What Are the Biggest Risks of Trust Deed Investing?
Lender · Salt Lake City, UT · Member since 2012 · 714 posts · 169 votes
A loan made to an individual or a business can be secured by real estate or real property. This is also called real estate lending, or trust deed investing. A trust deed is recorded, putting a lien on the Title to the real estate. This serves as the security for the loan. But what are the risks of trust deed investing?
Trust Deed Investing is not easy, as it requires knowledge of real estate, and in some cases, property management experience. Should the borrower not repay the loan, there is a risk of foreclosure. Depending on which State the real estate is located, the foreclosure process can be fast or slow. Once you are able to successfully take the property back, then you must market it and sell it.
Have you done any trust deed investing yourself? What are the biggest risks? How have you or others mitigated these risks?
Wow, how much time do I have...LOL
Deed/lien not properly perfected or made
The loan was made illegally
The wrong legal description was used on the DOT
The borrower stops paying
Costs of judicial foreclosure if contested
Improper escrow management
Documents at closing not properly completed or not in compliance
Cloud on title, borrower not having good title
Accounting errors in payments from previous note holder
Loss of collateral and not properly insured
Insurance policy has no loss payee clause for the note holder
Note purchase not in compliance, note not endorsed
Death, incapacitation of borrower
Bankruptcy
Tax/workmen's/material liens created
Failure to comply with applicable laws for the note holder
No lender's title coverage
Survey issues or encroachments
Assuming all sales proceeds from foreclosure go to the note holder
Just off the top of my head. Now, consider that having two or more such issues together is not uncommon!
Best way to avoid issues is due diligence with experience.
Wow, how much time do I have...LOL
Deed/lien not properly perfected or made
The loan was made illegally
The wrong legal description was used on the DOT
The borrower stops paying
Costs of judicial foreclosure if contested
Improper escrow management
Documents at closing not properly completed or not in compliance
Cloud on title, borrower not having good title
Accounting errors in payments from previous note holder
Loss of collateral and not properly insured
Insurance policy has no loss payee clause for the note holder
Note purchase not in compliance, note not endorsed
Death, incapacitation of borrower
Bankruptcy
Tax/workmen's/material liens created
Failure to comply with applicable laws for the note holder
No lender's title coverage
Survey issues or encroachments
Assuming all sales proceeds from foreclosure go to the note holder
Just off the top of my head. Now, consider that having two or more such issues together is not uncommon!
Best way to avoid issues is due diligence with experience.
Bill Gulley Wow! and just off the top of your head. I have a question, if its common to have 2 or more issues together... how often does that occur? If this occurs a lot, what is the upside to this type of investing? I have a very hard time wrapping my head around this type of investing. I've read up on it, had people try to explain it to me, but just can't get it. Since I can't grasp this concept I will not invest in something I don't understand. I'm just curious to know your thoughts on the subject since you are a wealth of knowledge. I always gain something from your posts and thank you for the amount of knowledge you spread to others on here.
It's too common to find one issue and then another, foreclosure search shows tax or workmen's liens that can go ahead of you, you get to foreclosure and find that notice was not given to another lien holder...Oooops, start all over, owner owned two lots, one vacant and that's the one used on the deed. Borrower files for bankruptcy, later dies without a will....that will take a few months if not over a year.
While most of the issues can be overcome there are real risks involved. Your due diligence should include the transaction where the note was originated, the property value and condition, title search with lender's coverage, past loan servicing records and verifications with the borrower, loan compliance, insurance review, taxes current, escrow account audited, basic borrower qualification issues and credit, payment history and keeping with loan covenants, note valuation, purchase agreement including proper indemnification for errors and ommissions, note endorsement properly made and filed, notices given to borrower, change of trustee appointment, servicing file set up and escrows deposited.
Many issues can be cleared up my making modifications or renewing the note and simply offer the borrower a better deal than they think they have.
Why do it, by paper.....$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
For the discount and yield over time. I won't attempt to compute the yield if I buy a 100K balance for 80K and refinance it in three weeks!
