Non performing notes

[Scott Miller]

Can someone help explain non performing notes to me?

Just have a general interest in what they are, how they work

Have you had success with them? Horror stories? Success stories?

Please feel free to post your two cents or any knowledge you have on this

Thank you

[Jean Norton]

I attended the Non-Performing Notes conference last fall and learned a LOT! First I thought I could buy a NPN, convince the owner to sell and I would approve a short sale, thus everyone wins. Check the blog below as I recently wrote a blog post about it.

[Account Closed]

Hey Scott,

It's hard to explain such a broad subject in one post. I suggest reading the forums, blogs, webinars etc about it.

Basically they are notes backed by real estate where the person stopped paying for one reason or another. Very often it's because of a temporary hardship such as unemployment, divorce, illness etc.

Most sane people don't want to get foreclosed on as long as they see the light at the end of the tunnel (aka hope). So generally you have 2 ways to make money - through an agreement with the borrower or through the house (ie foreclosing and selling it).

[Steve Babiak]

@Dave Van Horn is the resident NPN expert; he has an event later today so he might need some time to chime in here.

[Ellis San Jose]

@Scott Miller

I bought my first non-performing note over 11 years ago and have enjoyed investing in this niche ever since.

In a nutshell, I buy secured debt ( real estate note secured by a mortgage or trust deed)at a discount from a lender. It is discounted because the borrower has not been making their payments. I then negotiate with the borrower a plan for repayment or I foreclose. Since I am now the "bank" or "lender" I have all the rights of that lender to enforce recovery up to the full outstanding balance of the loan.

My first note I recovered $15,000 with an acquisition cost of $850 from a private lender.

Not a bad return on investment. So you can see how I got hooked. They aren't always " home runs" but if you learn the business properly, it can be very lucrative.

[Scott Miller]

I appreciate all your feedback, I began researching the topic without first reading other forums on BP so my apologies there.

Ellis thank you, that is how I was understanding but felt I was understanding wrong.

[Scott Miller]

as an overview, NPN seem way more complicated then flipping a house for someone at my level. Might be something to explore in the next few years when my bank acct has a little more flex to it but for now I will just stick to making ugly become nice.

Thank you for your time everyone

[Dave Van Horn]

Hi @Scott Miller

I don't know if you'll be able to pull of what @Ellis San Jose did right from the start, but I agree with @Account Closed in his description. I've had good experiences and good success over the past eight or so years with non-performing notes. I find it more scalable and lucrative than my real estate investing. I don't believe it's any more difficult; it's just different, but it is a "learn by doing" business.

I was first introduced to notes when I saw Jimmy Napier speak, and subsequently bought his book, Invest in Debt. This may be a good place to start.

Let me know if you have any additional questions.

Best,

Dave

[Tracy Bauld]

hi @Ellis could u please let us know how to properly learn the NPN business :)

[Anne Abrams]

I just discovered this asset class and searching this forum, I see that most postings are about 10 years old, just the aftermath of the 2007-2008 bubble.

Is it still a viable way to invest in 2024?

[Chris Seveney]

Quote from @Anne Abrams:

I just discovered this asset class and searching this forum, I see that most postings are about 10 years old, just the aftermath of the 2007-2008 bubble.

Is it still a viable way to invest in 2024?

 Yes it is a viable option but it is very different than 2008 and also very different pre covid. Like other asset classes, the home appreciation has been a savior for poorly managed NPL's because your downside risk was being protected. Now that home prices have stabilized, every month you hold a NPL it becomes less valuable because homes are not appreciating and time costs money, as well as additional incurred expenses like servicing, FPI, legal etc. (some may be recoverable).

Happy to talk more about it.