Note Investing Pricing Strategy

[Martin Saenz]

I hear a ton of discussion around this topic with regards to buying non-performing notes.Newer folks tend to think in terms of paying within an acceptable range given the marketplace.From day one, I’ve focused on the exit strategy for each note and developed expected returns given my due diligence process.Based on the expected returns when the note becomes cash flowing and the cash on cash returns I need to see as an investor, I let that determine what I am willing to pay for a non-performing note.I’d love to hear if anyone else has a different method.

[Dan Deppen]

My method is very similar. I have some macros in my ROI calculator that let me calculate a price based on a minimum return for a given exit scenario.

The minimum return I will accept for each scenario varies based on how likely I think that scenario is however. For example, if I think foreclosure is the most likely exit then I need to have a higher return for that scenario. If its very likely to reperform in some fashion or another, then I may be willing to accept a lower return for the foreclosure scenario since that less likely to happen.