How to start in note investing?

Question

I have been invested in multi-family for the past several years and looking for a new opportunity as costs in the Houston area apartments keep climbing and are hard to get. I have been looking into note investing and just finished Dave Van Horns book note investing. It was just enough to get me more excited in the idea but now lost in all the information or lack there of online. Any tips out there for someone starting from scratch? Thanks in advance.

Tracy Z. Rewey · Answer

Hello @Tim Long and welcome to the world of Note Investing.  Here are my 21 tips for starting out:

#1 – Learn From Others

#2 – Plan to Market

#3 – Know Your Type (Performing, Non Performing, Re performing, Investor Notes, Seller Financed, etc)

#4 – First Refer A Deal

#5 – Discover The Why Behind the Note Sale

#6 – Get To ‘Know’ The Payer

#7 – Verify Everything

#8 – Embrace The Boring (Due Diligence Counts)

#9 – Plan for The Worse

#10 – Partials Are Your Friend

#11 – Master The Time Value of Money

#12 – Encourage Early Payoffs

#13 – Originals Count (Get that original note and endorsements/allonges)

#14 – Stay In Control

#15 – Seek Professional Help

#16 – Use Solid Servicing Procedures

#17 – Understand When Laws Apply

#18 – Get Self-Directed

#19 – Spread The Risk

#20 – Know When To Fold

#21 – Be Creative

If you PM me here on Bigger Pockets I can send you details on the individual tips.

Ken Hobbick · Answer

Great advice already provided above in regards to training and all the options that one would encounter in note investing.   I would recommend reading as many books as time allows before you take training courses so you can get as much out of the course time as possible.  Otherwise it will be like drinking from a fire house...

You mentioned Dave Van Horn's book which is good start,  others include:

Martin Saenz- Note Investing made Easier

Joshua Andrews Paper Profits

Fuqan Bilal Turning Distress into Success

Jim Napier Invest in Debt  (from 1983 may have a difficult time find copy...)

Alex Goldovsky Bulletproof Title Due diligence

Troy Fullerwood  Power of Paper

Bill Bymel Win-Win Revolution

From the timing perspective these guys were in note investing and just had to figure it out without courses or books to help them along the way,  so I'm thankful they took the time to write a book..

Tim Long · Answer

@Tracy Z. Rewey

Great info! Thank you

Don Konipol · Answer

@Tim Long

Get an overview and feel for the market with emphasis on education so you can make a decision as to which area of note business you want to pursue.

1.  Residential or Commercial.

2.  Performing or Non Performing.?

3.  New originations or Seasoned Notes

4.  If Non Performing is intent to Modify to Re Preforming or to Obtain Property Ownership

5.  Property Located in a particular area or Located Anywhere

6.  High interest rate at full principal price or Low Interest Rate at discount

7.  Invest your own money or act as Intermediary for Other Peoples Money

8.  Active in finding, evaluating, and making offers or Passive in buying notes from intermediary

9.  Whole notes or Partials

10.  Individual ownership or Partials/Fractionalized ownership

Odie Ayaga · Answer

Just as a heads up to save you some time Dave Van Horn doesn't offer a course any longer. Much of the learning for notes is online from various videos (@Scott Carson has a ton) to podcasts. You can also find a number of resources here. I also think the Note Inc podcast is a good primer for getting into the industry.

Tim S. · Answer

A lot of people learn by doing JV deals with more experienced investors, it's a good way to go.  Typically the investor (you) puts up the money, and the experienced investor does the work, the profits are then split 50/50.  Some are more willing than others to hold your hand and bring you into the deal as a learning process.  Others would rather you just leave it to them and not ask too many questions.  Doesn't mean the latter type are shady, they just don't really have the time or desire to train you.

You should also take the training mentioned above.  I've taken Scott courses, they are worth the money.  He also has lots of free videos on YouTube and Vimeo.

Rodel Usam · Answer

Hi Tim,

There's a lot more to learn.  I think your best bet is to take a course from reputable names like Scott Carson, Dave Van Horn, Eddie Speed, Martin Saenz, etc.. There's a long list of folks who teach this stuff and there's more you'll learn even after that.

Just so you're aware, even after taking any of those courses, there's nothing that'll prepare you for your first note purchase because every note is different, ie. amount owed, location, value of asset, sellers asking price, etc.. Don't buy then do research, do research then buy, then do more research.  You'll understand that process soon enough.  I believe there's 9 - 13 different exit strategies so be familiar with them and hopefully master a few.  There's huge difference in asking price between performing and non-performing 1st's and 2nd's (senior or junior liens).  Also some new terminology that you'll become familiar with.

Good luck and I hope this helped.

Tim Long · Answer

@Logan Hassinger yes lets schedule a call. Let me know the best way and time to reach you.

Logan Hassinger · Answer

@Tim Long

There are a fair amount of moving parts when pricing a note, performing due diligence and the borrower workout when dealing with NPN’s.

Depending on your strategy, partnering with someone and learning from the sideline may be best.

If you would like to discuss further, I’d be happy to schedule a call.

Tim Long · Answer

Thanks Rodel Usam. Have you personally took any of the courses? Has anyone out there taken the Scott Carson course for $700? Seems reasonably priced if the content is good.

How to start in note investing?

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