All Forum Posts by: Dan Deppen

Just use the P&I payment. The tax and insurance escrows do not go to the loan. 

For paymet I subtract the monthly servicing fees, and also include the up front due diligence costs in my costs basis.

Everyone does them differently. But basically, most of them have the form of one partner putting up most or all of the funding, the other doing most of the work, and then profits split 50/50 upon an exit. 

There are some things to be careful of though. It really needs to be a partnership, not a passive funding partner otherwise you can violate securities laws. Consult with an attorney to make sure that the arrangement is legit. If you are providing funding, do your due diligence on your partner, and I mean really do it. Make sure they not only know what they are doing with notes but that they have a history of doing right by their partners. There are definitely bad actors lurking out there. Also make sure you are in agreement with how the decision making process is going to work and that you have access to all the data related to the deal. 

These kinds of loans are common, but there are a few things to keep in mind. Make sure you have an attorney draft the docs and verify that the title is clear and you will be able to foreclose if necessary. Also, how well do you know the person you are lending money to? I've been amazed at times at the sometimes outright criminal behavior of people who I would have never expected it from. I say this because I made the mistake of lending to a friend of a friend. Now I'm foreclosing but its a long, expensive and stressful process. 

I use Simplifile and it works fine. Most of the time I send my files to someone to handle the recording because its just easier.

Thanks for the heads up Chris! So far I haven't heard from the state on any of mine.

I have a BS and MS in mechanical engineering. Worked in the aerospace industry for many years but now do real estate full time.

Congrats! I have one in Memphis that will likely go to foreclosure, so this is good to hear. 

I'm seeing pretty much the same thing. Payments on performing and subperforming notes have been holding up better than I would have expected so far. But I believe that has to change at some point. Starting to see more assets hitting the street, but most of it has been recycled junk I wasn't interested in the first place. Next week I'll start proactively reaching out to seller and then I'll have a better idea what the pricing is. For now I'm content to sit on my hands. 

@Haritha N., 

Private investors will trade both. But find out if they are using a loan servicer. I personally won't by loans that are self serviced because if they didn't fully comply will all of the laws you could run into trouble if you have to foreclose.

When buying a performing note, the price I am willing to pay ultimately comes down to the yield I am targeting and the interest rate on the note. My target yield will vary based on the riskiness of the loan. Personally, I would never pay 100% of UPB for a loan. What happens if it stops performing and you now have foreclosure costs?

Paperstac is a good place to look for loans to buy. You can also network with private investors who trade with each other all the time.

Most states don't require you to have a license, but a handful do.

When buying a note the main thing is verifying the value. This is tricky because you can't see the inside of the property. That's where a lot of the risk lies. You should have a realtor on your team to help with this. Also pull an O&E report from a title company, and have an attorney who is licensed in that state review the chain of title and alert you to any liens or other issues. Although talk to them about the process, length of time, and cost to foreclose in that state if you need to.