So whatdoes all of this cost?

[Gordon F.]

Hi everyone, so what does buying and selling notes actually cost in terms of transaction fees? Certainly there are transaction fees... What do brokers usually charge for a buy or a sell?  Also, what do note servicing companies or banks charge to service the note?  

The answer may be “depends”, but humor me with some specific numbers you’ve paid, even if it’s a range.  I’m trying to get an idea of a pro forma P&L, and I honestly have no idea what the costs are, outside of the costs of the note itself and legal expenses.

[Chris Seveney]

@Gordon F. - Plenty of notes that you can buy without a broker. For doing due diligence you will order a BPO and an OE report then have an attorney review the report. Not including your standard overhead costs like software and systems etc. I would run $500 for due diligence. When buying a note you then have to record the assignment which costs under $100. If it is a contract for deed be careful on the state as you are physically buying the property and have transfer taxes etc.

Once it is boarded, there is a boarding fee of around $40 then you pay anywhere from $15-$35/month for performing notes (Depends on escrow and if it is a fixed or adjustable note). If it is non performing depending on the workout it can be $40-$95/per month. There are also many other costs that your servicer will provide on a menu style format. Every note is different so you will have different costs. 

What I will say is if someone says the P&I is $300/month, you are not getting $300 a month, you have costs. 

While many people disagree with me, I recommend to newer investors to either buy a performing note or JV with someone on their first deal if its non-performing because you will realize there is a lot of time involved and ancillary costs (such as you order the title report and there is a fatal defect on title - you may have just dropped $250 and not bought an asset). They also get to understand these costs because many learn the hard way because "they don't know what they don't know"