I appreciate all you do, and the education you provide to people. I have recently had the "Rich Dad Poor Dad" awakening so to speak, and I am in the decision phase of what assets I want to be investing in.
I have been very intrigued by the real estate markets, but something I saw Scott Carson say on youtube about "Be the Bank" is really striking a nerve for me.
My Question, is it too late to get into Investing in Notes? My goal is financial freedom from my Job and the ability to travel, and have future growth to give to many generations of Bagnanis. I have some investing partners in my family, but I am the main driver of our efforts, and once I pick a niche I will commit all my spare time, and even go full-time (quit my job) if I am successful enough.
Thanks for taking the time to read this, and if there are any good resources on the basics of cash flow notes, I'd love to check them out.
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
Hi @Stephen Bagnani, its never too late to invest in mortgage notes. As long as people need a place to live and have to borrow for the right to own, there will be notes. I would spend the next 6 months getting educated and attend conferences like Papersource and Note Expo. Make connections, learn from your peers and get some education on how to evaluate notes and due diligence. The consensus at a panel discussion at last year's IMN conference is that there are over $300 billion in extremely delinquent debt still to be liquidated to the secondary market, plenty to go around for all of us small balance investors.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
9y
@Stephen Bagnani, I reckon "Be the Bank" is a bit different than "Investing in Notes", but nothing in your post indicates where is your premise of "too late" is coming from?
What happened? Are people all of a sudden going to stop investing in Notes? Have they already?
Or is a better question: "Is it time to be even MORE diligent in my research?" To which the answer would be: SURE - always! (You can't do anything YESTERDAY, if you didn't already do it!) My 2c.
Fund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
9y
Hi Stephen,
If you're talking in reference to secured RE notes the industry will always exist as long as there's RE and mortgages. As for seller financed notes the good news is Dodd Frank is being deregulated and as for institutional notes it's a supply & demand equation with a big factor being jobs & economic growth, but there's always people defaulting due to job loss, divorce and medical. Anyway, best of luck in your decision.
It's definitely not "too late" to get into notes. Most people are just starting to enter the notes market because a note isn't as tangible as a property and some people like to hold title to a home rather than being the first position lender on a property and only holding paper. I like to do both myself and deal in both properties and paper. I prefer to stay on the safer side of notes and deal with performing notes. It's a very passive business and is not really set up to make people rich. Performing notes are for making rich people richer as it requires money to invest and it pays a consistent 12%. Non-performing notes are typically on the opposite side of the "Passive / Active" spectrum of investing and can make you rich (or poor if done incorrectly). If you are looking for a place to park your money, buy performing notes. If you are looking to start a real estate business, buy non-performing notes or tax liens. If you are looking someone in the middle, buy some turn-key cash flowing rental properties. I'd be happy to plan a strategy with you if you would like to connect.
Thanks, Darren. I was thinking of Turn-key Cashflow properties actually. However I am looking for toward out of state markets. Do you have experience with California? If I can get good deals in So. Cal. I would, but everything is quite expensive. On the other hand the renting market is really high because of it. I'll email you.
Real Estate Broker · Atkinson, NH · Member since 2015 · 92 posts · 24 votes
9y
@Stephen Bagnani Basically what @Darren Eady said! I invest in non-performing as a business to build cash. I like it better than flipping houses because of the current price point for NP notes in our market. You do have to know what you're doing, identify exit strategies, and also assume worst case scenario when purchasing them, while hoping for the best. We have an oversupply of NP notes still around from the big crash, so now is an excellent time to educate yourself on this business.
My bigger question is, by March I'll have about 15k in capital saved up, plus my full-time w-2 income. Is it even possible to be a Note investor in my situation? (Assuming I took topnotch Note education from say @Scott Carlson or that @Eddie? Speed gentleman)
I wont even try until I have invested on one of the in-depth courses to actually understand what's what.
Investor · Kingston, WA · Member since 2008 · 1k+ posts · 1k+ votes
9y
Hi @Stephen Bagnani, its never too late to invest in mortgage notes. As long as people need a place to live and have to borrow for the right to own, there will be notes. I would spend the next 6 months getting educated and attend conferences like Papersource and Note Expo. Make connections, learn from your peers and get some education on how to evaluate notes and due diligence. The consensus at a panel discussion at last year's IMN conference is that there are over $300 billion in extremely delinquent debt still to be liquidated to the secondary market, plenty to go around for all of us small balance investors.
Thanks Bob, its an honor to get feedback from you, I was literally listening to the Podcast with you as a guest as I read this. I will definitely take the routes you spoke of for education. This is very encouraging!
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
9y
You are really trying to jump into the deep end of the pool by starting out in notes as a newbie. Like a guy that took 1 anatomy class trying to go in the next day to perform brain surgery.
If you look at most of the successful notes guys, one of the things they have in common is that they didn't start out in notes, they went there after extensive experience in flipping, buy and hold, etc. There is good reason for this.
