Where to Purchase Partials

Question

Hello all,

I have been researching notes since June of 2018.  So far I've read several books and listened to several note podcasts to get myself educated; at this point I would say I know enough to make mistakes and lose money.  I am planning to make my first purchase in the note industry in late 2019; by then I will be able to invest $20,000 - $30,000 and am looking for a "secure" and "reliable" investment that can net me a 12% - 15% return.

I would like my first purchase to be a partial on a performing 1st mortgage note, I am thinking that to get started I would like to focus mainly on performing 1st mortgage notes (possibly contract for deeds, still researching this one), partials on performing 1sts, and performing seconds with a guarantee as is offered through PPR and other companies.

Would anyone be willing to offer some advice on where to find partials for sale, and possibly some due diligence on what to look for/look out for when purchasing a partial?

Wayne Snell · Answer

I am going to mirror @Steve Hodgdon as to seeking 12–15% yields. As you go up in percentages you’re taking on more risk because there’s obviously something less boring about the note. 🙂  Perhaps it’s a lower value contract for deed/land contract, or a re-performing note with very little seasoning or maybe there’s very little equity in the property.  You’re receiving a higher yield for the increased risk. Questions to ask are what happens if they default and who’s going to handle that? Most “good“ boring notes are going to yield you between 7 to 10% max. Feel free to PM me if you’d like to see what I have available. And Yes I do have some higher yielding notes as well

Steve Hodgdon · Answer

@Adam Johnson I make my own on seller carry notes. I also direct mail for them.

The 12-15% goal is admirable. I've gotten my butt kicked being a "yield hound". Those numbers come with elevated risk and work. A boring 8% is more achievable.

Chris Seveney · Answer

Also at $20,000 2-3 points on a return are so minor compared to the level of risk involved. Where I see a lot of investors make mistakes is they do not factor in volatility and risk in their deal. At 20k an extra $500 attorney fee can is 3% of your overall investment. If you wanted to make 10% in one year (2,000) that bill just ate up 25% of your profit and turned a 10% return into an 8% return. I ask people I work with, do you want to achieve 8% and can sleep well every night, or target 12-15% (note target) but be on a rollercoaster and could have some sleepless nights.

Chad U. · Answer

Here are some of the online exchanges you can buy from, granted they make not all sell performing notes or Partials:

• Paperstac
• LoanMLS
• ExchangeLoans
• AmeriNote Xchange
• Investors MLS
• NotesDirect
• NoteTraderExchange
• WaterMark Exchange

Don Konipol · Answer

@Adam Johnson

The ability to properly analyze and invest in loan secured by commercial real estate is, in my experience, rewarded with a positive yield differential of about 2 - 3 % points for the same level of risk as compared to residential notes.  The key is the ability to analyze commercial property...or hire someone who can

Liz Brumer-Smith · Answer

@Adam Johnson I would second what everyone is saying about the yield threshold. They do exist, but you may have to be flexible or be okay buying a note at a higher yield that has more risk. I would also suggest networking with other note investors. Most will have performing loans in their portfolio which means they may be open to selling partials. It sounds like you found a decent amount of potential sellers here, but I would continue to network outside of Bigger Pockets, attend conferences, etc. to meet more active note investors. I too sell partials and performing loans, so please feel free to direct message me if you're interested in chatting further. Best of luck!

Mike Hartzog · Answer

Notable Capital Fund (@Joshua Andrews, @Bob Malecki) make partial loans available for purchase from time to time. I would suggest reaching out to them.

Bob Malecki · Answer

Hi @Adam Johnson my partner Josh and I ocassionally sell partials on both 1st & second position performing loans. Feel free to reach out to me off-board for more info.

Bob

Rodel Usam · Answer

@Adam Johnson - it sounds like you're on the same path as I am.. I would suggest networking with other Note investors and perhaps when you're closer to your funds being available, start looking to JV (joint venture) or like you mentioned a partial.  I got my first performing note from another investor that is yielding me 17%.  Plenty of equity to cover if the borrow suddenly stops paying too.  I'm pretty sure you'll see that you've gotten all the book knowledge you can and it's time to jump in and build your experience, which you'll only learn by doing.  From my research/learning, it looks like the best deals you'll get is from non-performing 1sts or 2nds, which is a totally different aspect of this business but if you don't have any experience you could get into trouble, which is why i mentioned JV earlier.  JV with another experienced note investor to learn it to be safer but there is still no guarantee.  Mitigate your risk and be prepared for the worst.  Good luck to you, I hope this helped.

Adam Johnson · Answer

@Chad Urbshott thanks for the list, I'll be sure to check those out!  Even if they're not selling exactly what I'm looking for I'm sure there are notes in there that I can use for practice.

Where to Purchase Partials

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