What Have YOU Learned in Note Courses?

7 Replies

I would like to open a discussion which drills into the actual content of these note investing courses that are offered.  I would like the conversation to steer away from identifying which or whose course you took but rather deal more with the actual substance of the course.  I am talking about a paid course which offered to teach you how to invest real property secured notes.  This doesn't really include going to your local REI meetup and listening to someone talk about investing in loans.  

I suppose we can outline some topic areas to which, if you have been a student, you should be able to identify whether or not you feel you are competent and comfortable on relying on your knowledge and skill developed from these courses.  Like a student of any trade craft, even as an apprentice you should have some basic skills above that of a layperson.  What do you think those are?  What do you think you didn't learn?  Have you gone out and mostly found yourself prepared or ill prepared?  How many actual note transactions (not real property) have you closed since class?

To further segregate subtopics to identify, can you confidently and comfortably do the following (Apply to all any PL, RPL/SPL, NPL):

  • Source real product for sale outside of the internet exchanges such as FCI Exchange?
  • Price a loan when no indication of price is given by a seller?
  • Identify influences to the price by initial data?
  • Identify trade terms which are not in your best interest or do you simply expect to trade how a seller demands to trade?  (ie - making deposits, closing in 24 hours, etc)
  • Conduct due diligence extending beyond ordering a title report and looking up taxes - can you identify defects in documents, servicing and origination?   Do you know how to price that defect accordingly?
  • Are you familiar with regulations that affect how a loan is made, serviced and dispositioned?  
  • Do you use self servicing, limited servicing or full servicing platforms?
  • Do you understand the regulations around soliciting investors and raising capital?
  • What didn't you learn or feel like you could learn more about?

That should give a nice rounded out set of topics.  Again, the point of this discussion is not to bash any course or promoter of course.  Rather, I would like to quantify just what folks actually learn in these courses.  "I learned a lot." is not an answer to this thread.  If you have stepped into the industry and out of the unknown at some level you should be able to identify concepts to which you do not know much and those which you feel like you are properly knowledgeable and skilled.  

I hope some folks participate as I think the content of this type of discussion can be valuable for many.

3 take aways from 1000+ hours of working with notes, courses, blogs, mentoring, etc:

1. SYSTEMS in place

(do you have a workflow of working out a note?)

2. Taxes/Liens/Title 

(do you even own something or is it just a piece of paper?)

3. Collateral 

(is the house still there?)

Everything falls under those 3 points. The only thing that doesn't, is your own creativity.

Great topic Dion, I'm looking forward to the responses. I haven't taken any paid training yet, but I plan to. I've done a lot of self study, videos, books, conferences I think I have a basic understanding of all the topics you list. I'm not saying I'm knowledgeable in all these topics, I'm just saying I know what the topic is and some of the basics of it, and where I can go to learn more about it. I couldn't say that 4-5 months ago. back then, JV meant Junior Varsity, and a "tape" was just used to stick things together :-)

I recently paid for some training information (not a course, but some videos and printed material) from a well known trainer.  Frankly I was pretty disappointed with it, all the content was the same or similar to stuff I already found before, for free.  I didn't complain or ask for my money back (a money back guarantee was offered).  Two reasons, this person offers a lot of great free information, so It's my way of compensating him for that, it's wan't much money anyway.  And secondly I don't want to make an enemy out of this person, we may do business together at some point.  And to be fair, I've done a lot of self study already, someone who hasn't probably got their money's worth. 

I mention all of this because I don't want to take the training and come away with the same feeling, "That's it?  I knew that stuff already".  

Nice thread @Dion DePaoli ! My company @platinumventures buys NPNs. I'll chime in on the questions you asked point by point. By the way I have taken paid training courses from numerous note investing educators. I will not identify which ones here, but it is 4 different ones (so far): 

  • Source real product for sale outside of the internet exchanges such as FCI Exchange?

Absolutely. I learned how to speak with the potential sellers, understand their lingo, pricing requirements and how to find them. I currently work with over a dozen sellers from whom I buy NPNs regularly.

  • Price a loan when no indication of price is given by a seller?

Yes, and while many of the note educators advocate the "Stair Step" pricing method, current market conditions are trending towards higher price points than we prefer. There are still good deals out there but as you stated, you need to be aware of the defects with the docs, title, property itself, etc.

  • Identify influences to the price by initial data?

Not sure I understand your point here - can you clarify?

