lien flipping

7 Replies

can someone please inform me about lien flipping.  newbie here searching for a way to feed my family

Hmmm.  Sounds like some guru course that promises to teach you to buy note (aka liens or loans) from the lender and turn around and sell them to someone else (a note buyer).  There is some discussion of buying and selling notes in this forum where you've posted.  It does happen.  But you're not going to easily go to a bank, get a contract on a note then assign that to someone else.  Banks don't generally sell individual notes anyway and if you find one that does, they will want cash to sell it to you.

I'm sure @Dion DePaoli will have input.

More generally, if you're looking to feed your family soon none of these guru courses is what your looking for. Despite their statements, they're teaching you to do some job.  A commissioned sales job.  It takes time, effort and money to ramp up some endeavors.

Jon Holdman, Flying Phoenix LLC

Sean, Jon is right.  Probably not the best avenue for you.  It's not clear what type of lien you are talking about and it is not clear if you actually plan on making an investment to control the asset.  Contract assignments with Notes are impractical for the most part.  Notes do not work like real property in that manner where some folks have success wholesaling property.  If you do capitalize the trade, you would stand a chance of not being able to re-trade for any profit and that would mean you would have to capitalize the disposition depending on the performance.  There is a huge amount of upward pressure on price right now in the market and frankly it is difficult for even many experienced folks to find trades to get into that can be profitable.  

As Jon stated, there are lots of threads to read here around various topics related to the variety of liens that are out there.  Look around and read up.  There is much to learn when starting.  Feel free to ask more questions.  Good luck.

Hopefully I won't offend anyone on this thread but I will throw out a different perspective from @Jon Holdman  and @Dion DePaoli . I am not a broker as I prefer buying, holding and selling my paper, but I do know a few folks that make a nice living as note brokers and because of their position, they get a first crack at the best notes. I am always looking for product and as long as the price is right, I don't care who is getting a cut of the proceeds. Some of my best trades have been because brokers have found them for me including from banks and servicing companies. Having said this, the biggest 5 or 6 banks tend to deal with direct parties instead of having a middle man. My focus and area of expertise is on the residential side so it might be different for commercial notes. As the fine gentlemen stated though, it takes some time to ramp up in any endeavor. All the best.

@Dion DePaoli  , I'm curious to what you attribute the upward pressure on price? At what price tiers? Is note investing becoming "trendy"?

Thanks in advance. 

There are also businesses that buy/sell judgment liens. Could that be what the original poster was referring to?

As far as feeding your family, acting in some capacity between sellers and buyers will require some skill and training at some point before being able to command a fee or profit margin. 

Maybe Russ Dalbey is at it again?

Without knowing what type "lien" you are referring to (or a hint by what person or company is pitching such a concept to you) it's pretty impossible for us to guess how to direct you.

Originally posted by @Jim Farrell:

@Dion DePaoli , I'm curious to what you attribute the upward pressure on price? At what price tiers? Is note investing becoming "trendy"?

Thanks in advance. 

 Let me address those in reverse.  Is note investing becoming "trendy"?  YES  Simply look around BP for samples of the trend.  Real property has become hard to acquire in price ranges suitable for profit.  In many cases mid level assets are stuck in limbo.  So lower band assets are almost everywhere.  Lots of folks trying to get into second liens because of the lower capital barrier in hopes of high returns.  Likely disregarding the true risks involved.

The higher level stuff seems to get worked and pushed out in the market at a much faster rate than the mid level and lower level stuff.  Lots of the lower level stuff gets competitive because of the capital barrier as well.  If you only have $100k and you want a little diversity you can buy two $50k deals.  To diversify with into median priced assets you need almost $500k.  So, each band is restrictive in that manner.

Interestingly enough, there was just an article about the mid level price band of assets and potential consumers being under served.  Here is the story First Time Buyer Problems

Upward pressure on price.  I suppose some note investors not so in tuned with instutional markets might not like to hear the trade levels going off but pretty large trades pushing up into late 67% range of RE Value for non-performing stuff.  BTW, that is not the idea short term dispo stuff like non-judicial states, those pools were mixed fairly well.  A simply unleveraged note investor can't typically hit that level of trade.  Not sure anyone would want to.  The institutional investors have more rabbits in their hat in regards to accessing cheaper capital.  In addition, their threshold for returns is lower in general than most street level investors.  You do not see many street level investor running around talking about buying into new mortgage originations at 4.0% yields now do you?  

There is a pretty big trade out there right now, ok, well it's huge.  Defies logical in some ways really.  If we can get a pulse on the levels it trades at when it's done, I will likely post something about it for conversation sake.  

Outside of that trade most of the stuff floating around is low level stuff that is not really all that exciting.  We are trying to hunt some decent trades are closer to median values and are having a hard time.  Many peers I know are also have the same issue.  The huge boys are playing on their own court right now and there are not very many tickets for sale to the game if you know what I mean.  When big trades go off at high prices, that price demand eventually makes it way down - whether it is logical or not, unfortunately.  All that said, we will see what the end of the year brings, it should be interesting.  

Tax Liens and mortgage note trades are becoming more and more wide spread as the housing market tightens up and is inundated with new investors. In looking for deals you should seek out someone who is direct to banks and private lenders. Builders are a good source of mortgages also. .Stay away from LinkedIn note pools that are floating around as they have been daisy chained to everyone and contain junk. Get some education and keep asking question. These wealth producing vehicles can be run from anywhere in the world. Try doing that with flipping houses. 

Happy Fortune Building.....