When you first got into notes...

Question

I'm curious the answers to these questions from note investors out there.

• Did you start in Senior or Junior?
• Did you start in Performing or Non-Performing?
• You started with your IRA or your own cash?
• Educated yourself, take a course, got a mentor, JV'ed?

Also, if you could do at least one thing different from how you did it, what would it have been?

Dave Van Horn · Answer

1.) Junior (moved onto Senior liens a few years later, now almost exclusively work in them)

2.) NPNs as a business, Performers as an individual

3.) Partnered with the founders of PPR using a little bit of our own cash for the first handful of notes, then raised private capital for the rest.

4.) Educated ourselves mostly since there wasn't much education out there at the time, but learned a bit from our first note seller

Hard to pick just one thing to do over! The business is also very different today from when we started. I suppose having an endgame from the outset would have saved us a lot of time. That and working more "on the business" instead of working actively in it.

Bob Malecki · Answer

Hi @Nick Taylor here is an excerpt.

How does a Joint Venture work?

Two or more partners agree to form a new entity to pursue a specific business opportunity. Sometimes partners in JV’s contribute equal amounts of cash to the new venture or one partner may contribute cash while another partner contributes his expertise and the personnel resources to operate the Venture. When we establish a joint venture, typically we take the role of the manager, using our experience and expertise to supervise all of the operations of the project, while our partner/investor provides the funding for acquisition and expenses. Depending on the outcome/exit of the project,  monthly cash flow from a restructured note and capital gain from the liquidation of the note or underlying property are split between each venture partner.

Typically 100% of the principal payment is allocated to the Investor and interest income is split 50% between Manager and Investor. We target real estate investments that we believe possess cash flow potential and may benefit from the implementation of a rigorous, value-added asset management plan. This plan involves due diligence, price negotiation, asset repositioning, and eventual liquidation through appropriately selected channels.

Jamie Bateman · Answer

@Peter HallidayI wrote this about a year ago and we have grown a lot since then, but this is our story: https://www.biggerpockets.com/...

Don Konipol · Answer

@Peter Halliday

I purchased my first note in 1982, it was a newly created second lien.  For the next 15 years, I occasionally purchased second lien notes as a passive investor.  In the late 1990s I switched to first liens and then in 2005 I decided to concentrate on first liens on commercial properties only.  Began syndicating mortgage notes in late 2000 and thus created a full time syndication business.

Early in my career I attended a Jim Napier seminar, read and reread his book “invest in Debt” and that launched my interest in real estate debt instruments.

I have participated as a principal in the origination, purchase and or syndication of over 600 real estate notes in the last 20 years.

Note investing can be a passive investment strategy, an active investment strategy, a business, or combination, depending on the individual

Dan Deppen · Answer

I've only done senior loans. I started out with a JV, then bought a performing note to learn how the transactions worked. Did my initial deals all out of my IRA. I did join a mastermind and get a mentor. If I had it to do over I would have developed relationships with really experienced note investors sooner and tried to scale up faster.

Chris Seveney · Answer

@Peter Halliday

What you see is there is no right or wrong way. People follow a strategy that fits their personal avatar. That is what is great also about note investing, there are many options to get in the business and avenues you can go down. Those who say firsts are better than seconds or vice versa are speaking what is best for them. Learn about all aspects of the business and start down a path that you have passion for, it does not mean you cannot change it later, I know many who have.

Alecia Bolton · Answer

@Nick Taylor That's how I've set up my JV partnerships.  Happy to talk if you're looking for a partner.

• Did you start in Senior or Junior? - Senior
• Did you start in Performing or Non-Performing? Both...and lease options too.  Primarily focusing on performing in my retirement and NPN outside of it.
• You started with your IRA or your own cash?  I have a Solo401k and personal funds
• Educated yourself, take a course, got a mentor, JV'ed?  Yes.  I started off educating myself, joined a course and got a mentor, and I've JV'd with folks, although not right off.

Also, if you could do at least one thing different from how you did it, what would it have been?  I would've had a clearer picture of where I wanted to go rather than just 'quit from my job and do notes full time'.

Nick Taylor · Answer

I like this post. I am thinking I'd follow the same path as Dan i.e. start with a JV, then get a performing note to learn how it works first hand.

Question, if you were to do a JV, is it basically setting up an agreement with someone(reviewed by your attorney), then letting the more senior investor do all/most the work while the junior investor provides the funds?

Steve Hodgdon · Answer

I dove in. Sold a strip mall in 2015 and bought 26 first lien performers. But I have 35 years credit and collection experience and have been a landlord for 20 years.

Edward B. · Answer

• Did you start in Senior or Junior? Senior
• Did you start in Performing or Non-Performing? NPN, but would probably do it the other way now.
• You started with your IRA or your own cash? SDIRA
• Educated yourself, take a course, got a mentor, JV'ed? All of the above

When you first got into notes...

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