Notes on Properties In Rural Areas

[Ryan B.]

Hi there.

I am still a newer investor when it comes to the note space, but I have come across a situation where I am curious to get input from more seasoned investors. Do you ever consider the location of the property and the potential ability to sell the asset if you ever need to foreclose when considering a performing note? I know the answer probably is yes in many instances, but here is a broad example of a note that I am looking at: 

-Performing 1st with no missed payments over the past 15 years

-Equity in the house - less than 60% LTV

-Property is in rural WY

The note has been performing well for a long time and I view the chance of default as fairly low........however, if I ever had to foreclose on the property in the future, I am worried about the ability to sell the property (either through auction or on my own) might be difficult. I looked at some comps in the surrounding area and the sales volume is really low, like no sales of any homes in the past year and a half in that city.

So would you feel comfortable about buying a stable note, knowing that if you ever had to foreclose it might take years to get out from under the property. Or am I looking at this wrong?

[Chris Seveney]

@Ryan B. I agree with bryan. I know a lot of note investors are so fearful of investing in rural areas they won’t do it. That’s fine as it’s a business decision but I have a portion of my portfolio in rural areas because I can acquire them for less (a lot less) and the property condition itself still appears decent If someone offered me a NPN or CFD for $10k on a $35-$40k property in a rural area I would do that 9/10 times as long as the comps in the area do not show an abundance of REO homes selling in single digits. If it’s a 15 year performing I would focus on the monthly payment and returns