Buying notes PPR

[Chris Seveney]

I have heard wonderful things about PPR and their fund, my question is has anyone bought Individual NPN from them ? Reason I ask is the individual notes they sell are from their fund and wondering if they have already tried to get them performing and if the experts cannot get it performing then I would feel like I would have a snowballs chance in hell in getting them performing. Curious to thoughts and any reviews from people who have bought a NP note from them.

[Dave Van Horn]

Sure thing @Daniel Dietz

@Chris Seveney,

To answer your initial question, we actually take a swing at the bat on a percentage of our NPN assets that come in house by sending a demand letter. But in many cases, we don't even do that (a lot of our strategy is based on where the notes are located). Either way, at this point, we usually deal with so much product, that outside of the borrowers who initially respond quickly, we just move on and put those out to market. Doesn't mean they're bad assets by any means, they just didn't respond quick enough for us. What many of these guys who work NPN will tell you, is that it's not about what the investor wants to do, it's about what the borrower wants to do. Maybe the letter didn't reach them at the right time or effectively enough to call in at that moment, or maybe it did reach them but they didn't feel ready to make the call. But no matter what the borrower does while we own the note, it doesn't mean your outreach (as the new NPN owner) won't spur them to call in and work something out. Or that if you tried another tactic, consistent tactics and/or go down the path of the legal process (possibly in tandem) they wouldn't respond. I also don't believe that someone attempting to work an asset in the past is necessarily a bad thing either. You could look at this way: if you were to buy a NPN from us that we have attempted to work, you're picking up from where we left off further along in the process. So for example, in the past there have been many a times where we were months into the FC process on a note, without hearing a response from the borrower. We had then sold such a note, and the new buyer would get contacted almost immediately, completing a workout, and quickly finding themselves with a Re-Performing note (or they Foreclosed and got the property in a short period of time). Either way, if an asset touches someone else's hands, it doesn't mean that you're any less likely to find success with that note. No one has that crystal ball, including us. We don't know who is going to call in when and there is a time element we have to consider, which is what spurs the sale of our NPN more than anything else.

As to whether or not you want to invest in the fund or NPN, depends on your time commitment, risk tolerance, and skill set in loss mitigation (and also if you're an accredited investor). The fund is perfect for passive accredited investors, who want to receive a 12% return on their money every month for the duration of the investment term with pretty much zero work. People often call it mailbox money. And to Bob's point above, your risk is much more diversified among many assets (rather than all your eggs in one basket).

Now for those who work Non-Performing Notes, there's obviously nothing wrong with that. We do it ourselves. But that's exactly what you are doing with NPN, work. I often compare the two by asking investors "Do you want another job or do you want an investment?" Because that's what NPN can quickly turn into with calling borrowers, working with attorneys, and managing assets. The benefit to all this is that an investor could definitely see a much higher return than 12%, but with great rewards comes great risk. It also takes time and experience to do well in this business.

But hey, outside of something like fund investing, what investments don't you have to work for? Managing and working in the world of hard Real Estate was something we all had to learn to become successful at. Notes were the same for us. The big difference with our success vs. many individual investors is we had the resources, capital, and general wherewithal to do it as a company rather than on our own. Which is how we got to where we are today and can offer what we can.

And to answer your question about our mentoring program, that's something we decided to shift our focus on. To be frank, it became very time consuming for me as a Fund Manager to personally mentor students in the business. Our focus as a company also shifted as the market changed, with NPN students not being our biggest clientele anymore. We have to stick with what we like and what works best for us. This is why we changed to a more durable, comprehensive note course that still offers much of same (if not better content) found in our old program. So we can still help others getting started in the space, while doing what we do best - fund management. We also have just released a new Introduction to Note Investing E-book for those new to the business, which you can get for free on our website. It offers a general overview on the industry with case studies, a glossary, etc.

Not to mention, there are others out there that teach the NPN business as well. I believe even Bill is getting into the mentoring space this fall with his years of experience as an asset manager. So if that is a path you'd like to pursue, I'd definitely suggest talking to him more about it.

Hope this info could clear up any questions you guys have. 

As always, if you have any other questions, feel free to reach out.

Best,

Dave