Frankly, as Corey stated, you must have a good grasp of real estate in general, liens, encumbrances, valuations, closing and title issues and the market in general before you go to real estate financing and compliance issues. After that, it's a down hill slide if you are prudent.
Don't give up on the paper game! Flipping a note is alot easier than a property!
As Bill states, the list goes on and on and on. From a different angle, the biggest risk involved is subjective to your investment strategy into the loan in the first place. There are some who purchase loans with little to no performance with intent to carryout foreclosure and take the deed. What they do with the deed after that is again subject to investor desire. Some sell and some rent. In this situation all inherent real estate situations that might come up as a function of owning real estate are present. You could also say, if you desire this strategy, there is a sort of risk of reinstatement, where if the borrower does catch the loan up you have to stay your foreclosure and thus not execute your strategy to obtain the deed.
Others purchase the loan for more of a cash flow strategy where the risk involved is delinquency or default (see above) and/or prepayment. If you are after yield without the hassle of property management and ownership then defaulting 'might' force your hand to take ownership. This could eviscerating any return you forecast as foreclosure can be costly and timely. Delinquency can impair your forecast yield since they borrower no long makes the fully contract annual payments. Prepayment is a risk, but less of a risk when purchasing at a discount since your return will be a mix of interest and principal recovery opposed to just interest. The risk is you will receive less than the forecast yield and total return.
There is also an investment risk of simply not out running the market. In today's market rates are low, so buying into a loan with a higher than market rate would be subject to a likely refinance causing you to reposition your capital closer and closer to the prevailing market rate. On the flip side, a market where rates rise can lock up your capital with a lesser yield than market since a borrower will not want to refinance into a higher rate.
A lesson from last mortgage crisis taught us that even when we believe we have perfected the quantitative measure of intent of a borrower, we can be be proven grossly wrong.
The world of investing in this asset class exists around the exploitation and manipulation of all of those factors and folks make good profit and loose good profit on a daily basis.
Bill Gulley
Dion DePaoli
Great commentaries. Some of these risks I had not identified.
Let me clear up a myth, that buying the note and foreclosing makes you the owner to resell it at a profit or rent it......absolutely not the case. As a note holder you have only a financial interest in the property to the extent of costs of securing the property and the remaining amounts owed, that is a collateral interest.
Any sale arising from foreclosure is to pay the liens and any overage is due the owner/borrower.
Unlessit can be shown that a property/note is waaaay under water and no amounts could be due the past owner, you better sell it if taken as collateral.
If you take the property back from a cash loan you only have a collateral interest and the owner can sue your pants off for not selling and seeking any outstanding equity.
If the note was arising from any installment sale, the sale is purchased and if there is a default, the sale transaction is void and then the property reverts back to the note hollder, you can sell or rent that property. If you sell it and lose money, you can not seek a deficiency judgment from equity financed.
Many of the paper gurus seem to preach as if you own the property in any case and can do what you like, totally not correct. So if you buy a note with that or those assumptions, there is another risk of loss ahead of you.
All of this changes if you can get a quit claim deed as a deed-in-lieu-of-foreclosure, as that becomes a full payment of the debt outstanding for the property conveyed, meaning you bought it!
:)
Bill Gulley Thanks for the clarification. As someone who has no experience in buying and selling Notes, this is very useful insight Bill, thank you.
Bill Gulley, Andy Chu, Dion DePaoli, you guys are awesome. I've learned more from this thread then I have in years trying to read books and webpages to get a grasp of this stuff. You guys rock! Thanks for all the insight. Where di you guys find the majority of the notes you buy? How long does your DD take when researching what you are buying?
Michael Pilarski , if you want to get into this game of trading and servicing notes, I would start with learning the trades of a hard money lender. If you want the real estate instead, servicing companies are a great source of knowledge.
Andy Chu I'm interested because of the upside for sure. Besides reading here and all the great info from everyone, how would you recomend learning the trade of a hard money lender or servicing company. I haven't met anyone doing that in my REI club. Next meeting I'll have to ask around, but why would anyone even bother to take the time to help explain what they do to someone who isn't benefitting them in any way (at least until I understand this). I know from hearing conversations at the REI meetings that HML generally won't even bother with someone like me. I'd be willing to work for free nights or weekends to learn though.