If and only if you find a very experienced person in this space willing to mentor you and hold your hand walking you through it would I even consider it. Problem is, there are many more sharks than mentors, and they are more interested in draining your $15k than getting you started in the business, and you as a newbie won't necessarily be able to spot this before it is too late. Those that know the business well and are successful are usually too busy making money and don't have time to take on students for free, or even for a few grand which would be peanuts for them. Perhaps you find one that is not a shark and really likes you and agrees to help, maybe after you put in the time and effort to earn their trust they let you work for them, or maybe you have another skillset that would be useful for them you could trade in exchange. It is possible, but not very likely...
I don't think you are too late to start in notes (market wise), I think you are too early (experience wise) ...
David, I was planning on taking courses to concentrate my education on Notes, but thanks for the feedback.
Most of the courses are offered by the guru sharks mentioned above ... you will not learn the business simply by taking a course or two; you will need hands on experience, and the best place to get that initially is not on the debt side, it is on the equity side IMO. Sorry for the downer, but trying to keep it real ... be very wary of those that only tell you what you want to hear. Best of luck to you.
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
9y
@Stephen Bagnani please take this as its intended as a helpful post.. with 15k your woefully undercapitalized to enter the note business.. yes you could buy some sub prime NP note for 2 to 5k and slog through it.. and that would probably be better than blowing 30k on an eddie speed training seminar.. but the note business requires a LOT of capital.. to scale it in any fashion.
I would keep your money in your jeans.. if you want in the business Go work for a company that does what you want to learn to do.. get paid to learn... then once you have uber experience you can attract investors like some of the folks above have done.. they are not using their own dough they use others dough to run their deals.. LOL
We do a lot of notes over the years mainly in HML short term stuff the average demographic of a note investors is one that has Made a LOT of money in their day job.. IE business owner and their 401k.. for instance Buren Trucking IN alameda was a note buyer of mine... Or other professionals.
they then buy rentals some tire of the rentals but they cash out of those and have 250 to 1 mil in cash to go buy notes... and that's just what they do.. and those posting above are in the business to create note opps for those folks and make a fee to do it.. that's what you want.. non of your own money and make a fee to help others until you have enough dough to do it yourself.
It's definitely not "too late" to get into notes. Most people are just starting to enter the notes market because a note isn't as tangible as a property and some people like to hold title to a home rather than being the first position lender on a property and only holding paper. I like to do both myself and deal in both properties and paper. I prefer to stay on the safer side of notes and deal with performing notes. It's a very passive business and is not really set up to make people rich. Performing notes are for making rich people richer as it requires money to invest and it pays a consistent 12%. Non-performing notes are typically on the opposite side of the "Passive / Active" spectrum of investing and can make you rich (or poor if done incorrectly). If you are looking for a place to park your money, buy performing notes. If you are looking to start a real estate business, buy non-performing notes or tax liens. If you are looking someone in the middle, buy some turn-key cash flowing rental properties. I'd be happy to plan a strategy with you if you would like to connect.
Darren, could you take a look at my thread below and send me a private message if you have any thoughts since this seems to be an area you have knowledge of?
@Stephen Bagnani please take this as its intended as a helpful post.. with 15k your woefully undercapitalized to enter the note business.. yes you could buy some sub prime NP note for 2 to 5k and slog through it.. and that would probably be better than blowing 30k on an eddie speed training seminar.. but the note business requires a LOT of capital.. to scale it in any fashion.
I would keep your money in your jeans.. if you want in the business Go work for a company that does what you want to learn to do.. get paid to learn... then once you have uber experience you can attract investors like some of the folks above have done.. they are not using their own dough they use others dough to run their deals.. LOL
We do a lot of notes over the years mainly in HML short term stuff the average demographic of a note investors is one that has Made a LOT of money in their day job.. IE business owner and their 401k.. for instance Buren Trucking IN alameda was a note buyer of mine... Or other professionals.
they then buy rentals some tire of the rentals but they cash out of those and have 250 to 1 mil in cash to go buy notes... and that's just what they do.. and those posting above are in the business to create note opps for those folks and make a fee to do it.. that's what you want.. non of your own money and make a fee to help others until you have enough dough to do it yourself.
Thanks for the advice Jay. It would be my dream to get my hands dirty and actually work in the market, before I start seriously investing. I want to learn. Does anyone know any such companies in Southern California?
Lender · Los Angeles, CA · Member since 2009 · 1k+ posts · 2k+ votes
9y
There are at least two sides to the note business, @Stephen Bagnani: performing and non-performing and you're hearing from investors on each.
Compared to performing notes, non-performing notes, which are typically purchased at a substantial discount to the amount owed, can involve real work and take some time. Here you'll interact on occasion with homeowners, loan servicers, local attorneys, agents, contractors, foreclosure services, etc., etc. You can do this locally, but most non-performing investors are not geographically constrained.
