Investing in NPN 2nd notes

7 Replies

Recently I have talked to 2 investors one in my local market, and another out of town that have bought some smaller packages of 2nd position non performing notes.

Both investors have stated that the strategy is to make sure the 1st lien hasn't started the foreclosure process, and then try to either restructure the note and get the borrower paying again, or to work out a payoff. If neither works they can start the foreclosure process ahead of the 2nd which protects them, and then they can foreclose and sell the house. One of them stated that even if the 2nd gets foreclosed on they can file a deficiency judgement on them and or sell to a debt collector to get repaid. 

I am sure this is a big numbers game, and some of these will work out, while others have to be written off at a loss. 

I guess I am just trying to figure out, more about the process, and figure out where the holes in the above strategies lie at. It seems like it would be a great strategy to get some passive income going that is a similar but less hands on strategy than rentals.

I'd love to learn more about the process and both the upsides along with the pitfalls.

I believe this is all dependent on your local laws.  Some States would protect your second position much better than others. 

Of course a second position note protected by a trust deed is only as good as what I would call "the intrinsic value position"  which is not just current property market value, but who holds first position and what is it worth to them ? 

Hi Terry, there are a few companies who are mainly note funds who also provide a training course and this may be the best place for you to start. I know that I did!


Suggest you read Gordon Moss book on Amazon about seconds and that might

give you a better handle.

Also consider buying partials from those who gave owner financing to their buyer.

Also Keyhole Capital just released a very comprehensive online course for learning about 2nd position NPNs:

I've had the opportunity to review the course materials and IMHO, its one of the most comprehensive courses I"ve seen. 


@Bob Malecki  , would you mind sharing how you came upon the Keyhole Capital training?  Was it recommended by a trusted contact?  I had a bad experience recently with an expensive training course, and plan on vetting these "systems" a lot more carefully going forward.  Thanks!

This was referred to me by another fund manager who I've known for the past year. I've also bought notes from Keyhole and  Sherman Arnowitz, the company's principal is a straight-up guy. He provided me access to the course materials and there are 26 chapters to the course with each one requiring that you complete a test online before proceeding to the next chapter. Pretty slick program. I know there are other hucksters out there selling education so you absolutely need to be selective and evaluate quite thoroughly!


@Bob Malecki

 What was the pricing on the education for keyhole? Did you find any discounts?

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