Unfortunately, its a trade that's less touted about. If you connect with a hard money and they need to find qualified people, then you could potentially bird dog the loan. Or if you have enough greenbacks, one learns the quickest with their own money .
Michael Pilarski,
The term "trust deed investing" (or mortgage investing in a different state) can mean one of several things.
Lending money directly, secured by real estate
Providing part of the loan on a TD or mortgage
Investing in a fund which in turn lends money
Buying the TD or mortgage and therefore stepping into the shoes of the original lender
Buying out part of the loan
Investing in a fund which in turns buys the notes
As a further clarification, the note is the document that says "I promise to pay you X dollars under the following terms...yada yada" The mortgage or trust deed is the document which says "and if I don't you can forclose on my property, because I've secured the note by means of this mortgage or trust deed." The mortgage or trust deed is the document recorded at the registry because it creates a lien against the property.
This may be more simplistic than you need, but may help someone else reading this thread.
@Bill Gulley, it's amazing any of us lend money given your reminder of all the risks!! :-)
Michael Pilarski, sorry I missed your question. While I located notes in the usual ways, filed deed searches, most of mine came from a unique appraisal service. I appraised privately financed notes (cash or equity) for the State of Missouri, bankruptcies through attorneys, estate settlements, even hospitals and collectors arising from judgments. I was the only game in the midwest (probably the contry in the approach in the late 80s and 90s) ending up with contacts in 7 states.
As a bank examiner, I appraised real estate and did appraisals on various types of property. Part of any bank examination is the classification of loans and loan compliance. Put the two together and you have a note appraisal! Few other assets appraisers would touch this aspect when the issues involved were pointed out to anyone attempting to appraise a note for the public. But it can be taught which I also did in some cases.
It use to be that a bank would service a note for Ned Note holder, I believe FDIC and other regulators put an end to that due to the liability accepted for a small fee. This practice is common between banks or other institutions and servicing companies, but for regulated lenders. As the practice came to an end, that opened a new market as I saw it.
Then, I went a step further, originating as a broker (which is now required under the SAFE Act) and provided servicing of the note. Going even further, I guaranteed the note (at 80to100%) with the servicing fee which was similar to PMI, but avoided the insurance aspect by advancing the payments due to the holder and collecting payments. The trick was having a servicing agreement that allowed me to purchase the note in the event of default at the balance (par), continue making the payments and secure the collateral or refinance it taking the holder out of the loan. Very successful program.
From that, finding myself in bankruptcy court defending obligations, I was appointed as a Creditor's Representitive by the court as I am not an attorney. The court appointed appraiser never attempted to contradict any of my findings or claims and other attorneys accepted my opinions as well. Never had any issues or loss and usually ended up with the collateral or the debt reaffimed.
So many notes fell in my lap rather than running out and looking for them. :)
As Dion mentioned, with the business being at the exploitation of others, it doesn't have to be at all. In many instances a note holder gets in a situation with taxes or qualifying for government benefits where no matter what is paid for the note, they don't get the proceeds, in such cases a discounted purchase is a win, win, win as the government is not in the loan servicing business. While I got some amazing deals, I never felt like I was exploiting anyone.
Didn't mean for this to be so long, but perhaps without all the explanations, how I got the notes wouldn't really be fully understood. :)
Ok, we can beef this thread up a bit more. Always kudos to Bill Gulley clearing up likely misinterpretations. Common occurrences in today's market is not the same as a constant by way of rule or regulation in all market conditions.
I want to address Andy Chu statement of "...I would start with learning the trades of a hard money lender."
I am not sure I agree with that statement. There are certainly overlaps of knowledge and skill in the realm of origination, underwriting, servicing and investing I do not believe them to be congruent with each other nor do I believe one always leads to to another. They develop/demand different skills. That said, clearly they are not worlds apart but find me a great HML, that doesn't mean he is an awesome investor in whole mortgage loans.
