Who loves investing in non performing residential notes?

12 Replies

I have been investing in non performing notes now for 11 years primarily junior liens. 

I just love this business and would like to hear from you first off how you are using BiggerPockets, and second if you are enjoying this note space as well. 

I've I've found Bigger Pockets to be a great resource for both getting advice and giving advice on Note investing. We buy first position npls and rpls and I've also bought them in my personal self-directed Ira portfolio. I always prefer a loan payment rather than a rent check on any asset that I own!

Hey @Mike Ruscica I LOVE the note business. Haven't been around as long as you, Yoda, but I buy  1st liens, mortgages and contracts for deed. Love the lifestyle and love that I also get to help borrowers  and their communities while making big returns.

I prefer the origination side of the business and working with business owners as opposed to homeowners.. although as a short term HML we do have to fight through ups and downs.. no free lunch.

I have bought notes in the past but primarily from institutions right before they were going to cry them at the steps.. Idea being if someone bids it we make a wind fall but If I get the asset we turn it and sell it for big return..

I have been buying first position performing notes in my IRA since the early 80s.. owned two HML companies doing 10 to 20 million a year in new deals. So lot of water under the bridge.

and every decade brings a new soup de jour .. now with the internet NPN space is quite active.

Although from my perspective most beginner note investors would be best suited in a fund like

@Bob Malecki   or @Mike Hartzog for the NPN RPF space let them do the heavy lifting.. get experience then try it yourself..

or if your in the Junior space of course you can throw 3k on a junior in Ohio or MI and well what the heck just little money to practice on..

But if your going to invest bigger money and you have never done it.. again I think joining up with proven companies is a wise move to start.

Agreed! Dealing with homeowners is better than tenants and toilets. Hey @Mike Ruscica ! Hope New Jersey is treating you well. Hope to see you in Dallas next year.

I am just getting started, doing my research but love the note platform!  @Jay Hinrichs , you are spot on, that is what I am looking for a place to put my dollars while gaining more experience...seeing how the pros do it.  However, it seems most are only dealing with "accredited investors", not yet in that arena, but soon.  I've checked out @Bob Malecki site, and I'm pretty sure he's accredited only, will check out @Mike Hartzog as well, any other suggestions are definitely welcome.

G'day @Mike Ruscica . I gotta tell you, I'm loving the non performing notes space too! Having had a strong background in tax liens and tax deeds, I'm enjoying my expansion into the notes space, with a big thanks to you!

From using BP, I appreciate the podcasts - it was where I first heard about notes - listening to a podcast with @Bob Malecki talking about them. I also like the wide and varied perspectives from different investors. There is no one size fits all, and so different ideas motivate people in different ways. 

I have to be honest, I’m not living it. I’m new but this business from what I see is not what it’s portrayed. I do find people some of the well known people here pretty honest but I am very good at eliciting info and I see a lot of shiftiness.

I listen and watch people; more than they realize.

With that said it’s new so there is a learning curve. I sold my business last year and I’m going to be hit with a large tax bill. I called where my books were and asked them to pull the P&L and give me the bottom number. What they gave me, I almost fainted as it would have been a massive tax bill.

Long story short, I called my accountant and he said to send him the information. I had it emailed to me first and I opened the P&L and saw the problem immediately.

In other words it was easy for me; this note business so far is not so easy.

@Robert Beryl   I think the first thing you correctly recognized is that its not investing its a business.

and as such to be successful at it and plenty are.. you need to be able to scale and have the time energy etc to do that.. and include in that the know how.. you can get know how from many sources .. notes are not that complicated.. but the laws surrounding them these days and the notes that seem to be targeted OWNER OCC notes are the most difficult to deal with most of the time.. with dodd frank compliance and all that stuff..

Massive tax bill ONLY means you made a Massive amount of money   Congrats on that.. whats bad is Massive tax bill and no money to pay it.. :)

Thanks @Jay Hinrichs , I find you and @Bob Malecki the two most honest people on here well and @Dave Van Horn when he chimes in (no offense to others as I’m sure there are, I’m just new and the names I mentioned stand out.)

