All Forum Posts by: Bill B.

I've partnered with my mentor to purchase my first NPN. The purchase is now complete. It is a first position note. I'm very satisfied that the purchase price of the note is around 40% of the current fair market value of the property. That FMV price is for a well maintained, but NOT improved/NOT flipped, home. (we got lucky.....when we close out (which will verify or disprove the thoughts outlined above)....I'll flesh out how we ended up with sixty percent equity.

We have a qualified servicer lined up to stay in compliance with our beneficent government.   

The collateral is on the way, but I do not have it yet.

I can provide info like maturity date, interest rate, last paid date, but I don't know that such information is pertinent to the question.

I plan on reading every line of every document...just to learn about the collateral.  (My wife and I have purchased real property before....so I have some familiarity with the documentation.)  But, I understand that I am trying to make sure this is a full and complete package.  I also realize that the servicer is going to review it for completeness and propriety.  However, I trust slowly and also want to understand the process in detail. 

So, with all that as background, what am I looking for in the collateral? 

@Dion DePaoli @Mike Hartzog 

Dion and Mike,

Thanks to you both for your contributions.   Dion, my mentor did outline all that you and Mike wrote.  My question is born on the Reagan Doctrine of "Trust, but Verify".   Having been previously burned by my inexperience, I am hyper-paranoid.  I can't lose this money.  But I also cannot let it just sit. 

The mentor has skin in the game, but I was concerned that there may be greater exposure for which I was being made solely responsible. 

In short, I don't know what I don't know.  I am learning a LOT.  And I've read a LOT.  But this, I fully realize, is the most dangerous time of learning this process.   I am very able and even eager to admit that I don't know.  My favorite question of my mentor is, "what questions that I should be asking have I not asked yet?"

I also am a check and double check type of guy.  So, while I have this mentor, and while we are building rapport and trust, as the stakes get higher, my desire to touch base with other experts skyrockets.   Thanks to @Joshua Dorkin, BP is here.  But BP is nothing unless people like both of you are willing to have these discussions with green horns like me.  Your contributions allow me to sleep a LOT better.

@Mike Hartzog 

Thanks.  I understand that FC requires an attorney and would be a good idea for DIL.  

My question "Does this mean that the servicer is different from the FC agent?" was prompted by "BTW - If you end up needing to foreclose in OH, you will need to register your entity with the state as a foreign entity and get an in-state agent."

My understanding of a "servicer" was that they had all the licenses, brokerages, etc, required in a given state. That using a "servicer" was "covering my bases" and "staying legal".  That understanding led me to believe (perhaps erroneously) that the servicer would also be my in-state agent.  I understand that I'd still have to register my entity with OH, but that the servicer could also do the leg work for that registration.

Does that all sound correct, or is there another layer of abstraction that the "best and brightest" have engineered?

Thanks again for your time and help.

Bill

@Mike Hartzog 

Will do!!!

Does this mean that the servicer is different from the FC agent?

If I get through this (without spending all the profits on multiple cases of Tums and Pepto Bismol) I'll be posting about the experience.  After the FC or workout, I plan on going Pro here on BP to exit.

@Mike Hartzog 

Thanks again Mike!

The additional funds are available and will be transferred to our business account.

I really appreciate you taking the time to answer this and to add advice.

Most Sincerely,

Bill

@Mike Hartzog 

Thank you for posting! 

That is exactly the kind of info that I was looking for. I want to do this, but I want my "mentor" to be on the hook because (to be frank) I am very slow to trust ANYONE. Been burned too many times. As long as the JV agreement is binding him to any losses in the proportion stated in our agreement, I'm good to go.

Thank you so much!! 

I doubt I have time to set that up. I'm more worried about being left holding the bag on a deal gone bad. If this goes badly, I want his skin in the game, too. If the JV agreement states shared profit and losses, does that override the fact that I'm the managing partner?

@Bob Malecki 

Thanks for your post.   Is my perception correct that me being listed as the managing partner leaves me with total liability and him with zero?

Hi,

I'm working with a mentor to purchase my first NPN in OH.

We've done DD and are proceeding to purchase. I assumed that the purchase would be held by his corp and my corporation jointly. However, he just asked that I hold the note SOLELY in my corporation with us executing a JV on the side.

I balked.  

I said that I wanted both corps listed as owners (I want him on the hook, to keep his "interest" focused)

He countered with listing the JV as owner, with me as the managing partner.

If I recall, this leaves me with the liability, too.  Am I correct?  If so, how SHOULD the purchaser be documented?

Am I correct that I'm going to be the responsible party?

Thanks!!!

The Paranoid Man

@Dion DePaoli 

Sorry for the delay in responding to your request for details on my deal gone bad.  That was not a note, it was a fix and flip. I don't want to throw an unrelated tangent into your thread, so let's just leave in with the fact that I made every newbie mistake possible and was upside down between 30k and 40k.

Someday, when I grow up, I want to try fix and flips again.....even here in SoCal.  But I don't have the pockets or the stomach to try that again right now.

That experience is what drove me toward notes. My "partial loss" (i.e. the exposure was far higher) in that deal could have purchased between one and three (or even four) 1st TD NPN; spreading my risk considerably.

The chief stumbling block I see in NPN is making sure that I don't run amok with the Byzantine Hell created by Leviathan and its' minions.