Seller cary back notes - supply and demand

[Sean Dawson]

Hi BP community!

Happy labor day! I am happy to labor for my future business on RE topics today :)

I am interested in embarking on a marketing plan to find performing seller carry back notes.  I have had some advice that the target market is: retirees, probate and divorce attorneys, builders and title companies.

My question for the folks out there is, what is your experience with the supply and demand for seller carry back notes?  Are they a needle in a haystack?  I know a few investors in my area and I haven't heard of anyone doing this strategy.  I thought I would cast a net into the BP community to see what your experiences have been.

Love to hear your thoughts...…

[Hai Loc]

@Sean Dawson If your thinking about doing it in Columbus it might be difficult given the market conditions.. I think in most cases besides eating capital gains seller would prefer a lump sum of cash at closing.. Sellers would consider a take back note if they have difficulty selling the property, hiding a deficiency or need to unload it quick.. You mentioned retirees. If they need a steady cash flow to pay for their next community they want to live in then that may work.. don't know if divorce may work. Both parties may want to take the cash and run..

[Chad U.]

Originally posted by @Sean Dawson:

Hi BP community!

Happy labor day! I am happy to labor for my future business on RE topics today :)

I am interested in embarking on a marketing plan to find performing seller carry back notes.  I have had some advice that the target market is: retirees, probate and divorce attorneys, builders and title companies.

My question for the folks out there is, what is your experience with the supply and demand for seller carry back notes?  Are they a needle in a haystack?  I know a few investors in my area and I haven't heard of anyone doing this strategy.  I thought I would cast a net into the BP community to see what your experiences have been.

Love to hear your thoughts...…

 Sean, I've got one right in your backyard that you may be interested in.  I'll connect with you via PM.  

[Andy Mirza]

@Sean Dawson I took the first steps towards pursuing this type of strategy that @bill gulley mentioned in this forum a couple of years ago. He suggested that you should target sellers that provided owner financing about 18-36 months after they completed the sale. He mentioned that this was the sweet spot because many of these note holders at that point are ready to cash out for various reasons. His strategy was to pick these notes up at 60-65% of UPB and then work with the borrowers to refi at 100% payoff. Brilliant strategy. (I pivoted to focus on NPNs with my partner).

There aren't any lists that you can buy that I know of that will give you the names and addresses of owners of seller financed notes. You have to do it the hard way and go to the county recorders office and look up the 1st page of the recorded deeds of trust/mortgages. It's easy to identify the private note holders from the institutional lenders. Once you compile a big enough list, you can market to these note holders the same way wholesalers and fix and flip investors do when they're reaching out directly to sellers.

[Gail Greenberg]

@Sean Dawson, I'm a note investor and I would suggest you get active on the various Facebook groups where note investors gather. I and many others have sold reperforming notes on there to my peers. Join  @Dave Putz's "East Coast Distressed Note Investing," @Martin Saenz's "Note Investing Made Easier" and my group with @Chris Seveney "Notes and Bolts." Also check out LoanMLS.com and paperstac.com  Both have a lot of performing notes for sale.

[Sean Dawson]

Thank you all for the responses.  I will explore these avenues and ideas.  I am attracted by note investing and feel overwhelmed with where to start.  I see I need to assess the property value, note terms and payor credit and risks.  What vexes me most is how to identify the sources to market to bring them to market.  

[Andy Mirza]

@Sean Dawson Finding your sources of notes is the most difficult part of the process but therein lies the value you have over other investors out there. Once you have good sources of notes, you'll run out of capital to invest and you will be at the next difficult task of note investing: raising capital.