Investing In Real Estate Notes is the best Alternative Investment according to Jim Stepanian the CEO of Summerlin Asset Management

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Summerlin Asset Management introduces a strategic real estate investing system to the main stream investor community involving mortgages for sale.

Investing in Real Estate Notes

Investing in Real Estate Notes

We prefer to own the loan not the home, because we enjoy great cash flow on performing notes without the headaches of owning the property.

In this real estate market, many real estate investors are starting to look at note investments as a new opportunity to earn above market returns as the price of real estate continues to stabilize, according to Jim Stepanian of Summerlin Asset Management.    Note investing, is defined as the origination of new, or the purchase of existing real estate secured mortgages and/or trust deeds.    Many investors use language such as “Buy Notes” or “Note Investing” because the terms of a mortgage are detailed in the promissory “note.”

There are many similarities between investing in real estate and investing in real estate notes, including evaluating the collateral, and working with title, escrow and insurance companies. The old adage of real estate, “location, location, location” also applies to notes, although it may be more appropriate to say, “collateral, collateral, collateral.”    Value the underlying collateral of their note investment as if they will own the property. Jim Stepanian stated “we prefer to own the loan not the home, because we enjoy great cash flow on performing notes without the headaches of owning the property”.

Summerlin Asset Management also has a large supply of non performing defaulted loans it is buying from banks. After the acquisition of the note, Summerlin has the following workout solutions:

Short Payoff

One of the most equitable options they have for a borrower is a short payoff. In this instance, they provide a 6 month option where borrower can pay off their mortgage at a price below the market value of the property. This happens by way of a family member putting up the cash, private money financing, or using 401k proceeds (if available) to pay off the home.

Here is an example:

Unpaid Balance                    $300,000.00

Home Value                    $200,000.00

Purchase Price of Note                $120,000.00

In this case, they would offer the borrower a payoff at $180,000.00. In addition, they will write off the remaining debt and relieve the borrower from the difference. Since SAM is still profitable, they do not 1099 the borrower for the difference, thus creating no tax liability for the borrower.

Short Sale

The most common of all workouts, they work with the borrower to list their home. During the short sale period, they allow the borrower to live in the home with no mortgage payments. By keeping the borrowers in the home, it ensures SAM that the house is being properly maintained while the short sale process continues. If the borrower has a 2nd lien, SAM will work diligently with the subordinate lien holder to reduce their balance and be paid through escrow. Upon closing, SAM will provide the borrower with financial assistance to relocate in a smooth and efficient timeframe.

Loan Modification/Forbearance Agreement

In this case, the borrower fell behind for a variety of reasons; loss of income, health issues, career change, etc. The borrower has expressed the desire to stay in the home and demonstrated the financial ability to sustain the current mortgage payment. They create a forbearance agreement that will take the total amount of payments owing and divide the sum by 12. They add the 1/12 to the regular monthly payment. This will immediately help borrower to get back on track, increase their cash-on cash return, and reestablish the borrower as a seasoned performer. In the event that the borrower lapses on their forbearance payment, they reserve the right to initiate foreclosure.

Cash for Keys/Deed in Lieu of Foreclosure

This is an instance where borrower is emotionally disconnected with the home and is living in the home. They create an opportunity where the borrower is released from all personal liability on the obligation and walk away with enough cash to relocate and establish a new life. They offer them an aggressive cash incentive to sign over the deed to the home. This scenario exists if the home only has a first position lien (that they purchased) and the balance of the loan is higher than the value of the home. After they come to a formal agreement in writing, they perform a thorough inspection of the home to identify potential problems. Their contract states that within their discovery process they identify problematic situations, i.e. roof leak, they have the right to reduce their cash offer to the current owner. Their team encourages the home owner to treat this as a business decision.

Principal Balance Reduction

In this scenario, the balance of the borrower’s loan is 175 percent or greater than the value of the home. In this case, borrower wants to keep their home. However, the borrower realizes they will never recoup the negative equity that they are paying down.

SAM will structure a 12 month program to write down the balance of the borrower loan in exchange for 12 months of un-interrupted, on-time payments.

Here is an example below:

Unpaid Balance                            $300,000.00

Home Value                            $200,000.00

Purchase Price of Note                $120,000.00

Monthly Principal and Interest Payment     $1,896.20

SAM will give the borrower a $5000 per month balance reduction at the end of the 12th month assuming borrower has made 12 on time payments. The end result is their portfolio enjoys a cash-on-cash return of 18.96 percent on their $120,000 investment while the borrower has the benefit of reducing the balance of their loan by $60,000 by month 12. This gives the borrower hope that their house will become an asset in the near future. In addition, SAM now has the ability to sell a 12 month, seasoned, performing loan, upwards of 70 percent of the home value. In conclusion, their return on investment for 12 months is 35.62 percent.

Today, Summerlin Asset Management has contracts with national banks, regional banks, hedge funds, and loan servicing companies across the United States. Therefore, Summerlin has more supply of 1st Trust Deed mortgage notes than most of its competitors.

For more information please visit

Contact: Shannon Derosby or Adam Pakes at 928 854 7747

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Jim Stepanian

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