As Ann Bellamy points out, the title of the thread can mean a variety of different angles of getting involved with the asset class. That and who doesn't like a post which invokes "...yada, yada, yada" ?
Becoming a loan servicer is, in and of itself, is a monster of a task. Even if you are just a servicer in your home state a solid and thorough knowledge of lots of rules and regulations come with that including those that govern the accounting of loans, the treatment of borrowers along with an understanding of the legal proceedings that accompany loans including bankruptcy and foreclosure. To make money as a stand alone servicer requires lots of loans under management as servicing fees tend to be very low. Generically speaking a performing loan fetches anywhere between $15 to $25 per month. Some servicing contracts for large pools can garner 0.25% to 0.35% but those types of MSC are sold as stand alone investments and is a whole other topic. The capital demands are also very high since typically the servicer has to advance in some instances on behalf of the investor, who has advanced on behalf of the borrower and collect the funds from the investor. Moral of the story, if you are new to the business, not where I would recommend to start looking. You will be better off finding an existing loan servicing company to team up with and let them do what they do. You do not yet know, what you don't know and that can be very costly.
Michael Pilarski some of your other questions can be addressed in general. Where do you find loans to buy? Well, let's just play semantics for a moment and clear that up. As Andy states you can team up with a HML which is in the business of originating loans, they then can feed you opportunities. Alternatively, you can also seek loans that have already been originated both privately or institutionally and purchase those. Whether you buy a loan or fund is the discrimination. The entry point to the market is up to you. Know that each counter-party to you has their own incentives to the transaction. A HML tends to make fees from the origination and puts your capital at risk. Sometimes HML will participate in the funding of the loan which serves to encourage the HML to be a bit on the conservative side of origination since they share in the risk. A seller of an seasoned loan, like a seller of anything else, always wants the highest best price and believes 'their' asset is of high, stellar value. Both require a bit of understanding of, "what if". If the borrower pays as agreed, well then everything goes to plan. That is the simple part, what if they do not?
I have seen investors get "picked off" in both arenas. I know there are threads here in BP where folks describe opportunities and the populous that knows tends to bring to light the overzealous portions of the investment. As you have noted, there is no great place to learn the business. That learning, to truly cover the business is a library of information. You will likely find most have learned via trial by fire. The asset class is not without risk and if anyone ever tells you they have not lost money in the space, well they are silly.
I like to say there is no magic in mortgages. It is a true statement. Many folks grasp that and some hold some misunderstandings. IMO, because many of the populous is exposed to 'a' mortgage they tend to over step their limits of knowledge of the space. As Bill has detailed above, there are all sorts of things that can be wrong and yet over come, generally speaking a limited exposure to loans doesn't teach all facets of that. For instance, some folks might be really turned off by a lost note when purchasing a loan and other will not. It is not the end of days as the media would like you to believe, it is however a risk that some who invest in this space do not take.
There has certainly been an increase in interest in investing in whole loan mortgages and deeds of trust lately. Perhaps, some misguided. Risk and return do go hand in hand in this arena. The less risk, the less return and vice-versa. For instance, you are less likely to get steep, if any, discount on a "vanilla" loan when purchasing from a bank. Vanilla being excellent credit, income, assets and all paperwork in tip top shape. The secondary market was built to work on premiums not just discounts. If I have a borrower with an 850 FICO, 25% down, full document income and assets in primary SFR who has made the last 24 payments, what reason do I have to take any discount to the principal loan amount still owed when selling? (I don't) HML is a counter to that concept in that typically HML puts strong emphasis on the underlying property and less on the emphasis on the borrower, this brings a bit more risk.
When we speak to investors who seek exposure to this asset class, we proceed from the investor backwards. The amount of capital you have, the desired 'reasonable' yield you desire, the investment horizon, the geographic concentrations or exclusions along with other risk hot buttons for the investor usually scope out what to look for and to a certain extent where to find it. Total return goals and investment horizons, for us, play a large part in targeting assets. Again, that is how we approach the concept.
