Buying a Mortgage Note

[Lakshmi Chari]

Hello all, I am a brand newbie investor in real estate and require some advice. I thought I would start of investing in mortgage notes before fully diving deep into real estate property investment. What are the main criteria that I should focus on while purchasing a mortgage note. 

Thank you all for your advice 

[Natasha Hunter]

@lakshmi chari This is a very broad question but a very good one. When analyzing a note you should look at many factors. Here are some of the things I look at:

I personally only purchase notes that have a population of 10k people or more or are located very close to a metro area. This is because it will be much harder to resell the note, find a contractor, rent or sale if the population isn't very big. 

If you're a new note investor its a good idea to chose just a handful of states and focus only on those until you have learned their laws and the process. I won't invest in GA, NY, NJ and parts of Illinois. These are for personal reasons.

I won't invest in notes that have tax or other super liens attached. If you're not aware what super liens consist of, consider getting the book, Bulletproof title due diligence by Alex Goldovsky as it addresses some of the pitfalls of these liens. 

Occupancy Status. This depends more on your exit strategy. I cater more to occupied because I like to modify or reinstate these loans which is much easier to do if the occupants are still in the house

Another thing to consider would be the statute of limitations. Many states have laws as to how long you can foreclose after the borrower becomes delinquent. Speak to an attorney about the states you're interested in. 

ROI is obviously a good one. There are tons of notes available but they don't all make sense. It's important to determine what you are looking for in your ROI numbers especially if you plan on Joint Venturing these out. Be sure to include some possible rehab if that is a part of your strategy.

There are many others and it will be interesting to see what other note investors look for when purchasing a note.