how to buy notes that are non performing notes & performing notes

Question

hi everybody im trying to get started in buying non performing and performing notes but i don't know where to start right now im trying to look for videos on youtube, any advise?

Jay Hinrichs · Answer

@Eran G.  frankly its not that complicated our whole banking system runs on it..

that all said I started in the mid 80s working for a HML in Oakland Ca that started in the 50s i mentored with him and ended up owning the company.. we had 250 investors and about 50 million out at all times.. We did HML origination's and that business is still alive and well and will continue to be .

what your seeing is that the Guru's got into the How to business and they focus on buying existing notes from either owner occ seller carry back type or other commercial assets.. and then of course buying NPN .. all of these are very different.. and like my investors back in the 80s made 12 to 15% and note investors today make 8 to 12 on perfectly good performing notes and if you get with a proficient broker you always have deals..

what many talk about in the NPN space is finding stuff with very high potential returns.. but they take risk and those are complicated and the risk level is much higher.. its logical the note is already bad... :)

So just depends on what you want to do and how aggressive you want to be and what your risk tolerance is.. and then how much time and effort do you want to put into this .

as for notes compared to rentals done correctly notes are far more passive simply because you never have to deal with tenants or cap ex or any other things.. risk in notes is you have a default and you have to foreclose.

there are some note funds out there were they do the heavy lifting for you.. those can be options.  Although you do lose some control as your giving your money to someone else and when you buy your own notes you own it out right and have 100% control and are not sharing income with anyone else.

not sure if Don Knopol replied to this thread but notes in the IRA or solo K is excellent i have been doing that since the early 80s.

Jay Hinrichs · Answer

I just saw this.. if you would like to have a coffee and discuss notes we could do that..  ping me on a PM.. sorry for the delayed response

Darrin Carey · Answer

@Kenneth Wiley NPNs are a business; performing notes are an investment. There is a huge difference in time (and skill) required. Make sure you are getting into the right one for your expectations.

@Jay Hinrichs I've been holding landlord notes for the same reason. I created a new one this afternoon, it went straight to my Roth IRA. Locally we're usually about 3x rent, sometimes as much as 4x.

Jay Hinrichs · Answer

We look for NON owner occupied notes and ones that are new origination or performing.. this cuts down the HUGE list that @Tracy Z. Rewey  delineated ... if your buying notes were you have Joan and Bob living in the house.. those are the most work ... we tend to only look for notes that are back by two sources of repayment  rental income and the owner of the property.. then we look for 2 to 3X rent coverage over note payment.. and that sets up for a very solid secure note.. now granted these are going to have lower yields but VERY consistent and you don't have to deal with the drama of NPN.. which to me is a business not an investment.. but to each their own right.

Odie Ayaga · Answer

As mentioned above @Scott Carson provides a wealth of knowledge. There are a number of great podcasts that can help you get started as @Tracy Z. Rewey mentioned:

Note Inc

NoteMBA

The Note Closers Show

Kenneth Wiley · Answer

um

Eran G. · Answer

Jay - I have followed your comments here on BP extensively and heard your podcast.  You obviously know a lot about real estate.  Do you think buying notes should be reserved for more advanced investors?  I am an intelligent individual that loves to learn.  I am finding that the buy and hold real estate market has changed quite a bit with inventory being very tight in cash flowing markets, prices going up, and profit margins going down.  I have thought about investing in notes but this seems like an investment vehicle with many more moving parts than owning RE.  What are your thoughts about getting into investing in notes?

Nick Patel · Answer

I just subscribed to https://noteforceacademy.com. Money well spent $97 for beginners.

Jay Hinrichs · Answer

@Darrin Carey

absolutely for the conservative investors who want it basically turn key and done for them and don't want to take time effort money and then make a boo boo end of the day your product will out perform most..

not to mention being in the money game at least from my perspective I would SO much prefer to work with those that pay their bills than those that have had a history of not.. as anyone in the space will tell you its 50 50 whether they continue to pay.. then you have to foreclose then they beat the crap out of the house.. so you really can't just do that business with a few notes you have to be a fund or be able to buy 50 to 100 of them so you can income average.. I am sure those that tried it and got wiped out we never hear from them..   But hey that's what sells how to training and bird dogging and its those that want the big returns.. without really realizing the risk / reward quotient and that's OK.. kind of like building a stock portfolio.. but at your base in notes it good to have some rocks that you can count on then if you want to gamble on the NPN and do all that leg work etc.. one can give it a go..

how to buy notes that are non performing notes & performing notes

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