All Forum Posts by: Jordan P.

@Brandon Sturgill

Mostly agree with @Chris Seveney ...just to clarify performing notes are sold off of yield versus NPN that are sold directly off of lesser of UPB or FMV. However, a similar rule/effect applies to performing notes in that if the note they're selling is underwater because you negotiated a price over FMV an investor might want a higher yield, maybe 10% instead of 8%, than if the note had full equity.

So, I wouldn't do what you're proposing for two reasons: (1) it's unnecessary; (2) putting borrowers, myself included, into a situation where they are immediately upside on a property doesn't sit right with me. Instead, as Chris suggested, put a rate on the note that is close or equal to what an investor would require to buy it. Consider the two illustrative notes below. The first has a 7% rate and grosses up the loan principal by $20k over value. Because the note is underwater an investor looking to buy wants a 10% return, so seller has to discount the price down to $91k. This is a lose-lose. Seller loses $9k of value on the property they sold and buyer is $20k underwater. The second note is underwritten at 9%. Because it has full equity, the same investor will accept a 9% return because they know they can get their money back if the note defaults and they have to foreclose, so seller can liquidate the note at par. This is a win-win. Seller gets full value and buyer is paying roughly the same monthly payment as option #1, but isn't underwater on the property.

Got it. Sorry for coming across harsh, but I still don't understand your interest comment. In any event, assuming the arrears are a sure thing through the payment plan at $1,333/mo for 60 months, if you had to foreclosure immediately after that to recoup the $100k still owed you'd be looking at roughly 18% IRR on the trade if you purchased for $85k. Is the prospect of foreclosure down the road worth it to you at that return?

 This alone tells me you don't have a good enough handle on how notes work to be anywhere near considering a purchase. There are a ton of good resources and threads on BP to get you started...many of which reference books, other sites, knowledgeable people, etc. Asking the BP community at large if $0.85 is a good price on a BK13 without any understanding of the underlying math or any mention of the term "due diligence" is a great way to lose your $85k.

@Bob Malecki thanks, I appreciate your feedback. Still crickets from anyone who has actually taken the course as a beginner (or perhaps no one has?)

Anyone taken the Keyhole NPN 2nd course and/or JV mentorship program? Did a quick search here on BP and didn't find many with first hand experience, just a couple "through the grapevine" endorsements from a year or two ago. I know there are many who speak highly of Scott Carson's programs, which focuses on 1st's, but you don't hear about many out there for 2nd's. NNG and PPR both phased their programs out a while back. Thanks in advance.

@Russell Brazil looking at any snapshot per person stat out of context doesn't have much value, especially when talking buy and hold. As the state debt grows each year and the population decreases debt load per person will increase while median income will remain flat at best and at worst decrease in concert with the exodus of middle class corporate jobs. The problem with CT unlike MA or IL is that it doesn't have an anchor metropolitan economy like Chicago or Boston as @Jay Hinrichs made a good point. Fairfield county might as well be a suburb of NYC as that is where the jobs are. And Hartford is a city on the edge of bankruptcy.

@Account Closed great info. Being from CT it was this exact type of analysis that pushed me into note investing rather than SF or MF rentals in the state. Not to say people aren't doing it and making money - and REI is local and not necessarily macro - but it's hard to justify a buy-and-hold strategy in a state that is experiencing massive corporate job exodus, increasing taxes, ballooning debt, and net population loss. All of that translates into less demand for residential property and will pressure rents and property values. Perhaps this will evolve into a great opportunity in the future but It looks grim now.

Edit: Just realized CT is the only state on all three of your lists above.

This is not a true one size fits all statement. It depends on the domicile state. Remedies allowed to creditors of LLC's, as well as how each state treats single member vs. multi member entities will vary, so knowing the rules in the state where you plan on forming is very important. My state explicitly provides that a charging order is the only remedy a creditor has whether the LLC has one member or more than one member.

Depends on the HELOC you go with. The ones I've looked at so far have interest only due during the draw period, say 10 years. And then a 20 year amortization period. I'm currently looking at this as well. For performing notes I would keep the term short if you have a floating rate HELOC. No telling where interest rates will be 10-15 years from now and your spread could get eaten up over time investing I fixed rate instruments with floating rate debt. So I'm looking at using a HELOC for partials and NPN. Yes, you'll have interest to pay during the workout, but assuming a successful trade you have the ability to repay the principal in a matter of months. Rinse and repeat.

@Zachary Taylor Got it. So you've looked at two NY notes where both borrowers were deceased - my bad! Nothing non-performing in NY would be on my buy list, but don't take advice from me. I'm a newb that would prefer 10-12% on a $35k performer over 30% on a $3k NPN, which is why I'm looking for performing notes to start. Good luck on this one though, should be a good education if nothing else.