Hello there! I just attended a local RIA club meeting where they talked about note investing – first time for me hearing about note investing. It was a really nice eye-opener for the opportunities available and other method to acquire property (as worst case scenarios) through note investing. They offer a course to get educated with Eddie Speed from noteschool.com So my questions are: • Since I’m just re-starting my Real Estate Investment career, and wanted to focus on getting one deal before the end of this year, Am I getting ahead of myself by shifting to note investment from fix-flip (financing via hard money)? (assuming I would most likely have to buy a note outside of my state (Florida) • Is 40k sufficient amount to start investing on NPN and research all variables to make it a good deal? I know it depends on the purchase price of the note, LTV, Collateral Value and have read Mike Hartzog’s posts… but still looking to hear from someone that started if its enough or should come back when having more funds (how much?) to get better/realistic results vs now being able to buy-fix-flip one property with such funds.http://www.biggerpockets.com/blogs/5359/blog_posts/38939-note-investing-part-1---an-overviewhttp://www.biggerpockets.com/blogs/5359/blog_posts/39074-note-investing-part-2---elements-of-npn-investment-evaluation http://www.biggerpockets.com/blogs/5359/blog_posts/39294-note-investing-part-3---evaluating-npn-exit-strategieshttp://www.biggerpockets.com/blogs/5359/blog_posts/39783-due-diligence-for-notes---tax-and-title • Has anyone attended to an Eddie Speed noteschool program and is it recommended/worth it ($1000) value for 3 days? (to accelerate learning and further network?)One of their points is that they will guide you on how to create credibility with HedgeFunds they currently do business with in order to get better quality notes that one can find via internet sites or servicers like fciexchange.com (does that smell like an upsell for the future?) Thanks in advanced for the feedback, cheers!

I think the on-going street level investor trend is interesting. Obviously, I like loans and think they are a pretty good asset class to spend money and time on. I think the guru complaint, for me anyway, is the purpose of the program. Those folks who join the program pay a couple bucks to get some high level basic exposure to the asset class and it is not a bad idea. From those who I have talked to over the years and many recently, it is difficult to understand what is taught and what is inferred by the student. So judging the content from a far is difficult. Both Bobs seem content and have a good handle on their direction, others I talk to, not so much. We could devote an entire 7 page thread to misconceptions that are common with newer investors. If I had to put my finger on the origin of those, I would say it comes from trying to connect whole loan investing with real property investing. The "tickle switch", if you will. The general idea is investing in loans can be a lower barrier of entry to get into real property. Obviously, the current state of the real property market place helps fuel the fire with lower product supplies and higher price expectations and since 'distressed' loans trade for some discount, the bridge is easily made. My personal belief is, I would rather see newer investors learn what a loan is supposed to be with performance, good collateral and good credit and then learn lesser qualities of those standards before they learn what lesser qualities are as a standard. As Bill pointed out, I believe he is spot on, many of the programs out there and EVERYONE has some training class now, is ultimately about moving product that allows them to make money on. Whether that organization is buying loans and then re-trading them or acting as a broker to their network. That is the part that really makes guru programs a little dangerous. Nobody is ever going to be more concerned about YOUR money than YOU. If we are going to invest in loans, then make sure you are investing in loans as an asset and not the real property. I always like to say, "Don't get married to the asset, get married to the return.". Understand what your real investment objective is. Do not get swayed by the romance that is created around NPNs or loans in general. Invest for the right reason and invest knowing in full what you are getting into. If you simply want to fix and flip properties, then buy a property and fix and flip it. If we start at the basics, a loan is made to be repaid. A Mortgagee is not a property owner. There is no Seller of a loan better than the next, there is no secret door to banks or funds, any of them will gladly take your money if they have something to sell. Ultimately, there is simply no magic in mortgages. I think those fundamentals will help really carve out the emerging market of private investment back into mortgages in general. The issue we stand against, is joining the industry under the wrong pretense and with ill-advised expectations. As with the OP here, can you invest $40k? Sure, will you or should you buy a loan for the entire $40k? No, you will need money set aside to handle capital demands related to owning and dispostioning the asset. How much needs to be set aside is asset specific. So one of your risks then is the set aside portion of capital never makes a return as it sits and waits for its use which hopefully never comes. So if we, in theory, run the numbers and you make 20% on $25k on an NPN you could have achieved the same results with 12.5% on $40k with a PN. To some degree, those numbers are made up, but they are not unrealistic. The point is, what are you investing for, the exotic idea or the return? If we can stripe away the exotics and magics that are poping up around the asset class, I think there is a very real need and growing demand in the private mortgagee market. It is healthy for our economy and can do some real good overall not to mention the checkbooks of investors and borrowers alike who would benefit. The world needs more George Bailey and less Mr. Gower.

