PERFORMING NOTE OUTCOME

[Robert Harpster]

Curious about realistic expectations for outcome of a performing note. Example - A note modified a year ago to lower payment and get borrower making regular payments again. New 15 year amortization at 10% and approx 165 payments remaining. LTV of 55%. P&I payment approx $425 per month.

In your experience, what is most likely scenario of this note? Borrower pays to end of note? Home is sold in 4-5 years and note paid-off? Borrower refinances to a lower rate after 4-5 years and pays-off? Borrower stops paying or falls behind again? Note holder sells the note after 1-2 years?

Just looking for thoughts based on past experiences.

[Andy Mirza]

@Robert Harpster One of the easiest ways to mitigate your risks is by spreading your capital among several notes. When your entire investment is tied up with one note, you can really suffer if the worst case scenarios happen that you envisioned.

The reality in note investing is that there are some things you cannot control or know ahead of time. You won't necessarily know what the condition of the interior of the property is or what the borrower will ultimately do.

When you have more notes in your portfolio and you've done your acquisitions and DD right, the stronger performing investments can make up for the occasional outlier that doesn't do so well.