On the question of how long does due diligence take. Not that long for a single asset. Full due diligence should always be conducted on every asset, so the more assets, the more time. DD covers all the parts of the asset, investigation into the underlying property. Review of the title to the property. Review of the paperwork that created the loan including the collateral file, credit file and servicing records (if/when present). How long it take any investor to get through that is dependent on their skill of doing it. Generally speaking, we would look to a buyer to be through a single asset's due diligence within a 2 or three week span and prepared to fund the transaction. Since due diligence, when done property, involves vendor services such as property value reports and title reports you have to grant time to get those reports, usually 3 to 5 days and then grant time for the buyer to review them another 3 to 5 days, is how we generically look at it. That is the purchase of an already existing loan, origination tends to take alittle longer as your are not just checking on things in place and completed already but actually creating something new. The vendor services involved are a little different, for instance title in origination is the actual issuance of an insurance policy so they need time to do their work. In an existing loan, the policy is in place already and the time for that work is not needed, it just needs to be verified.
Lastly, IMO, you jump to conclusions that I am not sure would be entirely true. You mention HML would avoid you, well if you have no intent on investing, yes, they would. But capital is hard to come by in today's market. I would tend to think you will find more open arms than you think, provided they can see the light at the end of the tunnel of putting your capital to work with you.
Andy Chu, Ann Bellamy, Bill Gulley, and Dion DePaoli. Thank you so much for the in depth explanation and the awesome answers! I've learned more from all your posts then I have doing my own research. I have some more questions for all of you. I assume working for a mortgage broker would help in learning some of the ins and outs of doing this. Do you think becoming a mortgage broker or working for a mortgage broker be helpful? If so, for someone with no experience how would you get your foot in the door? What is the average cost of doing your DD for a single asset assuming title in origination is not required? My wife and I are in the middle of paying off our debts and we're gearing up to start investing. There's a chance we'll be debt free except for our house and 1 student loan within the next week or two. Once we pay off all our other debts, we will have some money left over and were thinking of putting it toward the student loan (as of this moment I don't think it would pay it off completely). Now I'm thinking maybe it would be best to either use that money to find a hard moeny lender to work with. It wouldn't be a lot probably somewhere between 7,000 and 11,000. Would this amount be sufficient to "get in the game" and what kind of return would we be looking at based on a slighty higher tolerance of risk than conservative? Thanks again!!!
Michael Pilarski, I can't answer you about the return you would get on that amount of money because:
1. It's below my minimum investment accepted
2. You are outside the geography in which I lend. And therefore most of my investors are from my local area.
3. Conditions and loan sizes will be different where you are.
As far as working for a mortgage broker, I would say that would only be helpful if the broker works with a lot of unconventional, private and hard money lending sources. If all they do is broker conventional mortgages originated by conventional lenders who sell on the secondary market, I'd think it would not be useful.
I'd go find either a hard money broker, or better, a hard money or private lender, and work for them.
Your local REIA probably has some of those, or at least has people there who know who the local hard money and private lenders are. Start there.
Dion DePaoli, LOL, you probably don't know it but you are inspiring me to write a book on the subject, something I've threatened to do for a few years.
Ann Bellamy, good points on the different aspects as there are alternatives to the paper game.
Three aspects as I see it, institutional investing in funds, institutional investing directly and private brokerage or mortgage investing.
In structured funds, professionally managed that either include or specialize in investing in mortgages. There is certainly less risk and therefore, less return. After the institutional costs, management, servicing and fees the profits shared will be similar to other investment funds. As an individual you will be competing with institutional investors, insurance companies, banks, etc. Like any broker, it is, IMO, hard to get into any great deals as they are blocked to perform in bulk portfolios and that may be hard for an individual to end up in the best performing blocks, if in fact they are available. Small investors may simply participate in the total pool and the fund performance will be distributed after costs and profits or earnings for the brokerage/servicers. It is the easiest way to get in the game, but really, the individual investor is not really "in the game" as there is no management in the backroom.
Institutional investing can be investing funds with a broker, some are rather large and many more are smaller, where you as an investor may fund a specific loan or buy a particular note. You may also participate with a small number of other investors for one or a small portfolio of notes. This too has a set structure, usually servicing provided and management for the investor. Since you have the flexibility to select what you participate in or fund, your assuming more risk and returns may be higher as a result, if you choose well.