OMG! If you buy car notes, you better know about cars and the market value, same if you buy notes secured by personal property, it's also necessary to know RE to buy mortgages. Start learning about RE. Don, I'm surprised, but I think you have the money to blow so I'm not concerned about you, you'll be fine. But, you're probably getting ripped. Some of Eddie's affiliate students/teachers have been on here pumping the classes. In three days or a week, you'll learn how to invest in Eddie's network, you aren't learning the note business so much I had a lady contact me here about learning the note business, she has her own money, she has an MBA, she has been in RE for years and owns rentals. I'm putting something to together for her and I'll probably assist her. I'm retired and don't have the time to teach beginning with what kinds of deeds there are or what title insurance covers and doesn't cover. Yu can buy notes and not have a clue from a broker and they will teach you how to do it in their brokerage arrangement, just like a stock broker will teach you about buying stock from him and make suggestions. If you have the money, they have the time and they may call their marketing teaching. There are hundreds if not a thousand threads on notes here, much of it is junk, but there are a few folks who have given very good advice. Hard to identify the good ones when you don't know, but posts by Dion and Dave have good stuff. Have I not addressed enough here about buying notes, the hoops, the collateral issues, foreclosures, due diligence, marketing aspects together with RE comments? I'd guess that there are over 5,000 posts about areas of finance and notes. And folks want to spend thousands in some short class? Makes me think I was in the wrong business and that I should spend a few days on some course books. There is nothing about buying notes that requires genius but there is so much information it takes time to really learn what you're doing on your own. You are not going to learn the mortgage/note business in some class with those selling notes. Did you go to a car dealer to learn how to drive? :)

@Eduardo Cardena I am a Note School student and have a thread Journey of a New Note Investor where I chronicle my journey. Feel free to check it out. The 1k program will get you a pretty good overview. It is however an introduction where you will be given the chance to sign up for a 15k mentorship program (25k if you want the deluxe). I will say that I think the 15k program was worth it, it kept us out of at least a few bad deals and gave us a running start. If you don't do the Eddie Speed program then find someone who knows the business and will work with you. This is a full contact sport and more complicated then just doing fix and flips. I have been on BP for 6 months or so and would say that I have not found anywhere near the level of information I have gotten from Note School on BP. Maybe I just need to look harder, but without education you won't even know what questions to ask or what to search on. My Honest advice for a newbie is to do some flips and then expand into notes. With notes if you get a property back it is not going to be ready for retail so having done a few flips will give you some familiarity with the product.

@Eduardo Cardena All Eddie Speed sell is snake oil you can learn everything right here on BP for free about notes. Don't waste your money on Eddie Speed? Joe Gore

Bill Gulley Actually, NPN interest me because I can see similarities between rehabbing a note and rehabbing a house; just lots more sanitary. I am also interested in generating some passive income. Performing Notes might be a better choice using SDIRA funds. Thanks to all Don

The prior post, I was being distracted here, I'll put this out now that I have a few minutes. I start AB Capital Inc. Then I get a circle of brokers to sell notes for me. Then I get forward contracts to purchase bulk notes at a good discount. Then I give seminars teaching how folks can get into the paper game. I get 100 "students" tell them they have the inside track to a fund manager (oh, I charge them big bucks for that too) then I get a sheet on loans available and pass that out to my brokers, we make a commitment to buy in 90 or 120 days. The students call the brokers and the brokers sell the note to the student. We slice off, cherry pick the package to the students, we even get several students to go together to buy the same note as a partnership (that's another sales pitch) we have 120 days to deliver the actual original note in safekeeping to the students. They get a copy of a loan file. They get tons of documents, assignments, qusip registration numbers and records. We may even give some lame guarantees to reduce their potential loss (out of our discount). We collect the money then take our cut and pass the funds up the food chain to my Capital company and close on the notes splitting them to our buyers. Never cost me a dime except to put the machine in motion. So, most students will never really know who they are talking to, some guy name Joe at AB Capital that was introduced to me by this great note guru. It's another straw man operation! If my guys hold the appropriate licenses and the company is registered, no laws are broken here, it's a brokerage operation. I deal in commitments on future inventory! So, what did you guys learn at school today? :))

Not entirely, Modifying a note is the same as allowing a new note to be made or having a borrower make a new loan obligation. :) We all use the term like making deal, the point is when looking at law and regulations, know that the loan s made by he maker who is the borrower. We'll keep things in context. When there is a differentiation necessary I'll point that out. I have no issue with somene saying the seller made a loan to sell his property I have an issue when someone who advises on Dodd-Frank and says there is no issue for the lender when they "make" a loan or say the borrower isn't responsible as they didn't "make" the loan. :)

@Mark Kemp I was enjoying your post on what you were saying until I got to the point you help someone stay in their home for seven years without paying, and it is good you help someone screw the lender you should have help them get a job. That is why no one can get a home loan because of all the deadbeats riding the system. You are right on what you are saying about the notes. Joe Gore

@Don Hines Always spend a few minutes with a lawyer to get the correct information on Dodd Frank because there are a lot of speculations on the Internet that might not be correct. Joe Gore

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Updated over 10 years ago on 09/29/2014. Most recent reply

18
Posts: 5
Votes

Eduardo CardenaPoster

Boynton Beach, FL

Tax Liens & Mortgage Notes

Is Note Investing (NPN) recommended for newbies w/40k to start?

