Investing in non performing Loans

32 Replies

Mark, good basic article, I'd suggest checking out other companies as well.

Another way, that avoids the forgiveness of debt issues in reducing the loan amount in a modification is to use a partitioned note. While you can still reduce amounts as an incentive to a borrower, it might be just a small amount. In your example of the 150k note reduced to 100k, it could have been say 130k with say 40k placed in a non-accrual status, not bearing interest without any payment required. The other 90k could then be amortized with payments required.

The issue as you pointed out is the market value. But additional amounts can be forgiven based on the future appraisal, so if it appraised at 120k, you could cut loose an additional 10k and refi it.

Or, hold it for a longer term and allow values to riase and refi at the future balance. :)

Thanks bill,
It is very basic advice as I am just learning about npl market. Any other info, suggestions or real world experience would be greatly appreciated. Have you bought any notes yourself?

Yes Mark, I have purchased a few in my day (LOL), it's what I did for twenty + years, never counted, but probably modified over a thousand contracts/notes over the years, brokered more than that, held and refied hundreds, portfolio is still in trust. Notes and lending being the area of greater expertise you might say.

Still thinking about a book, many have asked so I guess it will be written when I get enough round-to-its.

NPNs are not for the faint of heart or one with limited RE knowledge, not really a beginner's best bet. You should do fine with your experience as a broker..... Good luck...... :)

Thanks Bill. Do you have any other companies that might be worth checking out? Or is that privileged information? I completely understand if you don't want to share since you have spent years working in the field.

Mark, no secrets, just that every deal is different, there are different problems, issues, different people, the collateral is not the same, some are residential, commercial, business only without RE and how you solve the problems, while the approaches mentioned are basically the path to take, or combinations, it's not the same. There are stories about the people and such, but there are so many instances I'd don't really have one that sticks out that is easy to explain. :)

Mark Ferguson,

Jeff Merrick, Vice President of GLS has been a very reputable colleague of ours. Another company that sells notes beside us and GLS that you might want to check out is called Gemini Capital.

The biggest thing I can say about this business is that you learn as you go. I often tell the story about how we started, we bought 4 loans right out of the gate. One loan was a Grand Slam deal, one was a Home Run, and 2 we got wiped on. Those 2 we got wiped on may have hurt the most at the time, but we also learned a lot more than if we never bought them.

Best of luck,

@Dave Van Horn ,
Thank you for the tips. I will check out your company and Gemini.

Hey Bill,
Write that book. Can you start tomorrow....:)?

I second that.

Okay guys, and since this is your thread Mark, I thought that writing a book would be as easy as typing it out in Word Doc or something, well, I found out differently. It needs to be formatted to fit some computer stuff requirements I know nothing about.

Next, I was offering at first to make it free, I spoke to an attorney friend and he convinced me that I should not spend my time, effort and money to give away years of know-how and experience. Well, okay, but I don't need the money off some book that pulls in some pitance, but covers costs and the pain and I would do what Rich did, donate the profits, a non-profit housing organization that I have no affiliation with. Next queestion, I don't know what the costs are, but I am looking into it. I can also assure you anything like that would never be $99.95, it would be as cheap as I could make it as the whole idea is to make it affordable for everyone.

The other issue, being personal to me, is that everyone knows my opinion of most gurus, selling books and tapes, I can hear them now, oh look, Bill turned into a guru selling books! Don't really want to go there but I think too that if I don't enter the arena of some method, program, system and I'm not in the business of guruing, I can live with that.

I have talked with a few folks about writing on some RE topics, I also appreciate the support and requests. So, Mark Ferguson and @Ted Akers , your opinions, as well as others are most welcomed! :)

@Bill Gulley , Your experience and insight would be most appreciated. AND, you would not be thrown into that GURU category until you have an add-on price for the real details, have two or three up-sales, a not to be missed $997 boot-camp, a price-reduction if they do not buy at the offered price, and a$25-30K coaching program. I think you are safe with not being hung with that

Then again....we could have the first BP-Certified RE Guru!
No other Guru can claim that.
And the TV show spin offs...Winning Wealth With William the Wiley Note Wrangler!

I personally see nothing wrong with people making money off their knowledge and experience. If someone has done it and made a lot of money doing it, then they should be able to make some money teaching others as well.

The guru's who have never done a thing themselves and make false claims I have a problem with.

For a trainer/coach to have any legitimacy, they need to be successfully executing their techniques in the current market. Times change rapidly (to state the obvious!). It doesn't mean they have to do everything personally, that's what teams and delegation is all about, but they certainly need to be overseeing an operation that is currently successful. The once-successful (reputedly) investor who has completely morphed into full-time coach/trainer/purveyor of courses should have limited credibility.

For example, most highly successful wholesalers eventually develop a team with an acquisitions manager or two, other reps that deal with buyers, and somebody doing the marketing. They give strategic oversight and develop their staff. There are companies like this in virtually every metro area, most are under the radar because the owners have no desire to get into training/coaching (which can be pretty restrictive to the "time freedom" that RE investors covet).

@David Beard , Good points. In my mind the most successful business people are able to delegate almost all of their tasks to someone else so they can concentrate on the big picture and creating new business.

There are still a ton of people out there who are very successful doing most of the work themselves but I know my ultimate goal is to create a team that can eventually take over almost everything and I can sit on a beach someone with my family and a margarita.

I'm not saying they have to be a full time coach or hands on trainer, but more along the line of book writing or online systems that don't take a lot of man hours after they are complete.

Ted, I can assure you that would never be the case, my boot camp would be much more than that, that doesn't even cover the suite at the Hilton! LOL, Really, no, never going there!

