Newbie Mortgage NoteTrading, Buying, Selling & Exit Strategies

[Cody Krecicki]

Hello BiggerPockets. I've been surfing your site for a while now and finally want to jump in and start some discussion. I've come across PLENTY of write ups, theory, battle royal over the odds and ends of investing in mortgage notes. I'm not here for any negativity. If you have a sudden itch to tell me what could go wrong that's so arbitrary and low odds of happening: please don't post here.

So here is the first approach. I have three exit strategies and my biggest risk is a 6 month wait if they right me and contest the foreclosure. Here is my strategy for getting the house cheap. I am in Nevada and the typical process takes 90 days if uncontested. I plan on avoiding the courts and taking a non-judicial approach.

1. Buy a non-performing loan (NPL note) that is 30-90 days late or more.
2. Exit 1: Cash for keys -- Exit 2: Foreclosure
3. Foreclosures cost $2,500 to $25,000 here in Nevada.
4. Even if a house is only worth $100,000 as-is and comps in the area are $150,000 and I can buy a NPL at a steep (un-paid balance % of loan) UPD % discount say of $30,000 and spend $25,000 max on foreclosure and eviction. I still only invest $55,000 in a house I can sell for $100,000 as-is with a $45,000 profit. 

Here is my second approach. Which involves adjusting their rate and fixing any liens and reselling the note after I get it performing again.

I have been searching high and low for a piece of land or old house here in Las Vegas under $30,000 and it looks like that is not going to happen. I've been considering just focusing on Georgia, Texas and other states where foreclosures happen really quick. Then turning around and wholesaling the property to investors via email lists I buy.

What do you all think? Share your experiences please.

[Jay Raught]

@Cody Krecicki Here is the strategy I employ,  

1) Reinstate the loan 2) Modify the loan 3) REO 4) Rental ( I wrote an article on this but I cannot self promote)

Each note has its own story to tell.  I would not look to purchase every note with the house as the end target.  @Wayne Brooks is correct on pricing for the most part, you have to watch the prices and unless you are the absolute only one with access to the bank and no one else is looking at the tape from this bank you may get that pricing. I would think the bank knows the current rate for NPN's and will balk at low ball bids....

If you buy in Georgia make sure you know the laws there. after 5 notes you need a physical presence. The states in which foreclosures are quick; I invest in too and so do a slew of others, which again will drive the pricing upwards. Of 4 notes I recently purchased 2 of them became REO, that was not how I planned it originally but you have to be willing to roll with the changes. I hope this helps and again if you are the only buyer from that bank you strategies might work. This is how i delve in the world of notes. Good luck and let me know how it turns out.