And “massive” is relative :) to you and many others I’m sure it wouldn’t be, just to me it was a lot.

A lot of people coming into this space, this is no get rich easy gig by any stretch of the means. Probably 5 years ago when banks or when the crisis hit, yes. But I agree with you we will never see that opportunity in our lifetime. I’m sure there will be others, just not this. Doesn’t mean you can’t make a decent living, but that’s all relative too.

@Robert Beryl   a lot of these things we talk about are really a representation of the internet age and the selling of how to information..

I was at guru event in Vegas ( one of my buddies paid to go and I was there so I went in for a few minutes)... it was the upsell event.. this one was a few grand but if you liked it then you signed up for the 30k grand daddy training .. it was on wholesaling..  and some guy out of OHIO.. he was horrid on stage the things he talked about happened 4  to 6 years previous.. I left after the 3rd AHA moment he mentioned.. but the folks with limited experience in the space were riveted  and no doubt he got a bunch to sign up thinking Wholesaling is some huge money making thing if you bought HIS system.

However that all said.. everyone has the right to pay for education as they see fit..

Collage are for profit.. by and large and many spend a lot of money on a degree they never use.. end up in student debt.. same thing when people go to these events and put the 30k on a CC.

this is one thing that BP brings to folks is a lot of education for a very low price of a few hundred a year for a membership.. But you do have to wade through all the subterfuge of those posting like they are helping when in fact they just want to sell their product or systems.. only reason they are here ..

WE are all here to get business my self included .. but its nice when some of the folks actually contribute actionable advice as opposed to ONLY posting when its about their business model..

this does leave a lot of beginners dazed and confused as to what is what on BP :)

I am glad to see this post get such activity! I have never done anything on BP before and didn't know what the action would be like.

@Robert Beryl we are all here to get business either directly or indirectly and you bring up a great point on what motivates people or what are their intentions.

I have always been a 100% supporter of win win and the note business is one of the few true win win win "investments" I have ever seen.

1. The bank wins by getting these assets off their books so that frees up capital for new notes out to new borrowers, which also helps the economy,  they take 2+ years to write down the loss I come along and purchase the loan and they report my purchase money as profit for that quarter to their shareholders YaY! We purchase that debt at a steep discount in some cases 30-40 cents on the dollar plus the arrears of the loan is usually never figured in so there's that gravy as well.

2. We now own the debt at a discount and we can now be more flexible with the borrower in reducing their monthly payment, lowering their int. rate and or reducing the principal amount if we are so inclined to do so...sounds like another win also helps the economy

3. We collect cash flow from our investment and we win helps my economy

Not many other RE investments we can make that everybody wins, sometimes someone must lose equity for another to pick up equity.

But make no mistake about it is absolutely an investment, with any investment you must do your homework, you must know what the heck you are doing and you must know what your return on investment will be before you buy or at least have a good projection and have multiple exit strategies  

You can run it as a business if you choose with staff and investors and a fund or you can stay small and keep it all and live the life of an investor.

Thanks for all the posts!

Thanks @Mike Ruscica for responding. I heard you were at the NoteExpo (I really liked that event) and were a complete gentleman to a guy I’ve come to know that is new also and didn’t really know anyone there.

I think @Jay Hinrichs brings up a good point about the internet changing the game. It definitely lowers the barrier to entry but on the other hand it makes research a lot easier.

Just as a side note, I sold a business last year and turns out it was to white collar criminals who tried to steal quiet a bit from me. But thankfully due to the power of the internet I pieced it all together. Without the internet they would have gotten away with it.

So as you say due diligence is key and I do now have a grasp on the banking side of it thanks to that DistressedPro. Really makes those FDIC Call Reports easier to understand.

Thanks again and keep warm up there in Jersey. Spring is only a few months away (I pahk my cah so I can commiserate :) )

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