Pitfalls with purchasing notes? Due diligence

[Austin Moran]

I have the opportunity to purchase a small note on undeveloped land which was purchased with the intent to clear and build. Below is my checklist. Am I missing anything critical that needs to be answered before investing?

• Verify title / ensure lien has been recorded
•    -When is it customary for seller to pay for this?
• Is note senior to any construction loans?
  
• Compare land value to note
  
• Review credit histories of borrower
•   -What's the legal way to do this?

Thank you for helping me work through the due diligence.

-Austin

[Darren Eady]

Hey Austin, you're jumping into the lending industry on an asset that doesn't produce cash-flow for your borrower.  Don't do it!  Getting into the lending industry is tougher than you might think and there are at least two years ahead of you of learning the hard way.  If you would like to be a lender, without many of the headaches, buy performing mortgage notes instead.  You can earn a 12% annual return with performing notes.  You may miss out on the origination fees, but you'll probably also miss out on lending on the wrong properties, or lending to the wrong people, and losing your principle.  Connect with me if I can help further.