If your in the 1st NPN space listen to @Scott Carson and @Wayne Snell
I can answer your question because of their mentorship
Rules of thumb and standards are interchangeable. Standards are a good thing for systemization, processes and to separate the wheat from the chaff. When I get a list of 200 assets I need rules of thumb to drill down to what meets my criteria. After the drill down then the art of pricing kicks in. Without standards/rules of thumb your VC's will not have clear process to follow and you will be inconsistent in your buy criteria. #notecamp
1) Borrower's credit score is meaningless in 1st position NPN's. #notecamp #VNBFD #notebuyingblueprint
2) Borrower's equity in the property: I avoid assets with equity. Especially on higher values assets because they will fight with an expensive contested foreclosure (I also learned to vet lawyers that cap contested FC to $5K just incase). I want little equity on occupied assets for emotional equity. On CFD with 25% equity some states require foreclosure. #notecamp #VNBFD
3) Interest rate. The lower the interest rate the larger the discount you need to make a yield. Interest rate on 4% needs a lot more purchase price discount that an 8% rate loan. Take the monthly P&I x 12 months / purchase price to get a basic yield. If i'm are in teens I need a different deal or a bigger discount on the NPN. #notecamp #VNBFD
4) Senior status needing to be current (if 2nd lien): Wait long enough the 2nd can become a 1st. #VNBFD
@Wayne Snell5) Needs to earn over XX% of a returns (IRR, ROI, etc) Projected returns on paper rarely go up but they can easily go down. If I cannot get 20% on three exit strategies on paper then I bounce to the next deal. #notebuyingblueprint
