Top 4 Exit Strategies When Note Investing
When purchasing a note you must decide on what you are going to do with the note. These are referred to as exit strategies, or exits. What is your exit? Once the note purchase is complete, my exits are as follows:
1-Reinstate the loan- Come to an agreement with the borrower to resume payments as originally set in the terms of the note.
2- Modify the loan- Agree to new terms on the loan, adjusted to the borrowers current financial situation.
3-REO – If the attempts to reinstate or modify the loan fail, we foreclose on the asset, or take back the property via a deed in lieu/ cash for keys.
4-Rental- Once we complete the actions in step 3, I keep the asset as a rental.
These are the exits I employ, it is very important to devise an exit plan before you purchase any type of real estate asset. The exit you chose is solely based on what your investment goals are.
Thanks for reading and have a great day!
Jay Raught
Comments (6)
I add two pother exit strategies.
1. Repackage NPN's by state and sell to local investors that have closer ties to the community and can deal with taxes and code violations.
2. We also sell REO's and finance investors - never owner occupied new loans due to the Dodd Frank laws.
Good to meet up with other note investors.
Duke Marquiss, about 8 years ago
Excellent addition Duke!!!!
Jay Raught, about 8 years ago
Jeff V., about 8 years ago
Jeff,
I started with NPN 2nd notes, the price point was lower and better ROI.. I am now going after 1st NPN, because of the price point I can get them at and better position over the second. Sorry for the delayed response!!!
Jay Raught, almost 8 years ago
Jay,
Do you primarily invest in notes that are local to you? If you employ Option 3 and 4 do you self manage or hire a property manager?
I'm very interested in Note Investing both personally and through self directed IRA. Where can I get the details on Option 2 - Loan Modification and Foreclosure process?
Also, do you get your notes directly from banks, hedge funds, individuals, or some sort of investment fund... basically where are the notes coming from or found typically?
Thanks,
Jeff V
Jeff V., about 8 years ago
Jeff,
Here are some answers:
Do you primarily invest in notes that are local to you?
I target certain states, the state I live in does not carry many NPN's. I look all over the US, why limit the market? I am the bank after all.
If you employ Option 3 and 4 do you self manage or hire a property manager?
Outsource it all, I look at it like this. Is my time worth managing it when I can have someone else do this and I can focus on acquiring more assets.
Where can I get the details on Option 2 - Loan Modification and Foreclosure process?
For loan modification, that is a topic for another conversation. Foreclosures depend on each state, whether it is judicial or non-judicial.
On a side note, did you begin note investing with performing notes or non-performing notes and why?
I attempted to start on performing notes but the $$ vs NPN's was too high. I partnered with others and bought some NPN's in the 2nd position. I am currently in TX with a group doing business development and looking over 1000 npn 1st assets.
Also, do you get your notes directly from banks, hedge funds, individuals, or some sort of investment fund... basically where are the notes coming from or found typically?
I have contacts who are direct to hedge funds and banks. This helps my price point. The notes are found exactly where you asked in your question.
Check out the Notemba podcast if you listen to podcasts. I am here with Chase Thompson this week as well. Please connect with me and ask many questions. I will answer what I can and anything I cannot, I will get answered for you. I hope these answered any questions you may have. [email protected] is my email and on Linked In : Roland (jay) Raught
Jay Raught, about 8 years ago