  • Identify trade terms which are not in your best interest or do you simply expect to trade how a seller demands to trade? (ie - making deposits, closing in 24 hours, etc)

I think that when you are a newbie it is hard to get the sellers to accommodate your buying habit (funding when you want, closing on their schedule, etc.) However, I have learned that once we established our company as a credible purchaser, who does what we say we will do and when we committed to doing so, they allow us to set the terms (within reason). For example, I pretty much tell the seller how long my due diligence period needs to be, and when i will fund the deal assuming we elect to buy. We are also buying in mini-pools so that may have some impact on this.

  • Conduct due diligence extending beyond ordering a title report and looking up taxes - can you identify defects in documents, servicing and origination? Do you know how to price that defect accordingly?

We have a very extensive (but proprietary) DD process. It only starts with the O&E and BPO. All in all it includes over 35 data points which help us determine if we ant to bid, and what to bid. Some of the things I can share is we look at demographics for the property location (crime, population, market comps and sales trends. rents, etc.) We learned only the basics here from the teachers, and added the rest through trial-and-error, as well as through collaboration with other note buyers and sellers over the years.

  • Are you familiar with regulations that affect how a loan is made, serviced and dispositioned?

Yes, to a degree. We understand the regulations and comply with all. We do this by relying on our licensed servicer and attorneys to help us ensure we remain in compliance. This does require our oversight of the people they have handling our loss mitigation and we audit their processes regularly. 

  • Do you use self servicing, limited servicing or full servicing platforms?
  • Do you understand the regulations around soliciting investors and raising capital?

Yes. However this is an area I do believe that all of the educators could do a better job telling their students. There are many nuances here that are simply glossed over. I would really like to see more depth in this area of the training. Some do not even cover it at all.

  • What didn't you learn or feel like you could learn more about?

One topic that NO ONE is teaching that I feel many people would benefit from is in the area of tax treatment for notes. What is your cost basis? Is it a long term or short term capital gain, or ordinary income? are the implications when you foreclose, get a deed-in-lieu, reperforming note? How do you treat a waived deficiency judgement? What happens to the cost basis when you sell a partial or fill note. We have very good accountants and book keepers that help us, but many novices do not.

Happy to elaborate on this or any of the above points if needed.

Good stuff Dion, thanks for posting. Personally I did not enroll in any formal training. Instead I just started buying notes *cautiously* and "learned by doing".  Having this forum on BP and attending note conferences and developing relationships with both peers and vendors who could guide me along a path of knowledge was critical. 

Taking action and learning from my own mistakes allowed me to develop my skills and find the resources I needed to compliment my deficits. I see many students or "wannabe's" sit on the sidelines, essentially frozen by either fear or paralysis of analysis because they don't take action. 

As we all know this is an extreme relationship business. Having a mentor and a group of associates in a learning environment is important when starting out, but the networking and getting outside of one's comfort zone is really important to growth as a note investor. 

Bob

@Wayne Snell

Do you mind describing the "Stair Step" price method you mention?  I am sure some of us can speculate a little but curious what is actually taught/suggested.

The [Identity influences to the price by initial data?] question was me trying to drive deeper into pricing metrics.  When bid data is supplied by a Seller can you identify data points which will influence your bid?  

That influence may be an increase in pricing or a decrease in pricing.  For instance, a common data point we see absent from bid data for NPLs is foreclosure start and milestones.  Having that data present helps lift our bid pricing since in theory time to disposition should be reduced.  So less time to disposition should mean higher bid.

I often find myself discussing with sellers what I will bid well and what I will not void of geographical and other top line data inclusion or exclusion.  In other words, we get there is a bid difference between New York and Texas, what within say Texas asset populations can we bid well and why.  

I am pretty curious how much confidence folks have in their pricing and if they understand how to be aggressive in their pricing model without drastically increasing their risk.  

As an interesting aside observation, I think there is a little bit of a trend of folks as they gain more experience feeling like pricing is increasing.  I think I can date that trend back many years from lots of folks.  That sort of begs the question, is it really an external market influence - sellers asking for more money or is it an internal market influence - your model doesn't price that asset/segment/population as well as it use to with experience under your belt?

Good point on the tax and accounting of the actual asset.  

Hopefully we can get some more folks to chime in.  

When starting out I paid for several programs and classes from three or four teachers. What I learned was very valuable and ranged from the concepts and differences between different kinds of notes to getting a basic crash course on a financial calculator. All of it added to the knowledge base and at the same time I was buying notes and learning by experience. 

One of the other greatest advantages of this training was the connections and networking it provided. People I met years ago when starting out have become allies and even business partners. 

I've attended classes, read everything I could find, but have not joined any of the 5 figure masterminds. The learn by doing has been expensive and likely slower than was necessary. Concerted effort to network and "talk shop" has been productive. The senior members of this business have been gracious and patient with many questions. 

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