What Kinds Of Notes Are You Looking For?

10 Replies

As a wholesaler of notes backed by real estate, we are frequently asked to look at one or hundreds of notes for sale. Then when presented to investors, they tell me they don't like them, have seen them before, they don't deal with broker daisy chains, won't show proof of funds, won't sign NDNC's, or that it does not fit their criteria.

I can distill down there are two types of investors, individual and entities, that are looking for either performing, or non-performing notes, in either senior or junior position. That's the easy part; the hard part is separating the wheat from the chaff.

The question I want to put out to the note buyers, or potential note buyers in the community is what kind of notes are you looking for?

  • What kinds of prices will you pay on the UPB?
  • What seniority level are you looking for?
  • What kind of return or yield are you looking for?
  • What's your desired time frame, 10 years, 20 years, 30 years?
  • What states do you want to invest in?
  • What states do you want to avoid?
  • How dirty do you want to get? Do you want passive, performing notes, or will you do the work to make them performing, or do you want to go straight to foreclosure to fix & flip?
  • Am I asking too much for POF?
  • Is a NDNC asking too much?

I appreciate any and all replies to help me on my journey…

Thanks in advance,

Chris Winkler

Being a pretty regular note buyer of both 1st and 2nd lien non performing/performing notes as I invest in notes for a living, I could answer some of the following:

I invest in every state except NY, NJ, MA, CA, IL(only Cook County)

I always want to modify a non-performing note before I have to foreclose

If you show me notes that I have seen from another person, and you aren't the owner of the notes on the title, I will never deal with you again unless your a registered Broker/Dealer and your selling on someone's behalf.  If you put me directly in contact with the owner and admit upfront you are trying to broker the notes, I'd be more than happy to pay you a point or two commision, but don't waste my time.

Your not seeing my POF, unless I'm buying a huge pool from a verified SEC registered fund or Broker/Dealer

I typically will sign an NDA and a broker's agreement for a point or two of the sales price.

Originally posted by @Ian Barnes:

Being a pretty regular note buyer of both 1st and 2nd lien non performing/performing notes as I invest in notes for a living, I could answer some of the following:

I invest in every state except NY, NJ, MA, CA, IL(only Cook County)

I always want to modify a non-performing note before I have to foreclose

If you show me notes that I have seen from another person, and you aren't the owner of the notes on the title, I will never deal with you again unless your a registered Broker/Dealer and your selling on someone's behalf.  If you put me directly in contact with the owner and admit upfront you are trying to broker the notes, I'd be more than happy to pay you a point or two commision, but don't waste my time.

Your not seeing my POF, unless I'm buying a huge pool from a verified SEC registered fund or Broker/Dealer

I typically will sign an NDA and a broker's agreement for a point or two of the sales price.

That's great feedback Ian, thank you very much, especially about the POF & NDA. For the most part, staying away from the states you mention, specifically NJ & NY. Sometimes we own the note & sometimes we don't, and if we don't, we will always put you in touch with the buyer & disclose that. While I have held multiple securities & insurance licenses in the past, I am not opposed to getting my RE Brokers license & I figured it will never hurt. Appreciate you mentioning that also, as it adds so much for credibility.

Contemplating a move to Dallas, so one question for the board, if I am licensed in CA, am I only limited to CA transactions? Do any states reciprocate with RE licenses?

Christopher,

Texas is pretty tight on governing realtors.  I don't believe there is any reciprocity.  However, the following link will take you to the Texas Real Estate Commission for answers to all your questions!  Texas is a great place, and the Dallas market is ridiculously hot for sales.

http://www.trec.state.texas.us

Hattie

A real estate license has no relevance to brokering notes, except perhaps in CA.  Ian was referring to a Mortgage Broker's license.

My 2 cents:

I am focused on non-performing 1st lien notes. I expect to sign an NDA for anyone sharing note details with me and ask the same if I am sharing. I avoid NY and NC. I like to do workouts rather than FCL/DIL, and favor occupied single family or multi-family 1-4. I avoid condos, commercial, raw land, and extremely rural properties. I have never been asked for proof of funds, but I purchase through a business entity and tend to buy from sellers who know me already. I would expect to be cut off if I fail to fund. Most note sellers I work with require buyers purchase through a business entity. This may be is a better way than POF to filter out some of the chaff.

Originally posted by @Hattie D.:

Christopher,

Texas is pretty tight on governing realtors.  I don't believe there is any reciprocity.  However, the following link will take you to the Texas Real Estate Commission for answers to all your questions!  Texas is a great place, and the Dallas market is ridiculously hot for sales.

http://www.trec.state.texas.us

Hattie

 Thanks Hattie, I am looking forward to being a Texan!

Originally posted by @Wayne Brooks:

A real estate license has no relevance to brokering notes, except perhaps in CA.  Ian was referring to a Mortgage Broker's license.

 Agreed Wayne, however, it lets you deal with RE that you might not be able to deal with. Best to you.
Chris

Originally posted by @Mike Hartzog:

My 2 cents:

I am focused on non-performing 1st lien notes. I expect to sign an NDA for anyone sharing note details with me and ask the same if I am sharing. I avoid NY and NC. I like to do workouts rather than FCL/DIL, and favor occupied single family or multi-family 1-4. I avoid condos, commercial, raw land, and extremely rural properties. I have never been asked for proof of funds, but I purchase through a business entity and tend to buy from sellers who know me already. I would expect to be cut off if I fail to fund. Most note sellers I work with require buyers purchase through a business entity. This may be is a better way than POF to filter out some of the chaff.

 Great info for me Mike, and appreciate you taking a few to reply. What is it about NC that is a turn-off for you? 

We buy lower price band 1st lien, NP notes (with a BPO between 30-60k).  I prefer to buy occupied property and pay <40% of BPO.

I agree, if someone sends me a list of loans they say they own and I see them somewhere else on the internet I usually won't look at their stuff again.  

Thanks for the info on this thread of posts - I will not own any of the notes that I want to help anyone on this Bigger Pockets site to purchase, and I will say that upfront to my buyers.  I have become interested in THIS side of real estate investing because when I was approached by a seller back in April to help him find a buyer for HIS mortgage note, I put ONE ad on craigslist and got THIRTEEN PEOPLE / BUYERS to respond!!  Wow - THAT excited me so much that I wanted to CONTINUE to feed these buyers what they want to buy!!  These buyers knew IMMEDIATELY that I was gathering info from the seller, and that I was NOT the owner of the property, and I put my buyer directly in touch with my seller, and the buyer kept ME in the loop THE WHOLE TIME!!  So I want to RINSE AND REPEAT that sequence over and over again, and am growing my buyers' list and contact list and want to find ANY seller who wants to cash out!!  

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