What Questions Do You Ask Before Buying A Note

[Tracy Z. Rewey]

Hello BP Note Investors!  We all have our "go-to" list of questions we want answered before buying a note.  I recently put together a Baker's Dozen of 13 questions I like to ask as part of due diligence (because I couldn't keep it to a dozen).  Wondering what you would add?

1. How long has the buyer been making payments and are they current?
2. What is the current value and condition of the property?
3. How much equity is there (LTV & ITV)?
4. What is the creditworthiness of the buyer and are there any bankruptcy filings?
5. Is there a servicer collecting and validating the payments?
6. Do the documents match the terms presented for sale?
7. Are the real estate taxes paid current?
8. Is the Property insured for fire and other hazards?
9. Is there a title policy and updated title report?
10. What is the lien position and what else is owed on the property?
11. Who is the current holder or seller of the note being purchased?
12. Where is the original note and will it be delivered at closing?
13. What is my overall risk vs reward for each exit strategy?

[Brandon Plombon]

As a commercial lender, I'd want to see the three main things: Cashflow, Collateral, and Guarantees.

- I'd like to see the financials from the supporting documentation.

- Calculate debt service coverage ratio based on the financials

- What type of guarantees are attached to the note?