Buying A Note Is Like Buying A Boat

You have heard the old saying in Real Estate, the profit is made when you buy. How true that is! We have found that not matter if you are investing in Non-Performing Notes (NPN’s), or ugly houses, you HAVE to take into account ALL the costs you will run into from the day you buy it, until the day you sell it. If not, you can lose money; sometimes lots.

And that makes me think that investing in NPN’s is like buying a boat; the two happiest days are the day you buy it, and the day you sell it! Investing in a NPN, and cashing out for a profit, are my two happiest days as a note investor.

While there are some warm and fuzzy feelings experienced along the way, like finally making contact with a homeowner who wants to stay, despite doing his best to be invisible, and attempting to work out a payment plan to get them repaying their defaulted debt.

Otherwise its practically death by 1,000 cuts for the most part.

Sometimes I feel like we are being nickeled & dimed to death by a plethora of service providers, lawyers, rehabbers, lawn cutters, property preservation, house cleaners, city agencies, county tax collectors, Realtors, health inspectors, zoning ordinance, Home Owners Association, utilities, forest divisions, flood areas, blah, blah, blah, blah, blah, that want money for every time they move or type something.

So the most important thing I do now is come up with as many costs as possible, before we make an offer, so we can factor that into our purchase price. And we have been equating the home repair costs into our note buying bids now, so we know if we can still make a profit, or suffer a potential loss.

Now is the time to factor in the old phrase; “Measure Twice, Cut Once.” With notes, you want to make sure you run the numbers inside and out before you commit to buying a note. Count Twice, Buy Once.

We use our Secret Squirrel methods to get the scoop on the homes value, and factor in all the potential acquisition, holding, and closing costs. Just like in a rehab, if you don’t factor in ALL of these costs, and you have a lower valued asset, they could eat into any and all profit.

Christopher Winkler
The Note Whisperer
Silverwood Capital, LLC