PERMANENT portfolio and VARIABLE portfolio

[Don Konipol]

Permanent vs variable portfolio.  IKnow, I know, NOTHING’S permanent.  But, for practicality, I divide my portfolio of notes into two distinct portfolios.  My PERMANENT PORTFOLIO consists of notes and my participation in note syndications that are held for income, collect interest on a continuing basis, and (hopefully) get paid off at maturity without any “drama”.  In other words held for steady cash flow.

My VARIABLE (note) PORTFOLIO consists of more active/speculative notes - non performing notes I purchased at discount to principal owed; notes I hope to "work" for enhanced ROI, real property I "purchased" with a leaseback option to repurchase, and defaulted notes I purchased planning on eventually taking ownership of the real estate, as well as notes I created that don't have current payments but provide a guaranteed return plus an equity "kicker" when the property is sold.

Seems to me my “permanent note portfolio is basically a passive investment, while my variable note portfolio is somewhere between business and investment.  

Wondering is 

1- Anyone else thinks of their portfolio in a similar way

2- Anyone else see advantages (or disadvantages) of “dividing” your note portfolio into these two different arenas

3- Anyone else distinguish between “passive” investing, “active” investing, the investing “business”. 

Please share your thoughts

[Jay Hinrichs]

Good Morning Don,

I think most Note investors or those originating new loans/mortgages usually stick to one camp or the other.. IE they just work in the NPN space and try to work the notes and ending up owning probably happens maybe not the majority of the time but quite often..

Then you have companies that originate and having a loan go NP is a semi disaster :) 

What I am seeing is some of the NPN folks have had to go into origination as the NPN space inventory shrunk a ton and or pricing was to high to make sense.

I submit on BP your for sure one  of the most sophisticated members when it comes to this space . The vast majority of BP members really dont know anything about how lending really works but are here to learn with many more asking questions about how to be a lender..