What Have YOU Learned in Note Courses?

[Dion DePaoli]

I would like to open a discussion which drills into the actual content of these note investing courses that are offered.  I would like the conversation to steer away from identifying which or whose course you took but rather deal more with the actual substance of the course.  I am talking about a paid course which offered to teach you how to invest real property secured notes.  This doesn't really include going to your local REI meetup and listening to someone talk about investing in loans.  

I suppose we can outline some topic areas to which, if you have been a student, you should be able to identify whether or not you feel you are competent and comfortable on relying on your knowledge and skill developed from these courses.  Like a student of any trade craft, even as an apprentice you should have some basic skills above that of a layperson.  What do you think those are?  What do you think you didn't learn?  Have you gone out and mostly found yourself prepared or ill prepared?  How many actual note transactions (not real property) have you closed since class?

To further segregate subtopics to identify, can you confidently and comfortably do the following (Apply to all any PL, RPL/SPL, NPL):

• Source real product for sale outside of the internet exchanges such as FCI Exchange?
• Price a loan when no indication of price is given by a seller?
• Identify influences to the price by initial data?
• Identify trade terms which are not in your best interest or do you simply expect to trade how a seller demands to trade?  (ie - making deposits, closing in 24 hours, etc)
• Conduct due diligence extending beyond ordering a title report and looking up taxes - can you identify defects in documents, servicing and origination?   Do you know how to price that defect accordingly?
• Are you familiar with regulations that affect how a loan is made, serviced and dispositioned?  
• Do you use self servicing, limited servicing or full servicing platforms?
• Do you understand the regulations around soliciting investors and raising capital?
• What didn't you learn or feel like you could learn more about?

That should give a nice rounded out set of topics.  Again, the point of this discussion is not to bash any course or promoter of course.  Rather, I would like to quantify just what folks actually learn in these courses.  "I learned a lot." is not an answer to this thread.  If you have stepped into the industry and out of the unknown at some level you should be able to identify concepts to which you do not know much and those which you feel like you are properly knowledgeable and skilled.  

I hope some folks participate as I think the content of this type of discussion can be valuable for many.

[Wayne Snell]

Nice thread @Dion DePaoli! My company @platinumventures buys NPNs. I'll chime in on the questions you asked point by point. By the way I have taken paid training courses from numerous note investing educators. I will not identify which ones here, but it is 4 different ones (so far): 

• Source real product for sale outside of the internet exchanges such as FCI Exchange?

Absolutely. I learned how to speak with the potential sellers, understand their lingo, pricing requirements and how to find them. I currently work with over a dozen sellers from whom I buy NPNs regularly.

• Price a loan when no indication of price is given by a seller?

Yes, and while many of the note educators advocate the "Stair Step" pricing method, current market conditions are trending towards higher price points than we prefer. There are still good deals out there but as you stated, you need to be aware of the defects with the docs, title, property itself, etc.

• Identify influences to the price by initial data?

Not sure I understand your point here - can you clarify?

• Identify trade terms which are not in your best interest or do you simply expect to trade how a seller demands to trade? (ie - making deposits, closing in 24 hours, etc)

I think that when you are a newbie it is hard to get the sellers to accommodate your buying habit (funding when you want, closing on their schedule, etc.) However, I have learned that once we established our company as a credible purchaser, who does what we say we will do and when we committed to doing so, they allow us to set the terms (within reason). For example, I pretty much tell the seller how long my due diligence period needs to be, and when i will fund the deal assuming we elect to buy. We are also buying in mini-pools so that may have some impact on this.

• Conduct due diligence extending beyond ordering a title report and looking up taxes - can you identify defects in documents, servicing and origination? Do you know how to price that defect accordingly?

We have a very extensive (but proprietary) DD process. It only starts with the O&E and BPO. All in all it includes over 35 data points which help us determine if we ant to bid, and what to bid. Some of the things I can share is we look at demographics for the property location (crime, population, market comps and sales trends. rents, etc.) We learned only the basics here from the teachers, and added the rest through trial-and-error, as well as through collaboration with other note buyers and sellers over the years.

• Are you familiar with regulations that affect how a loan is made, serviced and dispositioned?

Yes, to a degree. We understand the regulations and comply with all. We do this by relying on our licensed servicer and attorneys to help us ensure we remain in compliance. This does require our oversight of the people they have handling our loss mitigation and we audit their processes regularly. 

• Do you use self servicing, limited servicing or full servicing platforms?

• Do you understand the regulations around soliciting investors and raising capital?

Yes. However this is an area I do believe that all of the educators could do a better job telling their students. There are many nuances here that are simply glossed over. I would really like to see more depth in this area of the training. Some do not even cover it at all.

• What didn't you learn or feel like you could learn more about?

One topic that NO ONE is teaching that I feel many people would benefit from is in the area of tax treatment for notes. What is your cost basis? Is it a long term or short term capital gain, or ordinary income? are the implications when you foreclose, get a deed-in-lieu, reperforming note? How do you treat a waived deficiency judgement? What happens to the cost basis when you sell a partial or fill note. We have very good accountants and book keepers that help us, but many novices do not.

Happy to elaborate on this or any of the above points if needed.