Jumping in the Note business

[JuanAntonio Ceballos]

Hi  all ,

     I'm a newbie to note investing.  Done very exhaustive research on the subject   and  would love to hear your experience  when you  first  started baying your first Note.   (what, how, where)

At  the moment  I have 20k - 30k to deploy

     This  is  my goal : buy my first note  and flip it or get  a  loan( based on that Note) to by my next  Note.

What  you guys  think  I  should  go first  Performing Note  or  Non-performing.   My goal  is  to Recapitalize  ASAP.  and eventually reach my goal  of  6 Performing Notes  for  cash flow.  And continue growing my Note portfolio.

 it be  a great idea to find a partner someone trustworthy to  see how  this  is  done  hands on.  I know  I have lots  to learn but  not going  to sit  and just  watch  

I'm  ready to  "Jump in the Note Investing business"

   Would  love  to hear  how  someone  did  just  that. 

Appreciate all your comments

[Al Curiel]

Depending on your risk tolerance and goals, you can go with a passive approach and buy a performing note. As in all things related to risk and reward, you have the same scenario with a performing note. Low risk, and, consequently, low or single digit yields. Moreover, performing notes do not give you a great deal of a discount for the very reason that I mentioned above, they offer safety with passive and steady income. Conversely, if you want to get into assets with some "hair" on them, but potentially higher yields and you have a tolerance for some risk, then a non performing note in the low price band could be a good place for you. I can give you some pointers if you want. Let me know and we can he some dialogue as there is much to discuss to evaluate one's goals, perform due diligence and make a decision. 

I hope this helps.

Best,

Al

[Ellis San Jose]

My first note was a non-performing private note ( 2nd TD). It was on a condo in So. Cal not too far from me.  I bought it for $800.00 & eventually collected $14k.    I was so nervous but it worked out pretty well.  After that I was hooked on paper.

[Katerina McKnight]

Wow, what a deal. That is amazing @Ellis San Jose

As a person starting my journey, how do you start your "Due Diligence" to evaluate notes?

Thanks,

Katerian

[Roman M.]

I think you will run into trouble recapitalizing on the first note you buy. I own a few notes and I am yet to find a lender who will accept an existing performing note as a collateral to borrow money against.  It is possible to do in theory but I think it only works bank to bank. You can probably borrow with a private money lender  against the note but most likely your interest will exceed the interest of the note and you will have a negative cash flow (if the note is performing). 

My suggestion is to buy non performing note, turn it to performing or foreclose then move to next target. Be sure to see the propery before you buy and or do BPO as this is the asset you may eventually own. I will buy only within 250 miles of where I live. 

Due diligence can be tricky especially if the note got sold a few times. You need to make sure that all assignment chains are in order and you get original note or you will have issues foreclosing.

[Jay Raught]

ASAP and non-performing notes,,,,, there isn't much ASAP with notes. they take time, and they will cost you $$$ if you buy the non-performing ones. Start with a performing note so you can build cash flow. If you go NPN, it will require time and possibly some $$ if you have to foreclose, use borrower outreach etc. Good luck, and remember, slow and steady wins the race!

[Richard Allen]

I will share a few posts that I have shared in the past for those getting started. 

 It wasn't long ago (5 years ago) that my partner and I bought our first note. We came from a wholesale background and progressed into fix and flips. One day one of the REO agents that we work with called and asked if we wanted to buy a note. We purchased a frame duplex in Winter Garden, FL with a UPB of 100,000.00 for $8400.00. The asset was worth around 50,000 fixed up. We purchased 3 or for more NPNs and exited all of them over the next 6 months. We took our spreadsheet that showed our results and went to show a family friend with hopes that he would give us some money to invest with.

We struck it big and he offered us a million dollars to work with, and we were off to the races. We structured everything in an LLC with an operating agreement and agreed to do the grunt work and split the profits.

Fast forward to today, we manage around 5 million in capital and we are in the process of our first Reg A+ tier 2 offering. Our plan is to raise $50 million with a focus of saving the homes of willing borrowers.

Along the way, we educated ourselves and took on a mentor via Eddie Speed and the Note School group. This was an invaluable experience and a key ingredient to fast tracking our success. I would encourage you to get some education, whether it's Eddie Speed, Scott Carson, Dave Van Horn, Note Force Academy, Google University or any other company. I would recommend checking out the Bob Malecki podcast on BP and also the Note MBA podcast on your mobile device (apple and android). Most all of the education listed above will provide you with the basics to evaluating a note.

I believe that starting out, $50,000 is the minimum that i would want to have to begin investing in notes.

The note space is a fantastic place to invest your money that will provide you with hearty financial gains along with the opportunity to do something socially responsible and save some houses. At the end of the day its all about Connecting Money with Meaning

[Richard Allen]

Vendor List

Inventory

www.fciexchange.com – the “original” trading platform, linked to their servicing arm so it usually has inventory.

www.notesdirect.com – Note School site, has some deals, not sure if open to public yet.

www.Debtx.com – Mostly pools of assets on this site, signup fee, big players at this site (newbies proceed with caution.)

Note Education

Note School http://noteschool.com/ This is the most extensive education available, the cost is on the higher end. Note School was created by Eddie Speed, who has been in the space for more than 30 years. Without a doubt, this is the “Harvard” of the note space.

We Close Notes - http://weclosenotes.com/ This is lead by Scott Carson. Scott offers several training options and Facebook Live updates.

