Newbie to Notes

[Challenor Jack]

Hi all,

I am looking to get started with notes investing.  The more I read the more I am confused as to where to begin.  So here are some of my questions and I hope someone can point me in the right direction.

• Should I start off with a pool
• Should I cherry pick
• Non performing 1st or Performing 1st
• Non performing 2nd or Performing 2nd
• At what point do you get a servicer(before getting a note or after the purchase)
• Total funds needed ( 10K, 20K or more)
• Solid due diligent techniques needed to separate the good from the bad notes.

I appreciate all that take the time to assist me and I am sure once I have this process down I will surely appreciate it.

[Bill B.]

Hi,

Newbie to newbie. I have one NPN currently in forbearance. We've received 5k in earnest money and are expecting the first of six monthly payments tomorrow!

• Should I start off with a pool:  If a pool, no more than two or three.  If your doing it part time (full time job?) I'd stick to one.  There are a LOT of moving parts.
• Should I cherry pick: see above
• Non performing 1st or Performing 1st: full disclosure, again I have only one note. It was not performing. You'll learn from both, but less from a performing note. The complexity is FAR greater for NPN.
• Non performing 2nd or Performing 2nd:  I'd stick with 1st position as there are far fewer things that can wipe out your investment.  With 2nds you are investing more in the borrower than the note as the first position note rules your world when you own the second. (Unless you have the pockets to cover the first in short notice.
• At what point do you get a servicer(before getting a note or after the purchase). Find, vet, and complete all the paperwork with the servicer FIRST.  I had not and it turned the transfer into a needless fire drill.  Had it been in place, the transfer is a simple phone call.
• Total funds needed ( 10K, 20K or more). Like Dion said, this is an it "depends". The key point here is, if you decide on a NPN, you must have enough capital in reserves to work out the note. That dollar amount varies depending how the loan workout progresses. Foreclosure is normally the most expensive process. I've read (NO personal experience) is to reserve 5k for FC. You MAY spend much less than that.
• Solid due diligent techniques needed to separate the good from the bad notes.  Again, keep in mind that I'm a newbie, too.  If you have a mentor, they should be looking over your shoulder.  That said, be CERTAIN, you have a period to review the collateral AND cancel the purchase IF you cannot review the collateral before making your offer.  Whenever you gain access to the collateral, if you do not have a mentor, Richmond Monroe and/or your servicing company can review the collateral for flaws.  DD on the Real Property securing the paper is like evaluating any real estate, good comparable (recent) sales; good neighborhood; etc

All of the above is the just the highlights, but enough to get you started.  I hope this is helpful.  Be well and prosper.