All Forum Posts by: Andy Mirza

We buy a lot of NPNs in Chicagoland and there seems to be plenty of inventory out there (along with NY, NJ, and OH).

Can't make it to a meet up anytime soon since I'm in CA but could connect virtually.

@Peter Halliday We bought a few NPNs from Revolve at the end of 2020. 2 out of the 3 purchase prices were below UPB. One purchase was at par. We did ok with one and very well with the other two.

From what I remember, there were some things that came up during DD but we were able to handle these with little issue. We had cooperation from them and hashed out solutions (delinquent taxes or liens or something like that.) As with any note seller, buyer beware and do your DD.

Our business model is short term liquidation. We have some notes that go re-performing & those we re-sell but they are very few and it's not our main focus for an exit strategy. Here's where buying below UPB is so important since performing note buyers base their calculations off of UPB, not total debt.

We are more aggressive, seek out the more delinquent notes, so getting re-performers is rare.

The best out of the 3 looked like this:

Purchase price:     $148,500

UPB: $149,059

Total Debt:           $217,829

Market Value:       $224,500

Sold to 3rd Party: $200,000

Bidder

Net Proceeds:      $190,830

Net Profit:           $34,034

I would definitely buy from Revolve again in the future.

@Mike Moore I've never been a broker but I don't think it's the best way to get in. You have to spend the time and money to develop relationships with buyers and sellers and develop trust.

If you have capital, you have the means of getting into the note business by jumping into the investor's spot and learning as you go.

If you want to get a job working for someone else so that you can learn the business without risking your own capital, I'd seek out private note funds. The smaller ones would give you the best opportunity to learn everything but might not pay us much or be stable in the long term.

I would try the bigger funds and try to get a job as an asset manager. You would be right in the thick of things and learn a lot.

@Chris Caye I hear your frustration. It baffles me why a guy like that is still in business and still continues to victimize people. Maybe there's a victims group that can approach a US attorneys office or the FBI?

I agree with @Chris Seveney. I don't do business with him and nobody I knows does either. So, he's been blackballed on the buying notes side by everyone I know but he's continuing to operate on the capital raising side because he's good at attracting people who don't know his reputation.

On a personal level, Scott reached out to me a couple of times via BP and LinkedIn years ago. I never responded. My only knowledge of his exploits is from this thread. Whenever I talk to newer investors, I ask about their experiences and warn them if his name comes up.

Other than that, I'm not sure what else I can do or other other investors can do that don't have direct experience with him.

I think we will see more NPNs come to the market place. I have no idea how much.

My main concern now is inflation and I think the implications are unclear in how that'll affect us. On one hand, inflation is assisting with a rise in real estate prices. This helps when buying little equity to underwater NPNs as the underlying asset goes up in value and valuations look back at the last 90 days of sales comps. When you close on the sale of the NPN, the value of the RE is already higher and continuing to climb.

You have to be quick to move if and when it goes the other way. I don't see any indications that RE will tank like it did in 2009. I think it will cool down and maybe flatten out.

Inflation hurts when buying, in general, as there is a lot more money out there chasing assets and yield. Sellers want more for their notes. 

Our main strategy is still the same: find the assets that the sellers undervalue. The big funds stick to their BPOs and don't challenge the values. When you find a BPO that's poorly completed and shows a much lower value than it should be, that's one to pursue.

@Ben Taub To me, it's not entirely clear what "purged from their system" means. As Chris said, it might be charged off and they're no longer collecting on it. I suspect, as Chad implies, that maybe the loan was sold off to someone else.

You can get an O&E report from ProTitle for about a hundred bucks that will show recorded docs against the property. You should be able to see who the last Assignee is from the last recorded Assignment of Mortgage. This would be the current lender and the one you need to deal with. If B of A sold this loan to someone else, you might be talking to the wrong servicer. 

Yes, lenders step in to pay the property taxes to protect their interests in the property. With non performing notes that are liquidated via foreclosure, the lender recovers 100% of their advances when there is sufficient equity in the property. The advances get added to the payoff along with the principal and interest and any recoverable costs.

When the property is underwater, advancing for property taxes is just another cost of doing business. As long as the lender bought the loan at a significant enough discount, he or she will still make a profit.

We use my partner's REO asset management company, which is set up to liquidate REOs. They find local real estate agents to be our boots on the ground to manage the assets. Most of the time, we try to sell for top dollar to a retail buyer but other times, we'll sell "as is" or with a minor rehab, depending on market conditions.

@Gary Dezoysa Yes, this is a viable business for note investing abroad and I have done it myself prior to 2017. I had a business partner based in the States, which made things much easier because he could handle some things a lot easier than I could.

Some of the obstacles: 

Time zones (as Chris mentioned). Most vendors work and are available Mon through Fri from 9 am to 5 pm. You have to adjust to their hours if you want to get things done.

Phone calls. E-mail is great but sometimes a phone call is the best way to communicate. Zoom can be even better. Where I was overseas, internet quality was mostly good but did go down at times. You're stuck in the water at those times.

Notary. Maybe the biggest inconvenience is getting things notarized. US consulates and embassies offer notarial services to US citizens abroad but this can be a hassle depending on your situation. So much nicer that all I have to do nowadays is go down to the UPS store and get my affidavit notarized. In the old days, I'd have to deal with checkpoints and hope that the one person who notarized documents was working that day since they never posted a set schedule.

Performing notes are a lot easier. NPNs are a full time job and I wouldn't want to do it without a trusted team based in the States.

@Brian Kempler I'm not aware of any statistics regarding whether there are more 13s or 7s but, in my experience, all of my NPNs that go BK are 13s. Ch 13 I believe is the most common for people who want to keep their house.

We like to buy underwater NPNs because we think there's less BK risk than loans with a lot of equity, which he avoid buying for the most part. Exceptions are when the coupon is high, which means that the payoff is increasing the longer we hold it.

Pricing NPNs is tricky and if you're too conservative, you won't buy very many loans. Sorry for the cryptic answer but there's so much that goes into pricing considerations.

Here's an article that goes into a lot more detail about Ch 13 considerations for a creditor, which might be helpful to you.