What was your first note deal?

[Account Closed]

Hello everyone!

This is my first post on BP and just want to first thank everyone in the community for the helpful information and encouragement they have provided, particularly to those of us just starting our real estate journey. I’m specifically interested in private lending and performing notes in general, and have been surprised by the willingness and patience of others to help us newbies, even with the most basic questions. Huge fan of the podcast as well @Joshua Dorkin and @Brandon Turner

Regarding this post in particular - one of my favorite threads on BP are the first time success stories, since they give some insight into the many different ways successful investors began their journey (as well as lessons learned). However I find that the stories are almost always about traditional REI strategies like flipping or wholesaling. So figured it may be useful if some of the investors on BP could possibly share what their first note/lending deal was, and the lessons learned from it? Specifically, thought it would be useful to hear the following:

What was your first note deal (e.g., first or second? Performing or non performing? Location and collateral type, interest rate and LTV?)?

How did you find your first note deal (e.g., exchange, REI meeting, contact at a bank)?

How long were you searching before you found your first deal?

What is one important lesson you learned from the deal that you still apply today?

p.s. if someone knows of an existing thread that does this, feel free to share as I may have missed it!

p.p.s. I will be visiting San Diego week of May 30 and would love to grab coffee with any BP members active in the area (already connected with some BP members which is exciting)!

[Andy Mirza]

Hi @Account Closed. Welcome to BP! You're in the right place to learn, to network, and to ask questions.

My first note purchases happened a few years ago and involved a JV with an experienced note investor with 2nd position NPN's. We liquidated two, got all our initial investment back, and have three reperforming notes left with a relatively high UPB, on which we plan to collect the entire amount. This turned out to be a very passive investment and I don't count it as my 1st note investment but I'm very happy with the returns.

A year ago, I partnered with another experienced note investor with the understanding that I would really get hands on experience and be much more involved. We looked for about a month before we settled on lower balance 1st position NPN with collateral in Phoenix, AZ. My partner doesn't normally go for the low balance stuff but I wanted the experience and, as someone used to lower end rentals, I wasn't afraid of taking that kind of property back as an REO.

I had a fuzzy idea of how the buying process worked and what you did to manage the note. I got to experience this first hand and do everything myself with someone experienced to watch over me.

The note was originated in 2005, 6.75% interest rate for $108k. There was also a 2nd. BPO value came in at $80k so the borrower was underwater. Borrower hadn't made a payment since 2009. Thin collateral file and the property was not in the best neighborhood. 

Purchase price: $22k. After we closed on the deal, I paid back taxes to the county and attorney fees to remove a lis pendens filed by the tax lien owner. We initiated FC and set the opening bid just above our all in costs to attract more bidders at the trustee sale and it worked. 5 month hold time.

All in costs: $34k. Opening bid: $36k. Winning bid: $48k.

Worked out well for us and I learned a ton. Hope this helps!