VERY IMPORTANT! Read this and let's discuss NPNs!

[Peter Lipschutz]

I just read this article about NPNs:

https://papersourceuniversity.com/the-dirty-little...

Some of you may already be familiar with this article, but it's something that has always bothered me. 

One school of thought is, as the article states, the hedge funds, private equity firms, etc. buy these notes in bulk, skim the cream off the top, and sell them to the firms "downstream". This process repeats until it reaches the private investor who gets the garbage that's left.

The other school of thought is the large firms don't bother working the notes. They split the notes into smaller groups, take a "small" percentage, and sell them.

As far as I'm concerned, this is a HUGE issue as to the viability of investing in NPNs. I would love to hear opinions on this. I think an open discussion would benefit every investor.

[Bob Malecki]

To Don's point there are many mentoring programs hyping up those big wins to sell education and of course they don't show the losers, so buyer beware when framed from that perspective. 

As far as "minimal investment returns", that is relative to the exit strategy on a NPL so what does not work from the "intensive analysis by highly trained MBAs", may work for the individual small balance investor who knows how to repurpose an asset for profit. Yes, there is portion of inventory offered which are "bottom of the barrel" assets and the savvy investor needs to know how to differentiate them from assets which have potential when performing due diligence prior to purchase. 

For most of us on this discussion board being at the bottom of the asset waterfall, and selecting from a pool of leftovers, learning how to sort the good from junk is key when buying NPLs. A broad statement that one may be a sucker if buying NPLs is hyperbole as you can be a sucker when buying in any assets class. Getting educated and working with more experienced note investors would be a good way to avoid this syndrome. 

My company and myself individually have found success when buying assets leftover from the large pools, and thorough research and correct pricing is what has kept us from losing money. I would say that 90% of the time our offers are rejected as "too low" since we are making them based on our internal standards and yield expectations. 

Bob