Wayne, BP Certified? I think Josh would have something to say about that....LOL

Mark, I agree! I have no problem at all with qualified instructors or teachers being compensated. I have no problem with someone leading someone leading a new person by the hand basically and giving proper instruction and being paid or working with them in some split fee arrangement. What I have a problem with is when that mentor teaches bad habits, lacks ethics, devises some off-shoot program for the sake of having some product, decevies with false get the picture.

David posted during my writing this, some good points, depends on what area of RE you're talking about, I can really see that applying to rehabs. Not so much in notes, while there are new legal issues, the basics haven't really changed. Institutional buying has changed, brokerage hasn't nor has the individual side. Besides, I'm still active in advising a local brokerage.

I'd have to say, notes are pretty borring, a dry subject. There are some tricks to make notes dance, there are ways to devise a note to accomplish various goals, but most of the contractual side and due diligence is dry stuff. Underwritting only gets interesting at times. It only gets sexy and creative after you have the basics, in fact a better understanding of requirements as you attempt to solve problems within set perameters. Guess I could talk about the woman who applied for private financing to open a strip joint!

There are some marketing aspects, acquiring notes off the street and how to build relationships that feed the beast so to speak.

Anyway, my efforts would be more similar to a text book than a whiz-bang super secret guru how-to!

I'll stop, thanks for the thoughts. feel like I'm hijacking Mark's thread.
Doubt the issue is worth an off-topic thread, but today had someone else suggest a basic RE class to happy to do it, if others really felt it would be worth while. :)

No worries about hijacking. Most my threads don't get any replies. :)

I will be first in line to buy the textbook version! Go for it Bill, really would be an awesome to learn from the master, then to also be able to ask questions of the author here on BP too.

Mark Ferguson - I just looked to see if your statement below was true or if you were just kidding.

Most my threads don't get any replies

It looks like you've got 283 posts, and 2 of those posts were in threads that you started that didn't get a response. Both of those threads were ads placed in the Marketplace.

One of the things we pride ourselves on is the interaction here, and you had me worried for a second. I'm glad that you were just messing around.

Josh, just messing around. That's what the smily face was for. I love BP.

Originally posted by Rick Bradd:
I will be first in line to buy the textbook version! Go for it Bill, really would be an awesome to learn from the master, then to also be able to ask questions of the author here on BP too.

I'd say that's a little over the top Rick, but I can be modest.....LOL :)

I guess I have Mark's permission to add to hid post count....

I actually fell into lending and the note business. I was interviewed by a large stock brokerage firm in St. Louis to do institutional accounts (which is a funny story as newbies don't start in institutional accounts) but there was some time before I woud start and it was suggested that since I had bank regulatory experience that I work for a mortgage brokerage in the mean time. I saw that business and picked it up quickly, the owner wanted to sell and I made an offer but we couldn't reach terms. then I decided I didn't need his company and started my own, the rest is history as they say.

Istarted a private loan/contract guarantee program, based on PMI but with agreements to purchase any defaulted contract, that got me into buying notes and installment contracts. It was the only program like it in the country and I covered 7 states and ultimately had a large private portfolio for servicing. There are ways to buy out those notes and refi them without ever putting out a dime, assuming the debt in default. That's how it started. Not the average way investors get into the note business. Then I did my own lending and brokerage activities.

I sold that company and retired, the guarantee program went with it. They company I sold and dropped off the face of the earth like other wholesale mtg operations being swallowed, the program was dropped. The agreement not to disclose or compete wore out several years ago, so the intellectual side can be public. To my knowledge, the company that purchased everything, except some select notes, actually destroyed the loan guarantee program documents (yes, they had no idea what it was or the refi possibilities) so that's gone.....but it remains in my little old head! LOL

So, that might be an interesting angle for note investors.

And, all that led to deeds in lieu in some cases, rehabs, business opportunities outside of RE and all kinds of things that the average guy off the`street would probably never get involved with. So, there is the story, first mentioned here on BP!

Not sure folks would be interested or not. :))

Thanks Mark. I wasn't taking offense -- I know how vibrant the community is, so when I hear something like that, I tend to dig in to find out what's up.

Mark and David,
I agree 100% that there are many very qualified mentors that can command high and justifiable fees. I fund for some of their students based on the mentors recommendation. My post to Bill was in jest as there are many out there that likely earn more on information marketing than in their real estate business. Qualified mentoring for a fee is entirely different than some that sell programs to new hopeful real estate investors and deliver relatively insignificant content, only to pitch the next level information they need to have to succeed, and then the next level again.

@Ted Akers @David Beard and Mark Ferguson, you to @Rick Bradd together with @Wayne Brooks .

I agree that not all mentors are bad, I would be a half million richer if everyone on BP who asked me to mentor them sent me a thousand bucks, so I see the incentive, but I have turned them away as to one-on-one mentoring.

Here is my question, as to what Ted mentioned, those step up classes or the progression on topics.

A problem I see is folks jumping in the deep end right off the bat, they can't even swim. How would you provide materials to new investors, from basic to advanced with it appearing to be a pitch for that next stage? You can't go to algebra without first having general math.

I can see some basic stuff being seen as insignificant. I suppose if that insgnificant information were shown as being the basis for some decision making that led to some great deals, it wouldn't seem so insignificant. Not talking about stories for verbage or claims of successful deals or pie in the sky stuff, but say, how surveying tied into a deal that allowed the property to be sub-divided, quickly to get to the county in time, saving a buyer on the hook. (?) :)

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