PPR Note Co – This one is lead by another industry influencer, Dave Van Horn. You can do everything from learn how to invest in notes, to participate in his fund.

RESOURCE SITES

• (Greatest vendor mgmt site)
• (breaks down area demographics, crime rates, income, housing)
• (virtual Drive bys on the house and surrounding area)
• (for public records research)
• Zillow.com (value)
• Pacer.gov (Bankruptcy info)
• Narrpr.com (if you are a realtor this is a great source for information)
• Homesnap.com (value)
• Realquest.com (this is a pay site, good for information) www.express.realquest.com
• Wegolook.com (awesome site, pay someone to go out and look at property for you and inspect it)
• http://shackshout.com/ (research site)
• http://www.rentometer.com/ (Great site to get rental rates)
• http://www.gosection8.com/ (Section 8 Rentals)
• http://www.foreclosurelaw.org/ (foreclosure information)

(Statistical references for the industry)

www.census.gov/housing/

www.nahb.org/(Housing Statistics)
www.nahb.org/(Housing Economics)
www.Mortgagestats.com
www.nationalmortgageprofessional.com/
www.calculatedriskblog.com
www.housingwire.com
www.bankregdata.com/main.asp
www.realtytrac.com/
www.realtor.org
www.corelogic.com
www.realtor.com/news/real-estate-news/
www.dsnews.com
www.dataquick.com
www.bloomberg.com/
www.bankregdata.com/
www.deptofnumbers.com
www.deptofnumbers.com/rent/us/
www.mortgagenewsdaily.com
www.mybudget360.com/home/

(Legal Reference sites)

• http://www.alllaw.com/

Servicers

FCI Lender Services http://www.trustfci.com/

SN Servicing https://borrower.snsc.com/

[Ellis San Jose]

Originally posted by @Katerina McKnight:

Wow, what a deal. That is amazing @Ellis San Jose

As a person starting my journey, how do you start your "Due Diligence" to evaluate notes?

Thanks,

Katerian

 I start by doing a title search on the property to see how much equity coverage if any is there.  That helps me determine how much to offer on the note. Rule number 1 for me is, understand the value of the collateral.

[Dion DePaoli]

@JuanAntonio Ceballos

You will not be able to flip a NPN loan like you may believe. There is no innate value increase in an NPN unless the asset is reinstated and has some level of reliable performance or further along the foreclosure cycle for subject property state.

A $20k investment is on the low side and will create additional barriers for you. If we assume the loan will actually have to be foreclosed, which is the most likely outcome of an NPN, then you will need capital to pay for servicing, taxes, insurance and legal fees at the least. This doesn't include any type of property repair on the REO.

So the available capital pushes you closer to a loan purchase price between $10k to $15k.  With the high side there carrying a bit more risk of you not having enough money to actually get a good resale on the REO.  

In regards to using the loan as collateral for more capital, probably not realistic.  One loan doesn't make you experienced and any lender is going to want to see some experience.  In addition, NPN's are highly il-liquid, so borrowing money to buy and disposition an NPN can eviscerate any chance of a return you may have.  This is what happened to many NPN firms coming out of the crash.  Leveraging non-cash flowing assets imploded lots of large and small firms.  

If the end goal is to obtain and hold cash flowing loans, then there is really no need to mess around with loans that don't cash flow.  Just target the cash flowing loans from the start.  This is the place I suggest all newbies start.  Typically expectations for NPNs by newbies is unrealistic and what they think they are investing looks more like gambling.  

We do have a group of new and experienced loan investors that we collaborate with.  If any of that is of interest to you message me and I will plug you into that group for some more information. 

[JuanAntonio Ceballos]

Very  much  appreciate  all the feedback.   Now  I  see the  value of  sharing my  thoughts  with experienced Investors on the subject.

[Scott Matthew C.]

Originally posted by @Dion DePaoli:

@JuanAntonio Ceballos

You will not be able to flip a NPN loan like you may believe. There is no innate value increase in an NPN unless the asset is reinstated and has some level of reliable performance or further along the foreclosure cycle for subject property state.

A $20k investment is on the low side and will create additional barriers for you. If we assume the loan will actually have to be foreclosed, which is the most likely outcome of an NPN, then you will need capital to pay for servicing, taxes, insurance and legal fees at the least. This doesn't include any type of property repair on the REO.

So the available capital pushes you closer to a loan purchase price between $10k to $15k.  With the high side there carrying a bit more risk of you not having enough money to actually get a good resale on the REO.  

In regards to using the loan as collateral for more capital, probably not realistic.  One loan doesn't make you experienced and any lender is going to want to see some experience.  In addition, NPN's are highly il-liquid, so borrowing money to buy and disposition an NPN can eviscerate any chance of a return you may have.  This is what happened to many NPN firms coming out of the crash.  Leveraging non-cash flowing assets imploded lots of large and small firms.  

If the end goal is to obtain and hold cash flowing loans, then there is really no need to mess around with loans that don't cash flow.  Just target the cash flowing loans from the start.  This is the place I suggest all newbies start.  Typically expectations for NPNs by newbies is unrealistic and what they think they are investing looks more like gambling.  

We do have a group of new and experienced loan investors that we collaborate with.  If any of that is of interest to you message me and I will plug you into that group for some more information. 

 This is really good advice! I like the "gambling," perspective.