States you'd steer clear of, if a beginner Note Investor and why?

16 Replies

Hello fellow BP'ers,

Just attended the NJ Distressed Mortgage Expo this pass weekend and really enjoyed it. Both from an educational and networking aspect. Thought it was a great event and met a lot of nice people there. 

I am new to Note Investing and trying to formulate some guidelines that would narrow down the many aspects of getting started.

If one were to seek out 1st/2nd/PN/NPN notes, are there any states you would recommend staying out of until more experienced?


I would suggest seeing if a license is required and avoid those states. IL, GA, KY, WA are a few that I know of off the top of my head. GA is OK if you are buying just a couple in your name, but as a business, you need a license. Talk to an attorney from that state. And you might need to ask if you can conduct business in that state as a foreign entity. Sometimes you are required to register an agent in that state. Real Estate attorneys don't always know that answer.

If you get a land contract, aka Contract for Deed, find out if they are legal. I wouldn't buy a CFD in TX. And MO is fuzzy on how they are handled.

Redemption periods are important if you wind up getting the property through foreclosure. You don't want to have to hold on to it for 2+ years. I think Maine might be the worst, but don't hold me to it.

So find a state you like and learn everything about it. Then expand. As you see, there are a lot of little details that can make a difference.

@Adam Adams Thanks for the detailed info Adam. That helps a lot. Many details... When you say License, is there a specific one that you are referring to or just a basic RE agent type of license for example? Perhaps that may vary too, state by state... Thanks!

In addition to the suggestions Adam provides, I would also consider staying away from long foreclosure states such as NY and NJ since you can be tied up with your funds for 2-3 years before you see any returns. States such as WI and AL have fairly long redemption periods as well which can have the sane effect on returns. And I personally do not invest in any notes in the Chicago area (Cook County) due to the anti-lender atmosphere. I don’t think I got a chance to meet you while at the event but I mentioned during one of my sessions that I have a video you can watch that discusses these sort of things. If you want the link PM me. I share it as a pay it forward 

One of the NMLS licenses. You should always ask an attorney on which one you need.  Google NMLS Resource Center.

@Wayne Snell Hi Wayne, you're right, we did not get a chance to meet but we learned and enjoyed your panel discussions. Thanks for the PM offer. I'll take you up on that. Tony

@Anthony Giunta Jr. I was at the Expo as well, but I also don't think we met there. It's good to see someone else from CT entering the business.

@Anthony Giunta Jr.
Did not get a good amount of time to talk at DME, hopefully see you there in September. Here are a few thoughts, pick 2-3 states you would consider investing in and I agree that you should stay out of The northeast from Maryland north. I would not be afraid of judicial stages, just understand the foreclosure times and costs - speak with and get an attorney lined up in that state. One mistake I hear a lot of newer investors make is they take the Fannie mar FC costs and run with that, but that does not include court costs, advertising costs etc. I would also try and know more about the areas you want to invest by talking to property managers, realtors and contractors.

One thing to also consider if it is judicial is if the borrower has redemption rights.

Stay away from Prince George's county MD.. Foreclosure  process here takes 1-2 years

It depends a little bit on what kind of note you are buying too. @Adam Adams referred to it briefly but if you are buying a contract for deed the rules are a bit different. For example in OH they are treated separately from a mortgage and are much easier to deal with unless the borrower has 20% or more equity or has lived in the house for 5 years or more. In those cases they are treated the same as a mortgage and you need to do a full foreclosure. I'll echo what @Chris Seveney said about pick a few states and then expand from there.

@Nathan Turner thanks for the info Nathan. Good to know about Contract for Deed. The twists and turns seem endless but I think it's because a lot of this is just new right now.

Unfortunately, I didn't get to make the expo but I would like to add IL especially Cook County. You need a license in IL and although I know many investors who still venture out there if you are going to invest in Cook County be sure to know how they conduct business. From my understanding, it is very different. I also steer clear of GA, NJ and NY (for long foreclosure timeframes). If you're just getting started maybe try sticking with just a couple of states and learn their laws until you feel comfortable moving on to some other places.

@Natasha Hunter thanks for the info. I can see starting narrow makes sense.

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