First Note Deal Lessons
Member since 2025 · 48 posts · 14 votes
First Note Deal Lessons
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
11moQuote from @Charles Kennedy:
What’s the biggest lesson you learned from your first note deal (good or bad)? Hoping to learn from real stories here before diving deeper.
It was not my first deal I learned the most from (but what I did learn from that deal is the servicing transfer process can be so painful when it should not be, especially depending on who your servicer is). The other is collateral storage company charges, one charged me like $100 for every exception (not to fix it but put it on a spreadsheet) and there were 3 of them. I was like wtf... I did not understand at the time but learned real quick
7e investments53 Reviews
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- Rental Property Investor · Arlington Heights, IL · Member since 2017 · 243 posts · 108 votes11mo
My first note was a lot of luck. I bought a note at a severe discount due to the note seller freaking out after the borrower stopped paying for two months. They got up to four months behind. Sent a demand letter via a lawyer. Then they got on a trial payment plan. Made good on it. Then kept paying every month after that. I eventually sold it for more money than I bought it for.
I learned a few lessons, be prepared to deal with non payment issues and have a plan. Even if you really just want performers. Performers go bad. Second, I proved the concept. This works. I can do it. I met vendors and learned the process.
- Member since 2025 · 48 posts · 14 votes11mo
Quote from @Peter Halliday:
My first note was a lot of luck. I bought a note at a severe discount due to the note seller freaking out after the borrower stopped paying for two months. They got up to four months behind. Sent a demand letter via a lawyer. Then they got on a trial payment plan. Made good on it. Then kept paying every month after that. I eventually sold it for more money than I bought it for.
I learned a few lessons, be prepared to deal with non payment issues and have a plan. Even if you really just want performers. Performers go bad. Second, I proved the concept. This works. I can do it. I met vendors and learned the process.
That’s a great first deal story, sounds like it was a solid intro to the reality of note investing. I like that takeaway about having a plan for non-performers even if you’re only aiming for performers. It’s a good reminder that things can change midstream.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes11mo
Quote from @Charles Kennedy:
What’s the biggest lesson you learned from your first note deal (good or bad)? Hoping to learn from real stories here before diving deeper.
It was not my first deal I learned the most from (but what I did learn from that deal is the servicing transfer process can be so painful when it should not be, especially depending on who your servicer is). The other is collateral storage company charges, one charged me like $100 for every exception (not to fix it but put it on a spreadsheet) and there were 3 of them. I was like wtf... I did not understand at the time but learned real quick
7e investments53 Reviews- Member since 2025 · 48 posts · 14 votes11mo
Quote from @Chris Seveney:
Quote from @Charles Kennedy:
What’s the biggest lesson you learned from your first note deal (good or bad)? Hoping to learn from real stories here before diving deeper.
It was not my first deal I learned the most from (but what I did learn from that deal is the servicing transfer process can be so painful when it should not be, especially depending on who your servicer is). The other is collateral storage company charges, one charged me like $100 for every exception (not to fix it but put it on a spreadsheet) and there were 3 of them. I was like wtf... I did not understand at the time but learned real quick
Haha I’ve heard a few stories like that. Thanks for sharing that tip, definitely something I’ll keep in mind before jumping into my first deal.
- Investor · Baltimore County, MD · Member since 2014 · 466 posts · 438 votes11mo
On my first deal I learned that low-balance loans with a low P+I can be a lot of work and the servicing costs can kill your returns if the loan goes delinquent. Many other lessons since then.
- Member since 2025 · 48 posts · 14 votes11mo
Quote from @Jamie Bateman:
On my first deal I learned that low-balance loans with a low P+I can be a lot of work and the servicing costs can kill your returns if the loan goes delinquent. Many other lessons since then.
That’s a solid point, those low-balance loans look easy going in, but they can definitely eat into profits once servicing costs and extra work kick in. Good lesson to keep in mind before jumping into a small deal.
- Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes11mo
Quote from @Charles Kennedy:
What’s the biggest lesson you learned from your first note deal (good or bad)? Hoping to learn from real stories here before diving deeper.
On one of my first note deals I overpaid for a low single digit interest rate loan. It had a significant amount of arrears, was heading for foreclosure and was told by a "guru" that the borrower had no chance of filing for another bankruptcy, but they were able to. Stuck it out through the the entire 5 years of BK and essentially broke even when I sold it again, as I had to sell it for a significant discount due to the low rate.
I didn't run the analysis on what the return would be if they declared BK13, as I was banking on a foreclosure. This is just one of dozens (probably hundreds) lessons learned.
- Investor · Baltimore County, MD · Member since 2014 · 466 posts · 438 votes11mo
Quote from @Chad U.:
Quote from @Charles Kennedy:
What’s the biggest lesson you learned from your first note deal (good or bad)? Hoping to learn from real stories here before diving deeper.
On one of my first note deals I overpaid for a low single digit interest rate loan. It had a significant amount of arrears, was heading for foreclosure and was told by a "guru" that the borrower had no chance of filing for another bankruptcy, but they were able to. Stuck it out through the the entire 5 years of BK and essentially broke even when I sold it again, as I had to sell it for a significant discount due to the low rate.
I didn't run the analysis on what the return would be if they declared BK13, as I was banking on a foreclosure. This is just one of dozens (probably hundreds) lessons learned.
@Chad U. that same guru a few years ago was giving terrible advice about Ch 13 to someone who was buying a note from me. I had to have my attonrey weigh in to set the record straight since the info I had been providing was accurate. Be careful which gurus you trust out there!
- Member since 2025 · 48 posts · 14 votes11mo
Quote from @Chad U.:
Quote from @Charles Kennedy:
What’s the biggest lesson you learned from your first note deal (good or bad)? Hoping to learn from real stories here before diving deeper.
On one of my first note deals I overpaid for a low single digit interest rate loan. It had a significant amount of arrears, was heading for foreclosure and was told by a "guru" that the borrower had no chance of filing for another bankruptcy, but they were able to. Stuck it out through the the entire 5 years of BK and essentially broke even when I sold it again, as I had to sell it for a significant discount due to the low rate.
I didn't run the analysis on what the return would be if they declared BK13, as I was banking on a foreclosure. This is just one of dozens (probably hundreds) lessons learned.
Oof, that’s a tough one — but such a valuable lesson. It’s easy to get caught up in what should happen, but factoring in every possible scenario (especially BK) definitely changes how you underwrite a deal. Thanks for sharing that one.
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