Help with Note/DOT investing

[Wade Wisner]

I am hoping to get some feedback/direction from investors who have been long-term in the Note investing space. I am a smaller Main Street Type investor and have created/manufactured SFR notes as part of my fix-n-flip program for many years. They have been great – deal after the deal – investments where I continue to reap long term returns from properties I have rehabbed and flipped. What investor does not love compound interest? And even though a few borrowers have had bankruptcies, and I had to foreclose on another when the balloon was not paid these were really no risk and just delays of payment. I love the fact that I don't have to manage the property as with rentals and can invest from anywhere. The laws mostly protect me the lender and I have always gotten paid even if there are occasional borrower problems. Since about 2015 I have owned a number of Notes in northern CA through a lender/broker there who has done hundreds of these notes. These were mostly pot farm loans that traditional lenders wouldn't touch. Typically the LTV was 50% and the term of 2-3 years and interest only payments of 12%. I would roll one into another as each paid off. As a mostly retired investor I loved owning them for the cash flow. It was a great niche for many years, but that market has mostly disappeared with legalization of pot in CA, which has pot prices crash.

I have also used seller financing in purchasing REO and other real estate purchases and these have worked out really well for all parties. Although I have owned a number of commercial properties, I have not done much with notes in this property type, but that would be an area I would consider. Maybe mobile home parks? They seem to do seller financing a lot.

I would like to do more in the Note space and want to know if anyone has ideas of how to grow note investing? I am a smaller Main Street type real estate investor and looking for more one-off type investments. I have spent time on the PaperStac site, but they seem like mostly “dog” notes and not ones that I would want to own or trust to buy. Eddie Speed and NoteSchool say they have access to thousands of notes through mutual fund purchases by Colonial Funding, but I seriously question that they actually do, or that members get to purchase them. Also the cost of membership is exorbitant and I don’t think worth the money.

I would like to purchase quality mortgage notes – either performing or non-performing – as investments. Any ideas of how to find them, or niche markets like the pot farms that might be conducive for them? Worse case I just continue to manufacture them through my fix-n-flip business and buy with seller financing where available.

Also, is tax lien investing really viable today?  Thanks for reading.