Discounted Note Buying for Older Generation Retirement

[Syed-Shawn Azam]

Hey All,

I just wanted to reach out to some people in my local area of Northern California to see what are your thoughts on Note investing in California.

First off, after watching podcast 17 (biggerpockets.com/show17) with Jeff Brown, I was inspired by they way he made investing for retirement sound. As a 23 year old, personally my plan is to get into rental properties (see my other forum for that), but I do have people very close to me that have struggled saving up for retirement and are currently around the age of 50-55 and only have about $100,000 saved up. The people I know in particular that are in this case are very hard working folks, and I know that thinking about how they are going to retire off of such a small amount makes them stress that much more... With this in mind, I wanted to try to reach out to others who have either been in this case or who have known or worked with others in this case and see if they wouldn't mind sharing some of their knowledge so that I may pass it on to those around me. As well, I was wondering if there is anyone on bigger pockets who knows of any great Wealth or Finance Advisors in the Sacramento - San Francisco Area who work with people in these situations. I would really appreciate it if I could pass that information on to those around me that could really use the advise and coaching.

Directly talking about notes, have any of you had success with buying discounted notes and turning a 20% ROI? Or is this facet of real estate beyond the scope of people just getting into the business who want a steady passive income?

Any advice on this topic would greatly help me to coach the people around me and if you do know people in the field, I may be able to help get them a little extra business!

Best Regards,
Shawn Azam

[Paul Birkett]

Hi @Syed-Shawn Azam. I would strongly advise against investing in notes given your level of experience (it looks like your are pretty new to the space - please correct me if I am wrong). Unless you plan on buying performing assets with a long payment history, its not an area for a newbie - certainly not one who knows nothing about the notes space. As a result, generating and IRR of 20% is not realistic. Seasoned reperformers should give you a net cap rate of ~12%. But again, you need to know what you are doing

You can certainly generate impressive returns over time if you build a highly structured methodical system to find notes and add value to them in some way. Either as @Mark Scarola says - by converting non performers into performers or by some other method.

I don't believe this is something that a new investor should attempt. Put it this way, all things being equal, you are more likely to lose money than generate a 20% return on your early investments. Note investing is a highly specialized business. You really need to know what you are doing. Its a tough business to learn in under a year (and I mean really working on it every day).

You might find my other posts on the topic helpful. But please don't buy notes thinking you can figure out what to do with them later. You are often buying assets that others (who know what they are doing) have rejected and are looking for the greater fool.

We have been doing this for 4 years, have 1500 notes on the books and do nothing else all-day-every-day.....and we still make mistakes. 

Don't believe the hype!!

Its a great space - but learn it thoroughly before buying anything

good luck

Paul