All Forum Posts by: Joshua Andrews

Awesome, thank you all! I appreciate the input and support!

- Josh

Hi Team,

Question you may be able to help me with. I am looking for a service that monitors the tax status of a property. This would be used for 1st position notes that are not escrowed. I would prefer the service to be automated compared to us checking manually.

I have seen such a service in the past, but don't remember the company or provider name. Anyone have thoughts or experience with something like this?

- Josh

One more thing I forgot to add, is to have clearly laid out in the purchase contract, how a default is handled, and by whom. The buyer or seller? 

Defaults do happen, so it's important to prepare in advance. Most do not default, but the buyer will want to know how a default situation would be handled, and how money would be recovered. This is easy to address in the purchase contract.

- Josh

Partials are great investments, both for the buyer and seller. The same due diligence you would apply to a note purchase, is the same used on a partial. This is because the partial is really just a "piece" of the note.

Yield is the best way to analyze the income potential and what your invested money is earning. Other thoughts on a partial is to make sure the amortization schedules are clearly spelled out, preferably in the purchase contract. There will be Amortization schedule A, and B. 

A is the buyers amortization, and B is the debtors.

Having these clearly spelled out will show at any point in time who is owed what money, in the event of a property sale or early payoff (which do happen).

Here is a great resource explaining partials. I have no affiliation with this company: http://noteinvestor.com/buy-notes/calculating-earl...

- Josh

Thanks everyone! I really appreciate the nice words. It took some time to write and of course I had help from various sources. Looking forward to seeing everyone at the next note convention if you can make it!

- Josh

Hi Peter,

This is a good article, Papersource is a wonderful resource and event, and the author of the article is a well heeled investor.

That being said, the process of buying non-performing loans downstream is a non-issue. There is profit to be made every step of the way. Now it may not be every investors cup of tea, but there is substantial profit at each step. This applies to both 1st and 2nd liens.

- Josh

Hi Kurt,

Buying it from First American or any large institutional owner is extremely unlikely. Unless you own the 1st mortgage and are foreclosing, it is unlikely they will entertain any type of conversation. If you do own the 1st lien, just complete your foreclosure to wipe the 2nd lien from property title.

- Josh

NY is a judicial state and a contested foreclosure could take several years. With such a low value asset this is not a great deal to cut your teeth on. I would opt to pay a bit more for an asset that is much higher fair market value, a bit more vanilla, in a non-judicial state, or at least a faster state. NY is at the top of the list of the longest foreclosure timeline, along with expense. That being said there are exceptions, but it is likely you will spend a great deal of time on this for very little if any reward.

As previously mentioned you cannot evict any individual who may be living in the home, as you will not be the property owner until you receive the deed, which as mentioned could take as long as 2-4 years.

- Josh

Zachary,

You will not need an attorney for a note purchase, unless it is tremendously large. If it is your first purchase, to help assist and feel more secure, you can have a local attorney set up an escrow account to hold funds for you. This attorney does not need to be located in the state or county the note is located in. 

The note seller would then ship the original collateral file to him for review. As long as all is in order, then you instruct the attorney to release funds to seller. The attorney is in place only to make sure you get the original collateral docs, and that all are in order.

That's about as complicated as it gets. Most transactions don't require that much.

You can technically make money on 2nd liens where the 1st is behind on payments or initiating foreclosure against the borrowers home. However, you need to pay pennies for this 2nd lien due to the high risk. If at foreclosure there is equity above the 1st mortgage, the remainder is paid first to any junior liens in line, then to the borrower in that order.

However, what makes this difficult is that typically when the 1st lien forecloses, they bid only enough to cover the amount they are owed, plus their legal expenses. This means it is likely the 2nd lien and all other junior liens will become wiped, or essentially removed from the property upon completion of the foreclosure sale.

Sometimes if the borrower is doing a deed in lieu with the 1st lien (essentially giving the property back to the lender without going through foreclosure), you can get a small fee from the 1st to release your junior lien. This is done to save the 1st from the legal expense and time of having to foreclose on you to wipe your lien. This strategy from an investor standpoint is hit and miss.

Focus on buying 2nd liens where the 1st lien is performing for best results.