Is there still an opportunity in notes investing?

Question

Hi all - I've been flipping real estate for the last decade and recently began researching notes investing. I read Martin Saenz book, have researched a bunch online, and watched Eddie Speed's and Brecht Palombo's free online seminars. I am really interested and ready to take the next step, but before investing more time and money I am trying to get a feel for whether or not an opportunity still exists for an individual investor to make money in this field, or if it's become too saturated or dominated by big money investors. A lot of the content and in depth discussion on here is from 4-6 years ago.

Does anyone have a good feel for the current state of the market, and what kinds of returns are to be had? Without knowing a lot at this point, I think I am interested in non-performing 1st position notes.

Many thanks,

Mike

Does anyone have a good feel for the current state of the market, and what kinds of returns are to be had? Without knowing a lot at this point, I think I am interested in non-performing 1st position notes.

Many thanks,

Mike

Rob Hakes · Answer

@Mike Moore

If you have experience in house flipping you already have an great in to note investing.  Have you created any notes after a flip?  I bet there is lots of opportunities to create a note via seller financing or contract for deed on a rehabbed property and see really awesome returns.

Robert Harpster · Answer

@Mike Moore

From 4-6 years ago? There is plenty of really current discussion here on note investing, strategy, returns, etc. If you search for Notes or even Note Strategy in the search field, you can sort content by latest or most current. I know personally there are lots of opportunities for smaller notes that the bigger guys aren't interested in. But as I have been told from many of the Pro's here "Whos's the seller?". In other words, know who you are buying from. I am just beginning in the note space and so many here have been really great with information!

Good luck!

Chad U. · Answer

Starting to see an uptick in notes for sale and there will likely be much more in the near future. So there still exists a market, however as mentioned above pricing is still far higher than it was years past, making it more difficult to meet return objectives.

However, this is not an easy business.  I have done many forms of RE investing over the past dozen years and note investing is by far the most complex and challenging.  Almost every day I get a another curve ball thrown at me. I'd highly suggest getting a good education along with buying a few low valued notes to learn the ropes simultaneously.

Chris Seveney · Answer

It’s like any business whether you have a restaurant a contracting business or whatever, there is always plenty of competition and those who succeed differentiate themselves from others.

Us mortgage debt is $16 trillion. 50% is owned by non GSE’s - so look at it as an $8T industry and if you can get .0001% market share you are doing great. It’s also something you can buy or create which makes it more diversified than other businesses

Jamie Bateman · Answer

@Mike Moore, yes there is still opportunity in this niche. Pricing is generally much higher than it was 8 or even 4 years ago (before I was in this space, to be clear), and there is not as much inventory, but there is reason to believe there will be an increase in inventory in the next 6 to 18 months.

I agree with @Andy Mirza that partnering up may be your best bet at first. Be wary of anyone who promises a specific return, but you can certainly find recent, profitable case studies here on BP and elsewhere. One thing to begin to focus on (soon, maybe not immediately) is a general geographic area since the laws and requirements vary considerably. Good luck!

Bob E. · Answer

Personally I think the area to be investing in right now is partials.  I suspect that if the economy takes a dive some of these will default and that some of the sellers will be short funds to cash out the partial buyers leaving the partial buyer in a position to FC.  As always read the contract and consult your lawyer / accountant.

Varinder Kumar · Answer

@Mike Moore

slim to none. As enticing as it may seem, beware of these joker brokers.

Jamie Bateman · Answer

@Mike Moore, several of us on here offer different ways to do that (joint ventures, funds, partials, etc.). I recommend contacting one or more of us privately to gather more info.

Mike Moore · Answer

Thanks @Chad Urbshott, @Chris Seveney, @Rob Hakes, @Jamie Bateman, @Andy Mirza and @Robert Harpster.  Much appreciated and all very encouraging.  When you guys mention "partnering up", how do you suggest finding someone willing and reputable?

Andy Mirza · Answer

@Mike Moore Yes, there are still plenty of opportunities for the small note investor. If you're talking about institutional non performing firsts, you'll be competing with people who have a huge lead on you. It will take work and effort to find the niche that works the best for you. I would suggest either joining others to get up to speed quicker or to look in the places that no one else is looking for deals.

Is there still an opportunity in notes investing?

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