Note purchasing

8 Replies

Hello, I have been considering note investing for quite some time. I want to try to get at least one note under my belt so I can say I can determine if It is something I want to jump in fully. I found a couple of places where notes are listed for sale (LoanMLS is one of them), but I am not too sure how to account for expenses. I know I will need a loan servicing company, but other than calling people and collecting the money I don't know what they do exactly. I would want to purchase non-performing notes at a discount and hopefully make them performing or acquire the property.

Hi Joe,

It sounds like you are on the right track, although I would recommend holding off on a note purchase until you understand the basics a little bit more. There is a lot to learn about notes, from the basics to different note niches to focus on. None of the learning is difficult, but it is necessary for you to understand much of the basics to avoid being taken advantage of or buying something you don't fully understand. I personally love notes, and would be happy to talk with you and provide some feedback or guidance based on my limited knowledge from buying them for myself. Feel free to post any specific questions I or another BP member might be able to help with.


Joe, before buying non-performing notes, I would educate yourself as much as possible first by reading as much as you can here on BP, attending either or both of the major Note conferences in Las Vegas (Noteworthy and Paper Source), attending Meet-Ups and RE clubs specific to Notes where you live.  Invest in Debt by Napier is a great book, and Performance Anxiety by Gordon Moss is another great book on 2nd liens.  Hope that helps.

Sounds like @Ken Martinez and @Joshua Andrews hit the nail on the head this time. While getting hands on experience is key to really understanding the process, I would not suggest buying a note, especially a non-performing note, without some background knowledge and education in the area. There is lots of free resources online but takes some digging. Also, there are moderately priced weekend seminars on the topics from various educators which provide a ton of content on the topic. 

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Hi, before you even consider buying a note for yourself, I would recommend you first broker (or refer) several notes to corporate funders. In this way, you will learn a great deal by watching the pros quote on, perform due diligence and fund transactions while providing all of the necessary documentation. What better way to learn, not to mention the funder (not you) assumes all of the risk. So, this way, you get paid while you are learning and then when you get a bit 'seasoned" you can start buying notes for your own account.

@Tim Fitzgerald @Liz Brumer @Ken Martinez @Joshua Andrews

Thank you all very much for your input.  I have done as much research as I feel is out there.  I think that I am ready to jump in and learn the process.  Right now I am in the process of reviewing two notes from Watermark Exchange.  I wound't mind your opinions about Watermark Exchange or the notes I am considering:

Note 1:

Jamestown, NY  Est Mkt value:  $20,000 UPB: $27,746  The loan was paid until 10/2014.

Delinquent taxes:  $1,700 rate:  4.87%  I offered $3,660.  The counter offer is $5,000

Note 2:  Montgomery, Al:  Est. Mkt value:  $22,000 UPB: $50,546.   Loan was paid until 3/2012.  Delinquent taxes:  $797  Tax lien:  $3,748.46.  My offer:  $3,490.90.  The counter offer is $4,500.  Note rate:  8.13%

I would like any of your opinions that you would care to share.  Are my offers on point or was I too low?  What do you think of the counter offers?   


For your first note I would strongly suggest avoiding both of these. I am assuming these are 1st liens. The actual property value is so low you will be hard pressed to see a return here. NY is a horrible state to foreclose in (takes years) and AL is a right of redemption state. My advice is to purchase a small, performing note first to see how everything works. That's how I started and I'm glad I did. I would suggest placing bids on assets from FCI Exchange. It's a safe, learn-able process compared to Watermark. Watermark is not where you want to cut your teeth, IMO.

I also work mostly with 2nds, so while I do know a good deal about 1st liens, they are not my specialty.


New York is a state I avoid too.  I would start with some front end payments on a performing note.  In that case you have an experienced investor standing behind you and you can start building connections with your servicer and other vendors.

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