3 Reasons that most Note Investors fail

30 Replies

Thank you all for this thread!  I've been thinking about notes for a while now and this thread is my introduction. I think that the career experience I have makes me pretty well suited to investing in NPNs and doing the work it takes to monetize them.  Expect some PMs and colleague requests from me soon, everybody and no - I will NOT be seeking to invest OPM.

@Tim S.
I agree 100%. Over the past few weeks I have spoken to a few investors who invested in other deals where they eventually found out the person they were working with either had not bought a note or are on their second one. One deal was an IRA deal where the JV agreement stayed the limited partner investment was final and the sponsor did not have any more $ to invest in the deal and was trying to get out. Problem was it was a NPN in flint where they were in it for $17k and said the BPO was $24k.

On another occasion an investor teamed with someone and they acquired a $30k CFD for $21,000 and it’s non performing. Oh and it’s in Ohio and over 5 years old and the property is worth around $30k. The sponsor doesn’t have an attorney yet and was unsure even what to do (according to the limited partner). I saw the JV agreement and it appeared to be pulled from google since it did not even include estimated period, how funds were split, acquisition price of note....


Originally posted by @Marco Bario :

This is a great thread. Thank you @Martin Saenz for starting it, and @Robert B. your long post sharing your experience starting out with NPNs was valuable especially to me. 

I'm a bit behind Robert. I've read a lot of the books (including yours @Martin Saenz, which was excellent), listened to many podcasts, joined calls, attended local meetings on the topic of notes and real estate investing in general, and recently signed up for an online program. As they say, I know enough to be dangerous. But I'm ready to dive in. If all goes well, I'll own my first note shortly.

For me the ability to navigate NPNs exposes (or will expose) me to lots of nitty gritty and give me a platform to think my way out of what I expect to be some interesting situations. Not that I'm wanting them all to be interesting. I'd said in a post once before, NPN investors are the Houdinis of real estate investing. I don't think it's for the faint of heart, the light of capital, or the naive. I would like real estate investing to become my primary revenue source, and my path of entry for deals to focus on notes - including non-performing.

Happy Investing...


Marco Bario

 Marco, appreciate the compliment.  I'm glad this threaded discussion is bringing folks in from all over the spectrum.  Sounds like you are on the road with notes from a mental standpoint.  Wish you much success!  Martin

1.  The biggest reason people fail is that they have no idea how to properly value the underlying asset!  

2.  The 2nd biggest is failing cover all aspects of the due diligence process 

3.  and third having no systems in place to handle the numerous variables that come into play

@Robert Beryl I am a fan of running notes through a company, I had been doing 2nd liens through PPR Note Co. until they stopped selling single notes, as I am not yet an accredited investor. Can you elaborate on the car note investing you've done? Are you still in this space? What company do you use? Do they also sell the car notes?