Where are all the Notes!?

Question

At our local real estate investors club last night in Rochester NY we had a very interesting discussion revolving around holding paper or real estate notes.

I have a background in finance and have been able to learn the macroeconomics behind lending but I feel I've only scratched the surface. I am left with many questions....

Most important....

1. Where in the world do I find notes!?? (I feel like I did when I started investing in RE. "I don't know where to find any good deals!" because I really have no clue where to buy notes....

Is there a website? Do I call banks? County Clerk?

2. Anyone have a successful strategy for investing in notes whether they be performing or non-performing notes?

Chuck 5854064863

Helen Heppie · Answer

@Tucker Long make sure you have control of the seller first. You need to have control of at least on of the parties involved (buyer or seller) otherwise the deal would never close. Do some initial DD on the pool (check values, etc) and see if your comps are in the same ballpark with the seller's. Its a must. Secondly make sure you qualify your buyer - you need to know his buying criteria and if he is realistic (pricing). You need to work on the reality level with both buyer and seller before taking them on otherwise your trade will blow up (it happened to me before). Third: be more than just a paper pusher. You have to create value for your services - help with due diligence.

Mark Gallagher · Answer

@Chuck VanDyneI have a long thread going on buying NPN - http://www.biggerpockets.com/forums/522/topics/222...

Chuck VanDyne · Answer

@Dustan MarshallThanks Man. Ill search for the podcast and give it a listen!

@Bob MaleckiThanks. Very useful information. I guess I just need to get the word out that I'm interested in buying/selling notes... I will be contacting you for more information. Thanks again

@George FryeThanks! A local investor was just telling me about PPR on Saturday. He said I needed to check them out as well.

@Bob E.WOW! That really is a fantastic idea! You don't have to worry about bank appraisals, thats a huge plus. I will be calling you to hear more. Thanks so much!

@Tim FitzgeraldA lot of useful information here. Thanks so much for the reply! I already work with a lot of real estate attorneys as a real estate agent. I can start spreading the word to them. Thanks again!

Tim Fitzgerald · Answer

Chuck, the three big keys to finding privately-held notes are 1. Marketing 2. Marketing and 3. Marketing. There are many ways to do go about this and I've found that developing a network of referral sources in the professional sector can be invaluable for repeat business. As in attorneys (any specialty), accountants and financial planners. These professionals tend to cater to clients who may be holding notes or other types of cash flows and who may (at some point) need a lump sum of cash but don't know how to go about getting it. If you can educate these financial professionals who are amenable as to what to look for, they can turn into valuable referral sources for repeat business... like maybe 2,4,6,8 or even 10 transactions per year each and every year. You can also purchase leads for private note holders culled from public records. There are also online note exchanges but that's a relatively new animal and I don't have any recommendations there as of now. And, re NPNs, that's a different animal than performing notes and for those you'd want to work with hedge fund managers and the like.

Bob E. · Answer

@Jerry W. we have not had any problems with Dodd Frank.  We have an RMLO that qualifies the borrower and takes care of most of the issues.

We have also done deals where we sell loaded / turnkey rentals to investors and carry the note.  In these cases is is not owner occupied so DF does not come into play.

Jerry W. · Answer

@Bob E. have you had any issues with Dodd/Frank?  I thought it pretty much stopped owner financing unless it was your primary residence unless you used the same criteria to approve that banks use?

Bob E. · Answer

@Chuck VanDyne Our favorite strategy is to buy and rehab then sell with owner financing.  This way we know both the property and the buyer.  You can force appreciation with the rehab and then sell at top dollar to someone that could not get financing otherwise.  We usually do land contracts on these properties to make the foreclosure process easier.  My phone number is in my profile and below.

Feel free to call if I can ever help.

George Frye · Answer

I think you mean #29 with Dave Van Horn. His company is PPR

Bob Malecki · Answer

Hi @Chuck VanDyne notes are a relationship business and I've built up my contact list from conferences, trade shows, Linkedin and here on BP. There are basically a handful of companies & brokers who provide good quality non performing notes and you need to build a contact list with these folks.

I've built a strategy and platform for evaluating, buying, due diligence, and various exit strategies for NPLs. It can be quite lucrative and sometimes a PITA. It takes time to learn and time to nurture the relationships with those who can provide quality tapes. Feel free to connect with me and definitely reach out to Bill Mencarow and get his perspectives. He's got decades of experience in the note biz.

Bob