mortgage note investing ... how to begin

[Brian Parsons]

Let me start by saying that with my self-directed IRA, I'd like to ultimately get into rentals and having the cash flow from them. I also would like to invest in mortgage notes. My issue at the moment is that I only have about $20K to work with, and I'm totally new to real estate investing. I also want to mention that I don't have a terrible amount of time to devote to this (i.e. I can't make this a full time job as I already have one and this is for my retirement funds).

So I've come to the conclusion that with the low balance available in my self-directed IRA that I'd probably have to start with the note investing. So that said ...

- Is there companies out there that provide services that help you out in finding, doing the research on the properties, and handling the transaction of mortgage notes ... for a reasonable fee (I'd like to have someone help me along for at least the first one I buy)?

- What are the best sites to find good notes for sale?

- How can one find good connections to get into hard money/private lending notes that are shorter term?

- Any other advice regarding note investing I can get would be much appreciated

[Dion DePaoli]

I think @Bob E. is hinting at some good points.  Are there SF with 680+ credit?  Yes.  However more of the stuff that is out there is less than prime borrowers so I think the overall trend is the average score is much lower than that.  As he said, with that score plus the aforementioned down payments these folks qualify for conventional loans typically.  So the ideas or qualifications will weight and balance each other. 

Does the good borrower win with a lower than SF rate or does the SF win with the sub prime rate?  The better cash position the borrower has the harder they can push back on high SF rates.   Ultimately the 680+ borrower who doesn't qualify for a conventional loan will have a hard time stomaching a 10% interest rate with out some other purposeful situation to resolve or deal with.  In most settings I would venture the rate is perhaps anything 6% plus.  The near miss of the borrower into conventional is not well understood and as far as most of those borrowers go, they think they are bank-able and blame it on the banks while still wanting a 4% rate and good terms.  

I suppose the question at hand is @Stephen Hopkins why not just go look at the typical exchanges and pick out a note and buy it?  

I am inclined to think there is a dimension here that is not in plain view.  It is mentioned that the intention is to purchase said note and hold on to it long term.  Finding a broker is not easy for lots of reasons.  Frankly being a broker is not easy, it is a pain in the butt really.  The most efficient path to the idea of 'just buying a note' is literally go to one of the exchanges and start reviewing and bidding on a note you like.   That is what you do if you are simply looking to invest your money.  Depending on your experience and knowledge get somebody to help you with due diligence.  Poof done.  

Go look for a broker if you are trying to make a business out of something here.  That really is a more involved task.  Details now matter more across the board with capital, investment term, return targets and the general plan.  There will be work involved with finding the right broker and then getting things set up.  Depending on the skill and knowledge of the inquirer identifying the broker's required skills will be a task in and of itself.  Majority of licensed brokers are conventional loan officers.  They just do not have much experience outside of that retail environment.   One must be careful that they do not fall in line behind a leader who said they knew but really didn't know.  

My point is do not get too far caught up in 'looking' for something that is readily at your finger tips just to invest.  Large down payments and high credit scores are conventional loans.  SF brings with it some form of less than prime feature to the loan.  Some of those features are less or more concerning than others.  The target return and capital allocation will also influence the choice.   Hard to comment too much there as not a lot of details are present in the post for intent and desire.  Anyhow, those are my general thoughts.