How to evaluate a note offering

11 Replies

Hello BP community!  I'm looking to find out how to get educated specifically around the process of evaluating a note.  I'm considering notes from various exchanges, but have no method/strategy defined around how to actually determine the good from the bad.  Any suggestions would be super helpful. Thanks!

Hi Alex, 

Below are my recommendations for more resources for getting some basic info on note buying. These resources will provide you a good start to build your knowledge foundation for note investing.

Recommended conferences: Papersource Symposium: Note Expo:
Below is a link to my parter Josh Andrew's book which is an excellent starting resource, and an e-book from Dave Van Horn about NPL investing.
Finally, check out NoteMogul which has a very reasonably priced intro course to note investing. They have a great self-paced starter course for under $500 that I think provides the basic info which let's you learn what you don't know to further your education.   Enjoy!

Bob Malecki  

Thanks @Bob Malecki - I've read the book by @Dave Van Horn , which got my interest piqued.  I appreciate your taking the time to point me to additional resources, and will check out further, specifically around the "how to evaluate one note from the next" in order to make an educated evaluation/comparison.

There are many things to consider when evaluating a note. Are you looking a 1st lien or 2nd? Residential or commercial? Performing or non-performing? What is your exit strategy? Each of these has a different set of criteria you'll want to focus on. If you're a beginner the book Bulletproof Title Due Diligence by Alex Goldovsky is a great book to read as it discusses how to utilize title reports to do a thorough evaluation of a note or pool of notes. It gives a break down of different things you will see when investing in notes as well as how to identify if these are trigger areas. Scott Carson, Eddie Speed and Dave Van Horn offer some great free content on youtube and vimeo on how to determine if a note is good as well. 

@Patrick Desjardins and @Natasha Hunter - thanks for asking and sharing the clarifying points.  I'm just getting educated on the differences (thanks to @Dave Van Horn  book and podcast recently), Patrick, and based on Natasha's response, I will read this book she recommended, as it sounds exactly what I'm looking for.  Do you both source your notes directly w/ banks, or via organizations such as FCI, PPR (Dave's company), or other?  Many thanks for taking the time to share your knowledge!   

Alex, you have a ton a great wisdom to digest from highly accomplished investors. Sourcing notes is putting the cart before the horse. I chuckle when I see post that claim they are looking for notes nationwide. I know exactly my buying criteria. Non-performing first or land contract, occupied, SFR, sub $75k purchase price or sub $125k UPB in, OH, IN, and MI. So knowing that, I have plugged in assets I found on the various exchanges into my ROI calculator set up for that specific state and security instrument. They did not hit double digit returns. I have spoken with 120 bank executives in 2018 across OR, OH, MI and IN with a script. There are many of reasons banks are not selling NPN much. I got my assets from LinkedIn connections and loan servicers. When I learned about notes I felt like Neo being aware of the matrix. Congrats you are aware and growth is in your hands.

Hi @Odie Ayaga I've known Josh for about 3-4 years. Last year he and Scott asked me to help them start a capital fund to deploy into both 1st and 2nd residential distressed debt, and I joined them as a management partner at the beginning of this year. So far its been an outstanding experience as both @Joshua Andrews  and Scott are both highly experienced, self starting entrepreneurs with realistic goals and enjoyable integrity.