What states do you avoid as a note investor

Question

I am curious to hear what states other investors avoid and the reason behind it. These are the top 5 I stay away from:

1. New York - lengthy and costly foreclosure

2 New Jersey - lengthy and costly foreclosure

3. Georgia - licensing requirements

4. Kentucky - licensing requirements

5. Illinois - most product is in crook county and costly and lengthy foreclosure

There are others but some of them have so little product anyways (ala Massachusetts / Connecticut etc.)

Don Konipol · Answer

We don't avoid any state.  We adjust LTV to account for states with lengthy foreclosure process.  Hence, highest LTV will be in non judicial foreclosure states.  We are a private lender that also buys existing mortgage notes - commercial only.

Chris Seveney · Answer

@Bob Malecki

Georgia is now one note if it’s bought with an entity. If it’s bought within an IRA your exempt (please confirm that with YOUR attorney).

The cost for the license is around $1,000 but you also need a $250,000 bond which runs around $2500.

I know of people who ignored it and some got away with it and others didn’t and got a hefty fine.

Bob Malecki · Answer

Yes @Andy Mirza WA has added "debt buyer" to their debt collector's license regulations.

Requirements To get a Collection Agency endorsement, you must:  Get a trust account.Maintain an office in Washington State, managed by a Washington resident.You cannot begin business activity until you receive a Business License listing the required endorsement.Washington is a closed-border state. You must have a license before contacting debtors or soliciting clients in Washington.Business License ApplicationCollection Agency AddendumProvide a Financial StatementSurety BondList of persons with more than 20% interest in the business$850 Licensing FeeHere is the link:https://bls.dor.wa.gov/collicense.aspx

• To get a Collection Agency endorsement, you must:  Get a trust account.Maintain an office in Washington State, managed by a Washington resident.You cannot begin business activity until you receive a Business License listing the required endorsement.Washington is a closed-border state. You must have a license before contacting debtors or soliciting clients in Washington.
• Get a trust account.
• Maintain an office in Washington State, managed by a Washington resident.
• You cannot begin business activity until you receive a Business License listing the required endorsement.
• Washington is a closed-border state. You must have a license before contacting debtors or soliciting clients in Washington.
• Business License Application
• Collection Agency Addendum
• Provide a Financial Statement
• Surety Bond
• List of persons with more than 20% interest in the business
• $850 Licensing Fee

• Get a trust account.
• Maintain an office in Washington State, managed by a Washington resident.
• You cannot begin business activity until you receive a Business License listing the required endorsement.
• Washington is a closed-border state. You must have a license before contacting debtors or soliciting clients in Washington.

Here is the link:https://bls.dor.wa.gov/collicense.aspx

Andy Mirza · Answer

@Chris Seveney I believe that Washington state now requires a lender's license. Can anyone confirm this? @Bob Malecki?

We've been dipping our foot in the IL market and so far so good. I agree about the comments regarding Crook County so we do factor in a lower purchase price to compensate for the added timelines and costs.

I'm coming to believe and will continue to test out the following: If you have a highly competent attorney, you should be able to reduce timelines and generally mitigate the risks of investing in judicial foreclosure states. Don't know if it's true yet but it makes sense when I look at the inefficiencies of the megabanks and hedgefunds when it comes to foreclosing on the notes I've seen in judicial states. On one note we bought in Chicago, it took a year for the new note owner to get the correct, properly executed AOM to the FC attorney. After we bought the note, It took us two weeks to solve that problem. Judicial foreclosures are more complicated and have more steps involved than the non-judicial FCs but, if you know what you're doing, you can streamline the process far better than any large institutional lender can.

Chad U. · Answer

If you lend using your own name, you should be fine.  If its done via an entity, then the licencing is required.

Tabish Bhimani · Answer

Let me throw a wrench in there. Do licensing requirements apply to lenders that are from Canada, such as myself?

Erick M. · Answer

@Chris Seveney

Do you know if this applies to private money lending for a residential flipping project. I’m Currently looking at a Potential deal in GA and any information prior would be beneficial.

Thanks

Erick

Erick M. · Answer

@Chris Seveney

Do you know if this applies to private money lending for a residential flipping project. I’m Currently looking at a Potential deal in GA and any information prior would be beneficial.

Thanks

Erick

Andy Mirza · Answer

I’m not sure I understand. Our foreclosing attorney handles everything for us. We don’t need to go to cook county ourselves.

What states do you avoid as a note investor

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