% interest, that's $3,000 a year.

Now if that's all the money you have that you can invest, that's good return.

But if you have 200,000, all these smaller deals, it can look like it's a lot of work.

So that's something to consider especially on seconds which also have potentially higher rate of default, possibly some people in seconds Would say no.

Then you know the money you make versus the risk.

Is the risk worth the reward?

Those are some of the things that you have to consider.

And the other is first position loans that low are typically on properties in very bad areas or the person is owns a property just looking for cash.

But what are they going to be doing with it?

They're probably paying off something else.

So that's where it makes it a little more challenging is the simple fact that a lot of it's not as much paper and the cost to do it.

But what is it secured by?

And then is the borrower okay with paying $5,000 in closing costs no matter what.

And that's a big percentage.

Now I will say do not do this on owner occupied properties.

Do not do this on owner occupied properties.

Seller financing.

I'd also say be very careful.

Private lending.

Good to go.

Okay, next question.

Does anyone know a company that monitors taxes on loans and real estate nationwide?

We need help.

Thank you.

Why yes we do.

There are several companies out there.

We used one.

Right now we're using Doc Solutions which is under Pro Titles.

It's affiliated with Pro Title USA where we get our title reports.

So they monitor the tax link taxes and we can have them check them annually, biannually, quarterly, however you want.

So that is something we do within our portfolio is at least every quarter I believe it is.

We check the taxes on all the properties, make sure none are gone.

A tax sale.

It's very affordable.

It's under $20 per loan I believe.

Don't quote me on that.

Also depends on the size of your portfolio.

There's other companies that we've used in the past.

Honestly I can't think of their name right now.

But there are other companies out there that will do this specifically for.

For you.

Highly recommend you do that.

When I was affiliated with a servicing company, we actually provided this as part of the servicing as well.

Which I thought any services out there listening to this added to your portfolio.

But yes.

So Alex Goldofsky, if you reach out to him, he can connect you with the people in his firm who can go there.

Another question.

What states are a no no and what states are good to invest?

I love this question.

For anyone that's ever heard me in the past, I always joke about Ohio.

Only headaches in Ohio.

That is my kryptonite is Ohio.

I still invest there.

I'm a license to invest in Ohio.

But I'm very careful where we invest in Ohio and I'm not actively seeking loans in Ohio.

If I were to run down the list of states which I'm gonna do just to tell you what I've invested in and which ones I enjoyed or which ones I haven't been in.

Let me just spend three to five minutes and just talk about that.

Alabama, love Alabama.

Just realized that in Alabama there's redemption rights by borrowers to foreclose.

Enjoy Alabama.

Alaska, never invested.

Arizona, very limited in Arizona but I thought it was a okay state.

Arkansas.

Ooh, it's been a while since I've seen anything in Arkansas.

What I recall it wasn't too bad.

California depends on what side of the bed you slept on.

It's easy.

Er, it's a non judicial state so you can foreclose but evicting is another whole nother challenge in California.

Colorado only had one asset and sold it so really can't talk.

Connecticut never owned an asset.

Delaware had one asset that we ended up selling.

Florida.

We invest in Florida.

People love Florida but honestly Florida is not my favorite state but just it's again they are very strict on making sure all the papers in order so just be careful with Florida.

Georgia, love Georgia.

Fast foreclosure state but you need to be licensed.

Hawaii never invested.

Idaho, I don't think I've ever had one.

Illinois I will not do.

You couldn't give me loans in Cook County.

I've invested in other parts of Illinois.

Right now we're seeing a lot of product in other locations so not my favorite.

Indiana, Done a lot in Indiana.

More on the contract for deed side.

Foreclosure can take a little bit of time there not a bad state.

Iowa, very limited assets there been a while but was no issues.

Kansas have some assets in Kansas that did take a long time to foreclose there and work sometime with borrowers.

Kentucky, very limited loans, they're not that bad of a state.

Louisiana takes a very long time to foreclose.

Maine takes forever to foreclose.

Not for the faint of heart.

Also look up the Greenleaf case.

Maryland love Maryland because everyone hates it.

It is a little more challenging.

It's quasi judicial now allegedly might need to be licensed in Maryland but we love Maryland.

Most people don't.

My home state.

Massachusetts I'm not alone in Massachusetts.

Michigan I like Michigan.

Can't recover legal fees, short redemption period but very fast foreclosure.

Minnesota been a hot minute since I've had anything in Minnesota.

Can't remember anything bad about it.

Mississippi, great state to be a lender.

Missouri good state to be a lender.

Montana had One foreclosure from a woman passed away there many moons ago Went pretty smoothly.

Nebraska, I don't know if I've ever owned Nebraska from what I heard, not a fun state.

Nevada had some loans in Nevada, kind of average there.

Doesn't take forever but process doesn't happen overnight.

New Hampshire, I think I've had one asset in New Hampshire that we got Deed and Luan.

New Jersey, same thing Very limited in New Jersey now those states typically don't target New Jersey because of really high taxes New Mexico, again one or two assets don't see much New York, we don't touch New York down by the boroughs very challenging get outside of that area not as challenging from servicers and everyone Not a lot of people want to do business in New York so we just.

It's one state that we see it come up on a list now we're just like no that Alaska and Hawaii typically are just all hard nose North Carolina, took us a while to find a good attorney there not that bad of a state.

North Dakota, I don't think I've ever seen a loan in North Dakota.

Ohio I already talked about only headaches in Ohio we will not buy in Cuyahoga county in Ohio.

Oklahoma, really hard state to foreclose on.

Gotta have all your paperwork in order really strict compliance on paperwork so just get good paper, you're okay but if not Oregon, never done a deal Working on potential participation with one in Oregon.

Pennsylvania, I like the western part of the state the eastern part not so much Philadelphia area takes forever.

Pittsburgh in the area still takes a while but a lot of opportunity.

Never had anything in Rhode Island.

South Carolina we like nothing in South Dakota.

Tennessee we like Texas, we like Utah haven't seen anything.

Vermont had some assets the whole Northeast can be pretty challenging for investors.

Virginia, my current home state, I like Virginia non judicial fast Washington again we don't.

We typically stay out of the Pacific Northwest as well Then Wisconsin kind of plant blah on Wisconsin and then Wyoming I've had an asset.

Wyoming foreclosure was really quick in Wyoming District of Columbia we've owned stuff but it's going to take a really long time.

I've not done the Puerto Rico or US Virgin Islands haven't done any of those so hope that answered your question and actually as part of our membership group we have a Once a month we do a deep dive into every state where we go through all the foreclosure laws, timelines, state laws, all of that where it's probably good 90 minute plus presentation outlining everything and everything about the foreclosure eviction processes within that state.

So wanted to wrap up this episode and change up a little bit by doing some Q.

And as that we typically get asked.

Hope you enjoyed this episode and as always, catch you on the next one.