All Forum Posts by: Jordan P.

@Chris Seveney @Bob Malecki Thanks. From what I've seen servicers execute modifications "at the direction of" the lender which implies it's the lender ultimately negotiating the modified credit terms. Maybe it's moot so long at it's not new credit. I'm probably just lost in the semantics and over analyzing as a result.

How many of you NPN investors out there are licensed mortgage lenders or brokers? I know the question of "do I have to?" has been discussed and debated on these forums and there is no replacement for professional legal advice, but I'm curious how many contributors here who are working out multiple loans mods across multiple states have chosen to get licensed and why they chose to do so.

@Mike Hartzog Thanks Mike, this is exactly the kind of answer I was looking for. I guess I was wondering if I should care about asking prices or not, and it sounds like the answer is no. Stick to my guns and get the deals I'm looking for.

@Michael M. Michael, I can clean up my model a bit and send to you if you're interested. While I consider myself a pretty good financial modeler, I'm not a note investor (yet), so take it with a grain of salt.

I'm currently getting my education in note investing and built a little financial model to run performing note deals through and develop offer pricing using my cost of capital plus risk tolerance based on various characteristics of the deal: Lien position, borrower credit, payment history, asset LTV, seasoning, loan tenor, etc. etc. Then compare my theoretical offer to the listed asking prices (looking mostly at FCI listings).

For the active brokers, buyers, and sellers out there: is there a typical bid-ask spread that is generally observed based on certain characteristics of the note? Or does it vary widely even for notes with similar risk profiles? Said differently, I feel comfortable with the rate of return I'm willing to accept given a certain set of risks, but I don't know if that return is realistic relative to the deals getting done everyday. It makes sense that the riskier you get as you approach non-performing notes, the wider the spreads will be, but even on relatively "safe" performing notes (first position, big equity, high FICO, well-seasoned payment history, etc.) my required returns are 50-100 bps above the offer price, which translates to 4-9% below ask (aka thousands of dollars). And that spread widens as the risk increases (up to 600+bps). Is it typical for sellers to throw out optimistic prices and then be negotiated down, or would my theoretical offers simply be ignored and/or laughed at and so I should recalibrate my expectations?

Any insight from the pros is appreciated!

Robert, I'm in the Hartford area and educating myself on REI. Give me a shout if you want to connect.

@Brian Garrett Good point and understood. The same rules should apply, though, so long as the cost of debt is reasonable. Maybe others have factored in risk-weighted returns, but I'm a newb and not that fancy yet :)

Not to dismiss the fact that leverage has it's own risks. Scale can help mitigate concentration risk, but not eliminate it. If you find yourself with a bunch of leveraged properties sitting vacant, it's going to hurt a lot more than a single un-mortgaged property. There is no free lunch.

@Brian Garrett @Josh Cuthbertson Maybe I'm oversimplifying but wouldn't time value of money theory always favor leverage over paying cash up front so long as you're net cash flow positive? The greater your equity investment and the longer you wait to take it back out, whether factoring in appreciation or not, the lower your IRR. Yes, cash flow without debt service would be higher, so there are lifestyle and personal goal considerations, but speaking strictly from an investment return perspective using leverage is more attractive. Also, in this interest rate environment you're taking on considerable interest rate risk by counting on a future equity out refi at the same or lower borrowing rates, and there is an implied cost to that risk.

Austin, congrats on a great accomplishment. I'm your age and just coming to the realization and goal formulation that you did a decade ago. I have a high-paying W2 and made almost all the wrong decisions with that income for a number of years (expensive home, new cars every couple years, etc.). My wife and I have spent the last year or two simplifying our lives and getting our fiscal house back in order. In the process we've accumulated a low six-figure capital base to invest in RE.

First question: You stress that education and "knowing your stuff" has been key to your success. Care to share your REI reading list and other educational tools outside of Rich Dad Poor Dad?

Second Question: Because I have capital to invest I'm debating between starting with a 10+ unit turn-key professionally managed investment package (which, by default, would mean joining with a group of investors out of the gate) to get the cash flow rolling and using that cash flow to compound the acquisition of new SF and MF properties on my own. Or starting small and using my base capital to pick up those SF and MF properties first and working up to condo/apartment style deals. Thoughts?

Third Question: My local market is not investor-friendly by any means. Net population outflow, anemic job growth, high taxes, high(ish) cost of living, and on-market deals generally have pretty unattractive rent-to-price ratios...the works. Do you believe that there are deals in any market and that success can be had anywhere? Or would you stay away from red flag markets?

Thanks in advance