Deed trust vs note fund

[David Hite]

Good evening everyone!

 So, I want to get people input on investing in deed trust notes vs note funds.

  By deed trust notes, I mean you can find companies that issue shorter term loans, basically hard money, who then turn around and sell the note to that loan backed by the real estate.  Usually it’s for ~3 years or less, most will offer between 9-12% on that note.  Usually interest only payments with balloon at the end for  the initial investment amount.

Versus a note fund, which will have a minimum investment, say $10k, give a return of 12%, and then after three years you are given all your initial principal back.   Ie PPRnote fund.

  Thanks 

Dave

[Jay Hinrichs]

Originally posted by @David Hite:

@Jay Hinrichs

The Deed Trust notes are performing, since they are such short term.  I suppose they could go non-performing at anytime, but they are purchased as performing.

 not all are short term.. depends where you source them ...

and yes any note can go non performing at anytime.. that goes without saying

so what are some of the most risky are the notes that they call re performers.. note is NPN someone buys it gets the buyer to make 6 payments then touts it as a performer.. this note is no way as secure as a well originated first with a great borrower not a homeowner who has already proven they can and wont pay.. :) people tend to fall back into the same bad habits.

and I think the boys and girls in that space will tell you that re performers have about a 50% chance of the note holder ending up owning the asset.. which can be  a disaster or it can be a good thing.  and totally depends on your ability to deal with bad debt.

Most folks that have been buying good solid performing notes do it for years stick with their same brokers for literally decades.

When I took over Langer Mortgage in Oakland CA back in the late 80s  Mr. Langer had been doing this for 40 plus years.. he had over 250 VERY loyal investors and that equated to about a 50  million dollar book.. And as I got to know these lenders many had been with Jack 10 20 30 years..

you will find folks like that in most big metro areas..  the key is at Langer we had deal flow .. you got a payoff there was something to go into literally next day.

Our routine was to look at loans in the field in the morning then Jack would work the phone in the afternoon replacing payoffs.. when you got to his level it was a simple how you doing I have a Caster loan for you.. hows the kids and what not Boom done.. it was quite the education for me.. I learned from the Master.