Eduardo CardenaPoster

Boynton Beach, FL

Posted September 14, 2014 21:07

Hello there!

I just attended a local RIA club meeting where they talked about note investing – first time for me hearing about note investing.

It was a really nice eye-opener for the opportunities available and other method to acquire property (as worst case scenarios) through note investing.

They offer a course to get educated with Eddie Speed from noteschool.com

So my questions are:

Since I’m just re-starting my Real Estate Investment career, and wanted to focus on getting one deal before the end of this year, Am I getting ahead of myself by shifting to note investment from fix-flip (financing via hard money)? (assuming I would most likely have to buy a note outside of my state (Florida)
Is 40k sufficient amount to start investing on NPN and research all variables to make it a good deal?
I know it depends on the purchase price of the note, LTV, Collateral Value and have read Mike Hartzog's posts… but still looking to hear from someone that started if its enough or should come back when having more funds (how much?) to get better/realistic results vs now being able to buy-fix-flip one property with such funds.
http://www.biggerpockets.com/blogs/5359/blog_posts/38939-note-investing-part-1---an-overview
http://www.biggerpockets.com/blogs/5359/blog_posts/39074-note-investing-part-2---elements-of-npn-investment-evaluation http://www.biggerpockets.com/blogs/5359/blog_posts/39294-note-investing-part-3---evaluating-npn-exit-strategies
http://www.biggerpockets.com/blogs/5359/blog_posts/39783-due-diligence-for-notes---tax-and-title
Has anyone attended to an Eddie Speed noteschool program and is it recommended/worth it ($1000) value for 3 days? (to accelerate learning and further network?)
One of their points is that they will guide you on how to create credibility with HedgeFunds they currently do business with in order to get better quality notes that one can find via internet sites or servicers like fciexchange.com (does that smell like an upsell for the future?)

Thanks in advanced for the feedback, cheers!

0 Votes

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41
Posts: 19
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Mark Kemp

Real Estate Investor
Provo, UT

Mark Kemp

Real Estate Investor
Provo, UT

Replied September 15, 2014 13:13

Eduardo,

Don't do it. How do I know what I am talking about? I have done 1600 note purchases since 1995 in over 40 different States. I can teach how it works better and faster than he can and I don't want any of your money.

Up front, here is my warning about buying notes. Note-buying can be great and a great business, but here are the pitfalls:

1. Know you are only buying a mortgage! You aren't getting the deed, you have no connection with the owner, and you could be stuck in this deal for years with zero income from your investment, because the owners learn how to master the BK process and you are simply stuck. You aren't in control of the process and might get a house which is totally gutted on the inside. Are you ok with that? Me either. Sounds like I am trying to talk you out of this, but I am not. I am letting you know what might happen. This are the truths and how to deal with them.

2. If I get a list of notes from a bank, I am going to each property and do all my homework before buying anything. I am going to the recorders office; I want to know have they been in default before, do they have any liens, etc. Next I go to the Courthouse to see what judgments are against the owners, are they in the middle of a divorce, is someone about to go to prison, etc. I need to know all these things. I need to check Www.pacer.gov to see if the owners have filed a bankruptcy in the past, and if so, when and how many times.

All that data helps me figure out who is toast and who isn't. I need to know how to approach the owners, and to know if they they are toast, regardless of what they say or think.

Now I need to talk to the owners, to see what their intentions are, are they going to be easy to resolve this or will they stay till the Sheriff shows up to evict them.

Buying notes isn't a good place for a beginner to start. Why? You need to know:

How to get the owners to deed you the house.

How to create a win for the owners while still creating a win for yourself.

How the Bankruptcy process works and how to win evertime you go to court.

How the eviction process works.

How to get a deed when an owner is in jail or prison.

What to do with owners that have mental problems.

Don't ask me how I know this. I have been in some amazing ugly situations in my investing career. I got into note buying immediately without knowing anything and made every mistake in the book, so I know what works and what doesn't. I have helped friends who lost their job stay in their home without making payments for over 7 years. At the end, the bank on their own accord, sent a $1,000 check with a note, please just let go of the home. Kept another home from going to sale for 6.5 years, all the while, no payments being made.

I am not trying to brag, I have just this so many times, I know what works and what doesn't, and all the pitfalls along the way. I would put my experience over anyone else in the Country.

If after reading all this, if you still want to buy notes, connect with me and we can chat more in depth on the phone.

Mark

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