Note Newbie Questions/Frustrations

[Jeff James]

I am an investor who is looking to buy my first note.  I am new.  I don't pretend to know all of the answers.  I am still in the "I don't know what I don't know" phase in many ways.

Because I have no experience and I don't have a hedge fund budget, I understand that I am not going to have note holders come running to me.  By the time the notes make it down to a level that they are available to me all of the obvious prime investment opportunities are going to be gone.  I get that.

I have been going to several of the usual websites where notes are available.  Even with my low expectations I have been disappointed with what I have found.  For example I have found more than one site with multiple notes that predate the most recent transfer of the property--the borrower and the property owner do not match and in some cases the borrower has not owned the property for a couple of years.  Is it possible that the new owner has acquired the property subject to the existing note?  I have never participated in that type of deal so I don't know how to recognize when that is the case--I just make it a policy to pass on those notes.  I have found some sites provide considerable due diligence type information and others treat it like a national security secret.  Sometimes the due diligence information provided is worthless because it is two years old by the time I get it or it is so full of errors that you cannot trust anything that is included.  I found that the information was inaccurate when doing my own due diligence.  I understand that the ultimate go/no go decision is mine alone so I perform checks on the info provided.

Believe it or not, I did not make this post to whine.  I hope that it doesn't come across that way.  If it does, it was not my intent and I apologize.  I don't expect anything to be handed to me.  I realize that I have to work for my results--good and bad.  My main purpose for this post was to discover whether what I am finding is typical and I need to reassess notes as an investment strategy or if my experience is merely the result of where I have been looking and with proper guidance I could find that notes are a good investment vehicle.  I can live with either scenario.

Thanks in advance for your time and consideration.

[Bob Malecki]

Originally posted by @Jeff James:

@Patrick Desjardins, if notes with a borrower that does not match the current property owner or a second on a property $200k under water, the first lien holder has started foreclosure, and the borrower has filed for bankruptcy protection is the perfect note then you are right I am not going to pull the trigger and note investing is obviously not for me.

 This is where thorough due diligence is required. If that profile is not of your liking, then move on to another note that has better characteristics. The front end due diligence is the most time consuming and difficult part, but provides a relatively straightforward path to income or capital gain. Much less work than owning a rental over the long haul. Notes in FC with BK and borrower issues may be something to be taken on by a more advanced note buyer. You should find something simpler with less distress and work your way to these advanced assets once you get more experience under your belt. 

Every problem contains the seed of opportunity-- as long as you have the perseverance and tolerance for it. 

Bob