Formula for Purchasing NPN's
I'm currently in the preliminary stages of buying notes. I've done some rentals & wholesaling of properties and notes. Now, I'm looking to buy notes. I would like to know how to work them efficiently. I am aware of what most of the steps are when you purchase them, I'd like to get an idea on the format or formula of the steps to take 1st to last in order not make to many costly mistakes.
Do you have any ideas?
go take a look at some of Scott carsons videos. Anything that mentions breaking down deals or tapes will give a good idea.
Hi @Keturah Rucker, Scott Carson has some great videos for breaking down the due diligence steps. He is running an online NoteCamp in a few weeks and it is very inexpensive. That would be another good avenue. I also recorded a video that walks through some of the systems and processes that I use in my notes business that I found helpful. I am happy to pay it forward and share with you. If you are interested in viewing it, PM me for the link.
@Keturah Rucker it would be helpful if the post wasn't so vague.
Steps to purchase a loan are different from managing a loan in its various stages of performance. Working a performing loan is less involved than working a defaulted loan.
Any information, when you have none or a limited supply will be helpful for sure but I advise to be careful not to group all loans and purchases into a cookie cutter template.
Dispositioning a loan starts with good due diligence but good due diligence isn't, in and of itself, dispositioning a loan. I also would not consider due diligence the same as the proper price to pay for an asset.
The easiest loan to work with will be one that pays as agreed. There just isn't much to do. As loans fall into greater distress there are more moving pieces. How to collect. When to advance. Bankruptcy risk. Default risk. All these and more will influence how well your efforts and investments will work.
What do you think you are looking to invest in, in regards to performance of the loan?
What is your risk tolerance for your investment?
What is your return expectation from the investment?
How much capital are you planning on allocating?
What do you think it means to "work a loan"?
Before newbies look for checklists of things to do, I find it valuable for them to answer those questions.
Thank you all for the insight of this subject matter. @Wayne Snell, I PM'd you in reference to your video. I have another question. What is an ideal yield, for eg. Your looking to purchase a performing note with a $60K note with a FV of $55K ($5K down) @ 9% APR with a 15 amortization and no balloon?. How do you calculate the yield?
Thanks
Hi Keturah,
I'd highly recommend you read Jimmy Napier's fundamental note investing book "Invest in Debt" before you go any further. In that book you will get some good basics such as calculating note yields.
Best Regards,
Michael
Wayne Snell would love to see your video Michael RIstau thanks for book recommendation !
@Shella Sanders you are welcome- glad someone else found it useful. What kind of deals are you sourcing in Dallas on the wholesale end? PM me?
@Michael RIstau There are weekly note meetups in OC. They are a good place to learn. You'll see all kinds of stuff. Pick through to find your own path. Along with reading every @Dion DePaoli post on BP you'll have a sense of the pitfalls in this asset class. I've been very happy building a solid passive income from non and performing loans over the last year. I'm in OC about once a month if you'd like to get coffee.