Many more moving parts than performing notes but you can expect to make a huge percent return on any one note and get wiped out on others. That is, non-performing notes are a numbers game and you typically want to buy and work on many at a time. You can buy these for low dollar amounts and $15k might buy a few but realistically, you don't have enough money to spread the risk over enough notes to make a go at these.
Private/hard money lenders are performing note investors. They will typically fund the purchase and rehab of a flip, but can also focus on larger commercial properties. Here the dollars are bigger since were talking about funding the majority of entire deals. Rehab costs will be much less, but $15k would not be nearly enough to fund any one rehab, either. The returns will be less than non-performing notes, but so will the time investment.
The majority of work in performing notes is in qualifying the buyer and the property, which is not that hard. This is what we do and I strongly suggest you focus locally (not a solicitation, we don't sell our loans or take on investors). Done carefully, you'd expect monthly payments and/or a lump sum when the project is sold. Foreclosure or at least collections would not be the norm, as they would be for non-performing notes. Within this realm are whole notes, fractionalized notes, and perhaps even Crowdfunding, or some of the B2B or P2P websites as Prosper and Lending Club. For some, you'll have to be accredited, which you are not.
Just some food for thought, Stephen, and some options. There are many legitimate ways to make money in real estate. Stay away from the naysayers, but listen to Jay in this case and save your money for a while. You're not there yet. Good luck.
Jeff I really appreciate your advice and encouragement. Let me know if you want me to make you guys coffee or be a bird dog or something. I work for experience.
Investor · Tampa, FL · Member since 2015 · 1k+ posts · 1k+ votes
9y
@Stephen Bagnani, with only $15,000, there are actually several other options for you in the crowd funding arena. Some of them even include having a professional manager with decades of experience or more. That way someone else has to worry about the notes, as well as deal with problems when 1 defaults. However, the best options require being an accredited investor. Are accredited or nonaccredited?
Realtor · Detroit, MI · Member since 2017 · 184 posts · 33 votes
9y
Hello @Stephen Bagnani if indeed you are interested in purchase if NPN or PN let me know and maybe we can connect as my company has a few all over the US. What areas are you interested in investing in? The best way to get your feet wet is to look at the inventory companies have avaialble then evaluate whether or not it's a good deal.
I am not accredited. Ian and Todd can you please give me more info.
I want to learn about this crowdfunding. I know i am young but one thing I have learned on my almost 30 years is when someone tries to tell me I CAN'T, it means I CAN, and they don't know how, so ask someone else.
Fairfield, CA · Member since 2016 · 5 posts · 2 votes
9y
@ Stephen
Iam also trying to educate myself on notes. So far just hitting dead ends. There are some sites like fciexchange.com and some others
I haven't bought any note yet, but have a vision of buying only first mortgage notes to start with and only in judicial states with respect to LTVs and market value. Also with all due diligences.I believe for a newbie like us a loan servicer or an real estate attorney would be a good investment in the long run. All the best any resource anyone wants to share on notes be my guest
Thanks
Seth
Specialist · Carmichael, CA · Member since 2017 · 33 posts · 14 votes
9y
It's not to late to enter the market. Of course your question is broad so I'll focus on 2nd liens which is where I think I have the most knowledge. Some investors are focused on 1st position, institutional Notes, others are focused on 2nd mortgages or junior-liens, which is a lien on a property which is subordinate to a more senior mortgage or loan secured by a house. Junior liens are where your money can go a lot further if you can stomach the risk, type of work, etc. For example 2nds are gong to run you say ≤.30 on the dollar. 1st's ≥.30.
I, like you @Stephen Bagnani am starting out with an undercapitalized warchest. I peruse a couple of websites everyday to get a pulse on the distressed debt market:
I've been looking at several indicators to judge the market. You might find them helpful as well. Here they are:
Household debt is high. One way to interpret the data is that high household debt indicates negative pressure and an inability for people to pay their other obligations.
Mortgage is the 3rd most popular form of debt. Houses are still being sold which indicates a percentage of these will devolve into distressed debt.
From 2009-2014, 2nd Home Mortgages were on the rise. This indicates there is no shortage of Notes being created. At least 2nds.
Should you jump in this game? Yes, here's my motivational speech... @Stephen Bagnani, get in the game. Get some education and get in the game. Yes it will hard but there are opportunities everywhere. If you hustle you will find your way. If you are not ready you will soon find that out and move onto something you may be better suited for. Note Investing isn't easy. You've gotta have passion, drive, tenacity and be marginally psychotic :-) to do this but if you stick with it, learn the business and create a bit of luck for yourself, you'll succed.
Note Investor · Austin, TX · Member since 2012 · 602 posts · 357 votes
9y
@Account Closed Your number 3 stat is off. 2nd home mortgages are not 2nd liens.....these are vacation or investment home mortgages. There is a lot less 2nd's out there as not many have been created since the crash.
