Pitfalls of investing in notes from a distance

6 Replies

While I've been intrigued by the ability to invest in notes from anywhere, it is what concerns me the most about making the leap into it. The transactional aspect is appealing, as well as the ability to accrue cashflow, which is my goal.  However, I've heard and read about how sometimes you just have to show up at whatever location the note is located to do whatever it is nobody else is willing/able to do.  Is this a reality I have to accept?  If I invest in notes, I will occasionally have to buy a $1000+ plane ticket to "get it done"?  Perhaps that's what I have to accept.  Upon jumping in, will I discover ways to mitigate the need to be my own boots on the ground?  Thank you for whatever thoughts anyone can offer. 

I've never visited any of the properties in my note portfolio. There is a plethora of vendors available who handle title, site visits, loss mitigation, legal/foreclosure, property preservation and property sales -- all can be directed via phone/email.  Some folks like Robby Woods from NoteMBA seem to like to travel to meet borrowers, but personally I'd rather have my vendors do the borrower contact so I can focus on building the portfolio. 

Bob

Hello Bob,
I am new to real estate note business.
Could you give a list of the vendors you talked about or recommend? Any vendors in WA state. Thank you.
Young

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I am no where near the level of @Bob Malecki , but I have never seen any of the assets I've purchased either. There are many national companies, in addition to your loan servicers, that perform these types of actions. One aspect of the note business that I relish is you can do it from anywhere in the world provided you have an internet access. Your value comes from managing vendors and building relationships with these various vendors.

I appreciate hearing this very much actually. Does this approach cut into your return? Would a proper comparison be rehabbing a house yourself vs hiring a contractor? It may cut into your profit, but you save time which allows you to do more deals?

Well well for the most part the answer is yes. The third parties which we use the services are not too expensive and easy to deploy. I prefer to outsource as much as possible so that I can focus on operations and optimize our return-on-investment. 

Additionally, some of these operational items such as collections require a license in the state in which the loan was originated. I know some smaller investors who self-service their loans and essentially fly under the radar of compliance but I would not recommend it. 

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