Note Investing - which states do you stay away from?

Tax Liens & Mortgage Notes
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Note Investing - which states do you stay away from?

Garrett Haefele
Accountant · Corte Madera, CA · Member since 2015 · 4 posts · 1 vote

Hi all,

Are there any states that you will not purchase notes in? If so what are they and why?

As I read through Alex Goldovsky's book Bulletproof Title Due Diligence (great book btw) and some of the potential title issues come to light, I'm wondering what jurisdictions you experienced investors have blacklisted and will not invest in. I'd think one may also even discount their bid for a note based on these facts as well.

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Andy Mirza
Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
8y

@Garrett Haefele I've heard the same bad things about NY and NJ from other investors so we avoid those states as well.

We're doing good in Cook county on a few notes we have but we're probably just lucky since the borrowers haven't contested FC. We're very wary of the city of Chicago because of it's "Keep Chicago Renting" ordinance, which seems just crazy to me. $10,000 for cash for keys!

In Georgia, you need to be licensed with the state. I've heard that they are very diligent in finding unlicensed lenders and heard of investors that had to dump their portfolios for a loss. Never tried to get a license in GA but it doesn't look too hard. When we're ready to buy there, we'll apply.

I would have said "no" to Nevada a year ago but it's probably ok now. We were a few weeks from foreclosing on a note when the state passed a law in June, 2017, requiring mediation prior to going to sale. The sale was on hold until the state issued guidelines and set up the offices to handle the new requirements. (We got the mediation cert and had a sale date in April, 2018, but the borrower filed BK 13 a couple of dates before the sale.) We talked to our trustee about foreclosures in Nevada and it sounds like there's still a backlog but I'm sure it should get better in the next few months.

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  • Linda HastingsPro Member
    Rental Property Investor · Stockdale, TX · Member since 2017 · 284 posts · 202 votes
    8y

    https://www.biggerpockets.com/forums/70/topics/443...

    https://www.biggerpockets.com/forums/70/topics/520...

    1Reply
  • Patrick Desjardins
    Real Estate Investor · Amherst, VA · Member since 2015 · 386 posts · 400 votes
    8y

    The only state that I would avoid entirely is New York. Terrible judicial system with corrupt judges. Everything outrageously expensive.

    Aside from that, it's more of a matter of what's available to you and how you rank them. For example I rarely if ever see North and south Dakota notes so they could be the best states ever and it wouldn't make a difference.

    Most of the notes available are in the midwest and the south.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    New York New Jersey with there very long drawn out foreclosure process's and expensive. especially if your buy NPN .. your already buying into a bummer..

    Trust deed states are generally the best for speed and expense of collateral disposition in a default..

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  • Chad U.
    Investor · Boca Raton, FL · Member since 2012 · 1k+ posts · 1k+ votes
    8y

    Steer clear of NY, NJ as mentioned above.  MD has a new rule for licencing which is tough to get from what I understand.  

    Also stay away from Cuyahoga and Cook counties, as the magistrates there highly favor borrowers and can really drag out the foreclosure process and rack up the legal fees. 

    2Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    8y
    Garrett Haefele Truly depends. Many say stay away from NY and NJ (which I do) but this also could lead to opportunity since their is less competition. You just have to be cognizant of the rules. In order to play the game you need to know the rules and how others manipulate them. As Chad mentioned Maryland is difficult as well but I have 20% of my portfolio there as I took the time to understand the rules and put a kick *** team in place If you are new to note investing them I agree wholeheartedly with the other comments - once you get some experience then you can decide where to continue to grow.
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  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    8y

    @Garrett Haefele I've heard the same bad things about NY and NJ from other investors so we avoid those states as well.

    We're doing good in Cook county on a few notes we have but we're probably just lucky since the borrowers haven't contested FC. We're very wary of the city of Chicago because of it's "Keep Chicago Renting" ordinance, which seems just crazy to me. $10,000 for cash for keys!

    In Georgia, you need to be licensed with the state. I've heard that they are very diligent in finding unlicensed lenders and heard of investors that had to dump their portfolios for a loss. Never tried to get a license in GA but it doesn't look too hard. When we're ready to buy there, we'll apply.

    I would have said "no" to Nevada a year ago but it's probably ok now. We were a few weeks from foreclosing on a note when the state passed a law in June, 2017, requiring mediation prior to going to sale. The sale was on hold until the state issued guidelines and set up the offices to handle the new requirements. (We got the mediation cert and had a sale date in April, 2018, but the borrower filed BK 13 a couple of dates before the sale.) We talked to our trustee about foreclosures in Nevada and it sounds like there's still a backlog but I'm sure it should get better in the next few months.

    4Reply
  • Garrett Haefele
    OP
    Accountant · Corte Madera, CA · Member since 2015 · 4 posts · 1 vote
    8y

    Thanks all for the replies!

    0Reply
  • Christopher Winkler
    Specialist · Dallas, TX · Member since 2014 · 900 posts · 392 votes
    8y

    We prefer non judicial states south of the Mason Dixon line, though we are branching out to some other Yankee states since notes are getting harder to find! 

    3Reply
  • Bob E.
    Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
    8y

    PA has not been a good experience for us.  Bought one there and that will be our last.

    1Reply
  • Andy Mirza
    Lender · Ladera Ranch, CA · Member since 2014 · 1k+ posts · 1k+ votes
    8y

    @Bob E. What was the problem in PA?

    0Reply
  • Bob E.
    Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
    8y

    @Andy Mirza  Very long foreclose time, especially for a vacant house.  Took well over a year.

    Bob

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Andy Mirza:

    @Garrett Haefele I've heard the same bad things about NY and NJ from other investors so we avoid those states as well.

    We're doing good in Cook county on a few notes we have but we're probably just lucky since the borrowers haven't contested FC. We're very wary of the city of Chicago because of it's "Keep Chicago Renting" ordinance, which seems just crazy to me. $10,000 for cash for keys!

    In Georgia, you need to be licensed with the state. I've heard that they are very diligent in finding unlicensed lenders and heard of investors that had to dump their portfolios for a loss. Never tried to get a license in GA but it doesn't look too hard. When we're ready to buy there, we'll apply.

    I would have said "no" to Nevada a year ago but it's probably ok now. We were a few weeks from foreclosing on a note when the state passed a law in June, 2017, requiring mediation prior to going to sale. The sale was on hold until the state issued guidelines and set up the offices to handle the new requirements. (We got the mediation cert and had a sale date in April, 2018, but the borrower filed BK 13 a couple of dates before the sale.) We talked to our trustee about foreclosures in Nevada and it sounds like there's still a backlog but I'm sure it should get better in the next few months.

    Oregon and Washington have the same mediation laws.. FYI for owner occ..  

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