Invest in Debt...great read, I want more

[Jason T.]

The president of my local REIA advised newbie note investors to read Invest in Debt by Jim Napier. It was extremely helpful for me & very interesting IMO...in fact I just got it last night and have already read through it! I would definitely recommend it!!

Can anyone in the BP community provide another recommendation for a good book on note investing? I heard Smart Trust Deed Investment by George Coats is also very good (and I will definitely pick that one up eventually), but I would like something a little more contemporary. I know there are a ton of great books out there (I'm sure many have been recommended on these forums already), but I respect the opinion of the BP community more than random reviewers on Amazon for example...

[Dion DePaoli]

I am not overly familiar with the books but I have certainly ran into many folks who have read them. I also not a fan of any gurus but I have ran in to a ton of folks who have paid for their service. My take on the lessons the folks walk away with from both sources, IMO, seem to point to a lack of proper understanding of the asset class in general. I think that is because most of these courses and books are modeled after the real estate (real property) guru genre and while indirectly related you simply have to know and understand much more to be good with notes.

I think you can see this if you take a step back and look at how notes in general are discussed, as if they are homogenous assets. They are not and that is the first key to understanding the asset class. The lack of homogeneity amongst notes is also what helped spawn securitzation and might be fuel for their exemption as a security. That is probably a topic for a different thread though. Back to my point, the discussion and request seem to be very broad in nature opposed to specific, which I think also illustrates a lack of acute understanding of those attempting to engage in a discussion about notes.

So can a book from 1999 do some good? Sure, some knowledge is better than none but many very influencing things have changed. Regulations have changed, investor participation has changed, origination has changed, mortgage products have changed....the list goes on and on. So from that type of publication or course if you can walk away and define an area of interest in more detail, I think that is a win. Then you need to follow up on that area specifically. That will take more specific topics and inquires and frankly research.

Just amongst the folks that Bill named in the above thread you have several different business models and market functions. We do not all seek the same note nor favor the same disposition strategies. Some of us have more exposure to first liens opposed to second liens or more institutional opposed to private or even specific collateral variations.

So when I see the question, what is a good book to read on notes, I sort of always want to say what type of notes, on what type of collateral, dealing with what type of borrower or origination source? A book written on commercial loans will be different than a book on residential loans. The learning curves are different due to the difference in collateral and borrower sophistication. Additionally, certain legal aspects are different. I know these are all things most people understand but it seems to never makes its way into these inquires.

Bill speaks to this and I agree when he says that some of these gurus 'sell' the foreclosure disposition as a path to riches or some magic short pay strategy, etc. Rightfully so, when he sees this he corrects it, as I do I. That is the dumb down marketing version of what they are selling which is only a small segment of the asset class and often times the take away is not entirely correct. People understand real estate investing in general so they lach onto that understanding and go to market with the book/course selling to some extent, what folks want to hear. "You can make money too this way....!" I always like to say there is no magic in mortgages. That is because it is true. There is no new disposition or strategy floating around on the street which has not been around for a long time nor pursued thousands if not millions of times.

As an investor do you HAVE to have this in depth knowledge of the asset class? No, I guess not, as suggested above you can subcontract it out. That said, not all brokers and advisors are made the same either, so one needs to be careful not be led by the inexperienced simply because they are more experienced than the pack of folks following them.

So what are good books to read? Well if you want to learn about the financial aspects of notes pick up a book on finance. You should learn to understand the time value of money and the math behind it. If you want to gain more knowledge about specifically investing in foreclosures, pick up some papers written on current foreclosure situaitons, perhaps even state specific to your desire. Additionally, reading some literature on contract law, as that is what the security instrument and note conform to will also help. After that, I would also suggest reading up on the more major headline events such as the Robo Signing and the MERs debate, I even suggest reading up on the Dobb Frank Act effect on the mortgage secondary market. That will start to prep you a bit for what the institutional climate looks like or at least expose you to may possible tangents of further learning.

The other problem that you run into, is reading up on it all is fine. Heck, I read a ton but in my very own opinion, experience is going to be the best source of education. The first question I tend to see from a new investor when I show them a loan or even a loan pool is, "Ok, where do I start?". There is a lot of data when it comes to loans and many fields have their own thesis to understand such as foreclosure events and bankruptcy events. I think having a supporting mentor, trainer or group will work wonders to help evolve skill sets. Make no bones about it, there is a lot to learn. Another good thing to remember, is everyone has an answer, but not all answers are right.

And with that, I will plug BP as probably one of the better sources of current in depth information on whole loans that I know of currently. And I think it's great. There are real folks here with real experience who participate often on topics. However, with as much interest as notes have started to garner and in tandem with the multiple times I have seen this exact question come up over the past months, it seems nobody wants to use the resource they are currently using. Which I suppose is slightly humorous. So there in lies the conundrum, for those newbies who want to learn more, where are your questions? I know I am happy to type a thesis on whole loan topics as many of the other guys are as well, but it seems we have to build the body of what information is being sought in order to get it out. In that sense, if we get more specific questions on the topic we can give specific answers or have valued in depth discussion on various legitimate topics.

Ramble, over.