Experienced Landlord Looking to Buy Notes from Banks – First Steps?

[Tony Christian]

I’ve been a landlord for a number of years, and I’m exploring ways to expand my investing strategy beyond just owning rentals. Buying performing or non-performing notes directly from banks has really caught my attention.

For those who’ve done it, I’d love to hear your perspective on a few things:

• Which bank department typically handles note sales? (Special Assets, Loss Mitigation, Secondary Marketing?)

• Do banks maintain a list of available notes, or is it all relationship-driven?

• What’s the best way to approach a bank without looking like you’re just kicking tires?

• Are there common pitfalls to watch out for when starting out?

I’m not coming to this as a complete newbie to real estate...just someone who’s serious about learning this side of the business and making smart moves from the start.

If you’ve made your first note purchase, how did you find it, and what do you wish you’d done differently?

[Don Konipol]

Quote from @Tony Christian:

I’ve been a landlord for a number of years, and I’m exploring ways to expand my investing strategy beyond just owning rentals. Buying performing or non-performing notes directly from banks has really caught my attention.

For those who’ve done it, I’d love to hear your perspective on a few things:

• Which bank department typically handles note sales? (Special Assets, Loss Mitigation, Secondary Marketing?)

• Do banks maintain a list of available notes, or is it all relationship-driven?

• What’s the best way to approach a bank without looking like you’re just kicking tires?

• Are there common pitfalls to watch out for when starting out?

I’m not coming to this as a complete newbie to real estate...just someone who’s serious about learning this side of the business and making smart moves from the start.

If you’ve made your first note purchase, how did you find it, and what do you wish you’d done differently?

I (we) mostly originate our notes but I’ve purchased about a dozen existing notes from banks and other note holders during the last 12 years.  

I’ve never been able able to develop a deep relationship with any lending institution, even the ones I successfully purchased notes from, (my purchases were all “one off”, usually originating from a contact with a mortgage broker or borrower). 

The reasons I’ve not developed these relationships are one or more of the following 

1. The lending institution selling notes expected me to “bail” them out of bad situations (by overpaying) as a quid pro quo for allowing me “access” to bid on their other notes they wanted to sell

2. The lending institution wanted me to purchase a “package” of notes rather than individual notes 

3. The lending institution provided “tapes” which I didn’t want to spend time analyzing just so I could put in a bid against a dozen other buyers

4. The selling note holder wanted a price much higher than I was willing to pay - and often got it from another buyer 

5, note in which the note holder had acquired the note from a different institution often lacked “clarity” as to default, reinstatement, disagreements with borrower, extensions, etc.