Best State(s) to buy Notes

[Kent Foltz]

I am interested to know if seasoned note investors would recommend the better states to buy notes. By "better", I mean in terms of (1) return (2) licensing restrictions, and (3) state law.  I reside in CA, and have invested in first and seconds in my home state.  However, I believe the returns can be significantly higher in many states.  Also, I understand there are certain states that might be best to avoid.  Any information on the states to avoid would also be appreciated.  

[Jamie Bateman]

@Kent Foltz
I hate to answer with "it depends" but...it depends. It depends on: (like you eluded to) whether you are buying 1sts or 2nds, whether you want NPLs or performing notes, whether you want the property, whether you buy CFDs, whether you can wait 18 months for a foreclosure, etc.

With that said, many note investors prefer the Midwest (IN, MI, MO, OH, etc.) and the South (GA, FL, TN, etc.). But there are always caveats. For example, GA is a fast foreclosure state but the licensing hurdle is expensive. TX can be great because the collateral value is usually strong but the paper itself can be a bit more expensive.

When it comes to foreclosure info broken down by state, I have found this site to be helpful: https://www.realtytrac.com/rea...

As for licensing info, the NMLS is probably your best starting point. 

As side note, some investors focus on the states that other note investors don't like. Less competition can lead to better pricing. So, NY and NJ can have long, expensive foreclosures but this means many of us stay away.

Hope this helps. 

[Dan Deppen]

It all depends on what price you are paying. But my favorites are MI and IN, because there is decent supply, they are reasonably easy to work in, and I already have good teams established there.

[Chris Seveney]

@Kent Foltz

Well risk goes with return, best spots have lowest returns because there is less risk.

What type of return are you looking for?

[Heath M.]

In for the comments.  This is on my "to do" list to learn more about in the future.

[Andy Mirza]

@Kent Foltz I think you've got to put the time in to research the different states and find the ones that will be the right fit for you.

I started with non judicial states only then moved to judicial as well. The more states that you are willing to buy in, the greater the pool you get to pick from.

Generally, notes with properties that are in states that have longer timelines to foreclose will have greater discounts to account for the greater risk and longer time commitment. This can be an advantage as smaller investors are far more nimble and get things done much faster than the big banks.

There's a reason that pools nowadays are heavy with notes in slow moving states. There aren't nearly as many notes for sales in the states that are quick to foreclose.

[Timur Abdullin]

Good thread. Thanks for info!