Note Investing

[Armand P.]

Hello-

I spent a few hours today reading and learning about non performing note investing. If I were to tap into my ROTH and convert it to a IRA LLC or SDIRA what would be a minimum requirement to start?

Let's just say I have $35K would that deliver a decent to above average ROI? Can someone provide me a case study or sample of what a non performing note would look like.

Lastly, would this amount allow me to buy multiple notes in the beginning or would I need to wait until the note is paid off or FC is completed? I also read that I could do partial withdrawal and take some $ off the table then renew the term and conditions with Tenant.

Thanks,

Armand

[Bob E.]

Non Performing notes are probably not where you want to start if you are limited to 35k, NPNs can get expensive.  Say you buy the note for 10k - now you have back taxes and city leans that you need to protect against, that might well cost you another 5k (total 15k)  now you get to foreclose - this can be anywhere from $2,500 - 10k but lets cal it 5k, (total spent now 20k).  

Good news is you now own the property, bad news is it needs a new roof 5k and extensive rehab 15k -  for a total of 20k you are now all in for 40K -  oops out of money.  

Unless you are feeling lucky, or have a large amount of reserves I would suggest buying a front end payments on a performing note.  This has a few advantages.  1)  You can buy a few short term payment streams to diversify.  2) you have a fairly low investment to value ratio.  3)  you cash flow from the first day.  4)  while you have a 1st position lien on the property the seller of the payments has a 2nd lien and has an incentive to make sure your are paid in full so they will likely be watching over the loan.