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Updated over 3 years ago on . Most recent reply

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Michaela McCoin
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Non-performing Notes Newbies!

Michaela McCoin
Posted

Hello, 

I feel at risk of being a stereotype here, but it's worth the risk! 

My partner and I recently took Paige Panzarello's 3-day Building Wealth with Notes workshop. It was great and jam-packed! with so much good information. We are hoping to find suggestions for where to look for tapes of non-performing notes with the goal of practicing due diligence, researching, and making offers. It may be naive, but our goal is to complete a purchase (at least one) within 90 days. Our budget for this first deal will be on the smaller side, and we will be happy to share any due diligence results on deals that are outside our budget, if it helps someone.

There are specific states we are interested in. But what we really seek is any advice, guidance, and wisdom we might need as we begin this adventure.

Thanks in advance.

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Chris Seveney
Lender
Pro Member
  • Investor
  • Virginia
15,259
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17,705
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Chris Seveney
Lender
Pro Member
  • Investor
  • Virginia
ModeratorReplied

@Michaela McCoin

Congratulations on starting your note journey. Bigger pockets is a great place to learn a lot about this business. 

If your goal is to buy a note in 90 days you should start with a business plan and work backwords from there on monthly and weekly goals. Some things you will need to have a thorough understanding on if you are going to be doing non performing (assuming firsts) are:

1. Pick your states

2. Find attorney, collateral storage/review co, servicer, preservation co. and title company in that state.

3. Build your financial modeling software / calculator

4. Understand the cost to foreclose (its not just what the attorney charges)

5. Understand the laws in that state (do you need licensing, are attorney fees recoverable)

6. Find sellers

7. Establish your software, systems etc. How will you manage the note, what software?

8. Understand your servicing costs - too many look at the monthly payment and are like ok great - and not the boarding, deboarding fees and all the other costs you get whacked for. 


I do not want to make it sound like I am raining on the proverbial parade by I would temper expectations and be prepared to have a "scratch your head" moment. What I mean is many of these weekend courses (I have not taken this one so this is not specific to this course), a common theme I hear from investors and verified by BP posts are they see these courses with case studies where they bought a note for 30-50% on the dollar etc. You are thinking wow that is awesome and then when you bid on your first round of assets the sellers counter at 75%+ on the dollar. Yep that is gonna happen. 

Many times this is the case because people are taught to buy a note in a fast foreclosure non judicial state near a metropolitan area with a 3 br home where rents are more than the mortgage. Every note seller knows this is taught so those assets prices get jacked up and sellers get very high prices for them.

I also see many people make big mistakes as they do not understand how to calculate returns and think if they are getting a $50,000 UPB note with a 4% rate paying $200/month for $25k they are doing awesome, then the loan starts reperforming and they realize after servicing costs it will take 12 years to get their money back which is approx. a 6% return - tack on paying ordinary income on that return and you mine as well invest in municipal bonds.

  • Chris Seveney
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7e investments
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