For the average investor, IMO, this is the best place to start. If you can find a good mortgage broker who accepts investor funds, they will explain each deal, they should be providing some guarantees, managing the transactions and servicing. That certainly has advanatges over attempting to go it alone.
The most profitable avenue is buying or funding for your own account, you get to keep it all and you can also lose it all if you really don't have a clue. But really, IMO, there is not much difference between doing a dealon your own (given you know what you're doing) and turning over the money to a small broker who may not be able to take you out of a deal.
I concentrate on the individual investing and brokerages. Dion is at the institutional level dealing in bulk portfolios and larger brokerage operations I believe. In many ways it's two different worlds. Ann is one the origination side, not sure if she purchases existing obligations. We also have Marc Faulkner who purchases as a broker and others. All seeking capital for operations I would imagine at different levels and specialities.
Probably the biggest issue with investing with a broker on specific deals is the way your money is collateralized in a participation, funding with other investors. If you don't have sufficient funds to make the deal yourself, you partner up with others. While such investors need to know about the collateral issues of the note, they are looking to the broker as well and will need to know the financial position of the broker, how to secure interests, sometimes through UCC filings and secuirty issues to stay away from a non-listed secuirty as there are brokers who may not be totally familiar with pooling funds. So, there is even more to learn to protect your investment.
IMO, the best way to learn is to get with a mortgage broker active in purchasing and funding loans. For the use of your money, they will need to walk you through an investment. Before you write any check, run it by your attorney and make sure you are secured. As a beginning note investor, you can never have enough advisors, other brokers, loan officers, attorneys, title folks, accountants and at times contractors and Realtors.
Comments??? Marc, you there?
Yea the capital amount ($7k to $10k) really not up my alley either. It is also likely that amount of capital, as Bill states, is better served in some participation. Even if you get in at 50%, what does a $14k to $20k house look like that secures your money? (Look up Detroit) Not the best collateral for that low amount. You could look at a partial purchase of payments perhaps, not really my gig but that also might have barriers of entry that you are below make sense capital.
On a side note, you questions are good. Your eagerness admirable. This type of investing has risks. You are yet to know and understand those risks.
How devastating or not would it be to loose all of that money?
Are you really ready or should you continue to learn, invest in a little safer asset class while you learn and build up some "play money" to learn with?
Ann Bellamy, Bill Gulley, Dion DePaoli All this info is wonderful! Ann I will be hunting for HML in my REI club for sure. Bill, stop doing 12 oz. curls and write that book (you can still do cardio though)! You've probably forgotten more on this subject than some of the people that are actually investing now and considered pros. Getting with a mortgage broker that is active in purchasing and funding is a great idea. I already have a good attorney in the wings for when I jump in (the jump in point based on this conversation may change) Which brings me to Dion. Losing the money wouldn't be devastating, but would put our plans behind further than I'd like. That being said, I need to continue to learn and build funds. It is blatantly obvious this small amount isn't going to be worth the risk to start and I still have a lot to learn. I'm not saying it couldn't be done, but the common thread all of you mentioned is that the amount is something all of you are not interested in and all of you are from different areas and markets. I would venture a guess that may be pretty standard in most markets today including mine. Would it be possible for one of you to walk me through a loan you've purchased or a theoretical loan with figures and amounts for profit or loss and with a pitfall or two as mentioned earlier in the thread? Again, awesome info and insight. Thank you!!!
You might consider:
1. Get a job as a loan processor with any bank or brokerage
2. Work up to the loan officer/originator level and get your originator's license.
3. Then consider being a mortgage broker and doing secondary market loans.
4. From there you will likely meet local investors and you can expand into private notes, funding and purchasing.
This suggested progression may take a few years, the hump will be getting a wholesle mortgage banker accepting you to originate loans for you and you'll "meet them" as an originator at other banks or brokerages. If you originate quality loans and have good production, they may sponsor you. Know too that Wells Fargo just dumped their brokers due to all their bad loans and admin problems.
