Note investing

16 Replies

There are a lot of note investors / funds / groups in the tri state area. I would start by going to the different events and listen to people talk, ask questions, meet some vendors etc.

@Matthew Tierney I am a note investor from Delaware, that is close enough to Philly. We have a meetup every couple of months on Naanmans  Road right over the Delaware state line. I am currently working on 2 notes in Ohio that have gone from us owning the note to taking back the property.  One is a mess but we are cleaning it up and the other is looking like a deed in lieu.  

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@Jay Raught and @Michael Daggett, wish I had you both in Alaska for your brains and for your connections. I've discovered one remote note where there is no equity on raw land, and the seller won't even send the docs that I've requested. So, needless to say, I've considered that dead and not something I'm interested in. They were referred to me by my banker who wouldn't consider loaning because of back child support problems that the husband had. We have some long time note buyers and lenders here who appear to be tying up the market and we don't have a very big market. A friend suggested I contact land developers out in the Valley (Matanuska-Susitna Valley, where Sarah Palin comes from), but if I have to foreclose I've got a chunk of land, maybe with a gravel driveway, out in the boonies. It would be valued at the top of the market now, but Alaska has a lot of land and it could be worth $1.98 if we have a crash. I already have six lots in Laurel Acres in South Anchorage where the growth actually is and they aren't worth much. I'm whining, wishing I could find notes to even work on/practice on, but as a beginner, they have to be in Alaska.

you can take a deed in Lieu you will be responsible for anything that is on title ahead of you.

this is why many lenders don't allow junior loans.. because it precludes them from foreclosing. so if you have a bunch of liens etc.. your normal course would be to foreclose them out if they are junior to you... or negotiate them down and pay them off in the same escrow you do the deed in Lieu .

Didn't read this thread, just the OP, read the thread "Calling ALL note investor pros" there are other threads on Dodd-Frank and note brokering, might start there. :)

@Matthew Tierney You may also want to look up Dave Van Horne in your town. He mostly deals in second lien notes but is very knowledgeable about notes in general and is a straight shooter.

@Dolly Caswell don't be afraid to invest outside of your local area, especially in notes. I live in Montreal and invest exclusively in the US and never visit the houses on the notes I buy.

Nathan, I have to disagree about buying notes out of your domain. There are plenty of notes in every city and for any newbie it's best to be able to reach out and touch your collateral and borrower. Know your own backyard before learning what they might do 4 states away. 

Since brokers don't guarantee squat, you can't do your due diligence from afar relying on who knows who you got to assist you on the phone, it's just not for new note investors. 

Even appraisers have been known to get the wrong picture of a property as the subject property. 

After you become more seasoned in notes, understanding the legal implications you can venture further and do your due diligence on those assisting you as well. :) 

@Bill Gulley - I kind of disagree with you on buying notes on where you lived as you just limit yourself and your market. Frankly, if you can find  notes in your own backyard then it's a bonus.

The point is if the note is a good note then do you care where it located?

Secondly, the due diligence process is the same regardless where the notes are and mostly with the Internet you can do the due diligence anywhere. However, if you FC, then you should know the difference between judicial vs. non-judicial

@Nathan Tuner - I second for Dave Van Horn in Phily - is a very knowledge person on notes.

Cheers, can definitely change!  I agree with @Nathan and @Bac Nguyen because you aren't going to find npn deals that make sense in San Diego or Canada.  It's a lot like Austin, TX where I'm from.  Now if you live in MO, FL, IN, IL, OH, MI and other states where there is still a lot of note inventory, then yes, you are correct.  

I would have gone broke a long time ago if I was just focused on assets in TX.  I had to buy assets in other states.  The due diligence process is the same across the board.  By knowing your values (realtors) and checking taxes, you'll secure your investment.  But make sure to check title, servicing, and the collateral.  And don't be surprised when the exit strategy does change!  It happens everyday!  

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The key to buying notes in any area of the country are

1. Know the legal framework especially foreclosure laws, and how those laws are being enforced

2. Know the current market cycle for the area the property is located in

3. Understand the supply and demand factors of the particular property type securing the note you are investing in

4. Know the financial position of the borrower and guarantors

5. Know the market value of the note you are purchasing

6. Understand the significant differences in legal compliance and legal risk between notes secured by owner occupied residential property, non owner occupied residential property, and commercial property.

I'd like to know if there's a real market for delinquent notes in Minnesota. From what I understand, contacting lawyers directly can be your best sources. But just truly delinquent notes, and not non-performing ones.

@Matt Skog Yes you can get delinquent notes in Minnesota although to be honest I don't see many on any tapes I get. Checking with local attorneys, banks, and servicing companies are a good place to start.