Smaller investors in the note game?

[Steve K]

Hi all,

Kicking around a sort of hypothetical situation in my head and trying to come up with what the best way to structure some deals would be. Let's say you had access to some asset managers for CMBS products who are authorized to sell non performing notes on an individual basis rather than selling as a pool. Let's also assume that you have an attorney to handle the foreclosure who will contribute services without billing for them, but could receive some sort of ownership interest or other arrangement for services rendered.

What’s the best way to capitalize on this situation without being a wholesaler? If you pay cash for a non performing multi family note with the intention of selling it to a retail financed buyer you will have your cash tied up for at least a year while you manage the property and create solid historical figures, right?

Since this approach is so cash intensive, what are the options for scalability? Investors? Money managers? Investment funds? Pipe dream? I’ve got little experience raising capital outside of people I know personally.

I realize there are a lot of potential landmines when buying non performing notes, but for arguments sake I’m making the assumption that several deals per year could be attained via cash for keys or another structure that removes some of the risk of an ugly foreclosure.

This post grew much longer than I expected – sorry about that.