Stay in good graces with past employors as you may be able to go back to them as a broker.
Currently you are under capitalized as many state minimum secured loans are 5K, you can't make a 2K loan on real estateas states have minimum requirements.
What you may find is a small seller carry back note as a second from a sale transaction, 7 may buy 10. In some areas, Realtors carry back commissions on transactions, you may be able to buy them out as well. However, doing seconds carries even more risk as you will have to take out a first to protect your second place investment! The good news, individuals who hole a second mortgage behind a bank loan are often allowed to assume the first, but not every bank nor in every state or circustance.
If you invest in yourself and go to the required classes and become a licensened mortgage broker, you might be able to skip the first stage of processing and get a job as a mortgage originator at a bank or brokerage, at some point you will need a license.
There is also a possibility that a local brokerage will take you off the street, send you to school and give you a job! I know sucgh an originator who had a degree in finance and a couple years out of college. So, it depends too on what your education may be in and if you can get in and hit the ground running.
The mortgage business is a production oriented business, just like insurance or real estate sales, it's a sales job and you have financial products.
I'd also suggest you get rid of student debt as quickly as you can!
Good luck.....
Bill Gulley Great suggestions! Unfortunately, taking that route would sideline the plans my wife and I already have. I have a job now in IT that I'm doing well in and real estate will be a side business for me for a bit until I can transfer into it fulltime. I agree about the student debt and will be talking with the little Mrs. tonight after all this new info. Since we are retiring all of our debt except the house and student loan, she has come around and is willing to allow me my dream of real estate investing. I tried to explain some of this to her and I got the impression going this route scares her. She's like me in the fact that she doesn't want to be involved in something she doesn't understand and I obviously need to learn a lot more (and have the reserves) before doing this type of investing. This will definately be a strategy later on after we've get our original plans going. Thanks yet again for all the info and things to think about!
You don’t have to start a career or take a job to learn how to buy secured notes or loan money, Michael Pilarski. There are many books and courses on buying notes secured by trust deeds. They tend to focus on the various time value of money strategies to maximize gain, but also discuss risk, due diligence, and the mechanics of note buying. Live classes are often offered by note brokers so there’s always an element of sales and risk is often downplayed. It’s a well discussed topic here. This is a relevant thread that might help you.
What amazes me are how many classes offered on finding a property for investors (i.e. the murderously difficult job of wholesaling in this climate) compared to finding money for the investors to buy the property with. I’d suggest lately, there is a lot more money around than properties and probably more money to be made on the finance side of the transaction than the inventory or supply side.
Truer words have not been said, Andy Chu. +one.
Jeff
What amazes me are how many classes offered on finding a property for investors (i.e. the murderously difficult job of wholesaling in this climate) compared to finding money for the investors to buy the property with. I’d suggest lately, there is a lot more money around than properties and probably more money to be made on the finance side of the transaction than the inventory or supply side.
Truer words have not been said, Andy Chu. +one.
Jeff
Just for fun and the recognition that BP is so addicting and eats away at my daylight from time to time (completely my fault).
The lessens of working in the industry, while can be touched on in a book or course, will never amount to the lessons from being in the industry. If that were not the case, the book "How to Be an Astronaut" would make me, well an Astronaut. (note: I am not an Astronaut) ;)
On a more serious note, some recent market insight from the institutional capital world and from a definitive 'Market Maker'. They estimate on any given day recently there is somewhere around $12 to $15 Billion dollars chasing investment into whole loans. The demand, far exceeds the supply available. Credit this to shrinking margins and volume of deals.
The gap that exists seems to stem from the management of expectations of yield and total return. Just because you desire a 20% yield (who doesn't?) does not mean a seller is going to hand you one. Your gain, their loss...welcome to investing.
Jeff S Thanks for the link. That gives me a lot to research regarding courses and books. Bill Gulley you posted in the thread Jeff mentioned and as alwys very informative and the fact that you don't want to be seen a s guru as a reason not to write the book is bogus. You're already a guru... not a predatory guru. You could always write the book and give it away in electronic format or sell it and give the proceeds to charity.