All Forum Posts by: Account Closed

Hi @Clint Galliano, no worries -  lenders (which is what you become when you buy a note) can't take back a property unless you go through the formal foreclosure steps or the borrower agrees to deed the property to you. After you get ownership, it's yours to either rent or sell. When it goes to auction just be mindful that (i) nowadays auctions are well-attended and it's likely other investors will bid the price up higher to win the property, so you can't set the bid lower than the property's value and assume you will land the property at that amount, and (ii) typically proceeds in excess of liens owed go to the borrower, so not sure if setting the bid excessively higher than the property's value & amount due would make sense. I guess if the amount due on your performing loan is higher than the value of the property, and you set the min bid at that amount due, it's pretty much a given you will end up with the property in the end, but I don't think that's necessarily a cause for celebration...(unless the amount you paid for the loan was far less) 

I'm sticking to performing notes in my response since that's the topic of this thread, but a lot of this can also be applied to NPNs. I'd also flag most NPN investors I know are much happier getting the loan re-performing, taking back the property is just a backup option, not the primary goal.

p.s. I am assuming when we all say notes we mean Note + Deed of Trust or Mortgage security. I am not including contracts for deeds, those are a different animal to me.

@Michael Plaks

Interesting, I would have thought if you buy a performing note at a discount, and all gains until the discount is exhausted are considered interest income (assuming you hold to maturity), the same would be true if you bought an NPN at a discount and then payments started coming in. But that's just first impressions based on the posts/article, what's your view on why the market discount rules don't apply to NPNs?

Also - I know it seems like a lot of details, it is and I still get frustrated at times. But like anything else in real estate, the more practice and time you put into it the quicker you pick it up. My favorite quote when I start getting lost in information overload comes from Charlie Munger:  "It's not supposed to be easy. Anyone who finds it easy is stupid." =)

@Nathan Patterson - sure. Using a lawyer or third party due diligence company (e.g., SDSX or Richard Monroe) is always helpful, but it's also a good idea to start becoming familiar with big button issues yourself, particularly with post-Dodd Frank loans to owner-occupants. That way you have an idea of what to look out for ahead of time. In case it's helpful here's what I've found to be useful:

1 - read as many articles (lawyer briefings and CFPB articles are a good start) as you can about seller financing/mortgage origination rules, and have a look at the actual legislature clauses being referenced (even if they aren't reader friendly). Suggestion: don't take one person's view as the sole truth and stop there, instead supplement what you read by also chatting with experienced lawyers/lenders/investors and looking at the actual legislature.

2- research High Cost Mortgages and High Price Mortgages.

3 - sign up for news alerts from HousingWire and InsideARM. Google anything you don't understand.

4 - Another BP investor showed me this helpful tool, if you google InsideARM state licensing, they have a graph briefly showing what requirements each state has. Many states only require collection agent licenses (which your servicer will have), but some may require investors to also have a license. 

5 - once you know what state you want to buy in, chat with lawyers, servicers and experienced lenders active in that state and ask about licensing/registration requirements. Also ask them what compliance issues they commonly see investors running into in the state. 

Note, I'm not saying you will become an expert if you do the above, and it's not meant to be an exhaustive list. But you will be more educated when looking at buying loans (especially those originated post-DF), and hopefully save yourself any big headaches in the future. 

Good Luck!

@Gail Greenberg- I agree, I'm not implying (and don't think I said) that you should ensure the house has equity so that you benefit from the equity gain. I'm saying ensure there is sufficient equity so that you are paid out in full at foreclosure auction (UPB + out of pocket expenses).

Hey @Nathan Patterson - figured I would share my thoughts but want to flag I'm <1 year into this

My response would be it is very much a whole picture aspect vs just price or IRR (this is true for every investment). The common view is that buying performers (which in my experience are frequently re-performers) should return 12-15% IRR. But simply buying a 12.5% note without doing full due diligence and understanding the value of your collateral is setting yourself up for trouble. So I would actually say that even though most tutorials are aimed at NPNs, a lot of the information is very useful/relevant when looking at a PNs, especially when it comes to doing due diligence like ensuring title is as expected (you don't want to buy a 1st lien and find out you're now junior) and valuing the property (e.g., through a BPO). You also want to spend time thinking about your exit strategy and foreclosure process in your state, even if it's a PN. For example, if I paid 90% of UPB for a PN, I would want to make sure my purchase price was significantly below the value of the property so I'm comfortably covered in a foreclosure scenario, just in case.

Also - I haven't seen a lot of tutorials covering this point, but since there are a lot of performers originated post-Dodd Frank, be mindful of regulatory/compliance items that may impact the loan. I spend a good deal of time on the CFPB's (surprisingly user-friendly) website and asking questions when I come across a new item.

PNs are more expensive than NPNs, but the good thing is if purchased and diligenced properly, they theoretically require little to no work post-purchase. Just a quick add if you are considering NPNs, they are cheaper, but they are also much more work intensive and I would caution against pricing a NPN based on the view that you expect the borrower will agree to some sort of modifiction/DIL. I'm closing on one now and just assumed the worst when pricing, but will be pleasantly surprised if there is a workout.

Hi @Ricardo Powell Jr - I just recently went through this exercise and here's what I did. First I set up an account with a domain host like Godaddy or BlueHost. I use Bluehost and it costs something really cheap like $5 a month. This is also where you select your domain name. Depending on the domain name you want, there may be a fee to purchase it (ranges from $5 to I've seen some for $1mm). Then you build a website on top of that. Like @Grayson Graham mentioned, Wordpress is a simple option and is also what I used. Wordpress can also be loaded with 1-click on Bluehost (I'm sure Godaddy is the same). When you have Wordpress installed then you can play around selecting the overall theme (i.e. look of the website) and the content. There are many youtube videos that do walk-throughs, frustrating at first but once you get the hang of it it all becomes intuitive. Also Wordpress is free, but if you want a premium theme you can pay a one time fee (prices range), but the free themes work fine. 

Guys - if his email (a gmail account) is saying “wonderful opportunity brought by biggerpockets.com”, Mindy + Scott are saying BP doesn’t endorse this, and there is money being asked upfront, it is very likely this is not legitimate. I could be completely wrong and the subject person is happy to correct me on this discussion forum, but seems like there are several red flags without adequate answers

If the both parties have US bank accounts, Zelle has worked great for me (recently made a same day pmt while overseas). All you need is the email or phone number linked to the other persons account.

@Saul L. - great example with the HML crowdfund, can be a great tool when it works, but also very easy to forget you have little to no say in a workout scenario, and hopefully everyone (including the platform) understands the state's foreclosure process.

@Ian Ippolito - agreed, I think crowdfunding in general can be interesting, and Zopa did refund me for extra fees I incurred. That said it seems we both liquidated in a strong market - will be interesting to see what happens when the market turns, and a lot more folks submit redemption requests at the same time.