NPN Investing as a JV

[Stacey Marsh]

Hello Note Investors,

I am considering investing with an someone who specializes in NPNs. I'd like to get your thoughts on the proposed terms.  I would bring the capital and we'd split equity 40%/60%  - my return at 40% with a full return on principle.  I won't pay any of the start up fees.  I have also asked to ride shotgun so I can really learn the business.

Does 40% seem appropriate based on other business models or are most people looking for a 50/50 split? 

Any advice is greatly appreciated. 

Thanks!

[Bob Malecki]

Originally posted by @Stacey Marsh:

What minimum capital do require to work with JV investors who want to partner on individual notes instead of syndication?

I usually set the floor at $50K with $5K of that allocated to reserves for holding costs and possible legal/FC fees. At a $45K acquisition price we are buying debt with a UPB or BPO value of $80-100K. Its pretty much the same amount of work to perform loss mit on a $40K asset as it is on a $80K asset. With the potential profit level growing mostly in proportion with the value of the asset it does not make sense to acquire anything lower than a $50K budget.

Also, in my experience, the lower end assets will, at most times, have a borrower who has a much higher risk profile and will be more of a challenge for loss mit and a higher probability to redefault later over the remaining term of the loan. 

Your mileage may vary.........

Bob