Where Will the OPPORTUNITIES be in Note Investing in the Next Few Years?

[Don Konipol]

"Notes" are such a BIG field, that I've found it more efficient, effective and profitable to target specific "arena" of notes at different times in different economic environments. I know most BP note investors deal in SFR notes exclusively, or at least mostly, and for myself 98% of my note investments are notes secured by commercial properties. But, that aside, I'd like to initiate a discussion of where note investors feel the opportunities will lie moving forward.

I’ll go first.   I see two major areas I will target (NOT exclusively) in 2025.  

1. Real estate loans to owner occupied properties where the business of the owner is closed down - or SHOULD be, and the owner needs some time to sell the property. if the note is currently in default and we can buy at at least a small discount, we may be able to restructure the note with no monthly payments - we would get paid all interest at closing when the property sells. Typically, depending on the LTV - and we wouldn't go above 50%, we'd be looking for a 18 - 25% annual return. Sometimes we structure a"kicker" where if the property sells for over a certain amount we earn part of that. We've used this at least 5 times previous with excellent results

2. Note origination where the borrower owns multiple properties with little or no debt, needs a loan for an acquisition, but can't produce proof of income sufficient to get institutional financing. On these we are targeting g loans even we wouldn't normally consider; EXCEPT for the fact that we are receiving so much collateral that we end up at 35% LTV or less. Again, we have done this successfully in the past.

Maybe it’s just gut feel, but for some reason It FEELS like these two scenarios will provide excellent opportunities moving forward, while fishing for notes to purchase at significant discounts to current principal enough to yield sufficient returns doesn’t seem as promising.  

Please share your thoughts on this topic.