Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
I mean no dis-respect with the title, I just need to quickly determine who the real players in the industry are - whether they are individuals, companies or institutions. Please feel free to reply on here or refer individuals on here who are known as high quality note buyers.
I need to be educated quickly on the preferred terms and structure as well as seasoning requirements for top note buyers.
This is an area of real estate that I have no past experience and would like to network with those that are considered experts and who are actively buying private notes.
Note Investor · Pasadena, CA · Member since 2009 · 849 posts · 544 votes
15y
Chris,
Note buyers in today's market are becoming more picky. Whereas a year ago they were buying entire notes, most are now only offering partial purchases.
Off the top of my head, here is how you get 75-80% of face on a note in today's market:
1. Equity!!! 20% down for owner-occupied.
2. Credit. 620 minimum.
3. Debt to Income ratio.
4. Full amortization, 10 years max. Impounded taxes & escrow. 3rd party note servicing. ACH payments.
5. Verified income of payor.
6. Verified value of property.
Seasoning: More is always better. But if you're looking to churn through your seller-financed flips, 3-6 months of seasoning is usually the requirement.
If you have a relationship and a track record, some note buyers will buy your notes "green."
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
or me. I am by no means an expert, and just recently started buying notes, but I do buy notes, I am the actual buyer and I have also originated notes as well.
Real Estate Investor · Las Vegas, NV · Member since 2008 · 127 posts · 10 votes
15y
I buy notes and I sale them as well. I am active in 6 different states. level of experience is very different on note buying
you have performing note buyers &
you also have non-performing note buyers.
what kind of product do you have that you are looking for real buyers? At the end of the day I think someone's portfolio on NOTES and transactions closed speak volume about what they do.
Again real players status as an individual to a company and then an institution is very different as they all perform differently and have different criteria and funds available... What an individual may require is different than what an institution buyer will require. Yiled requirement are very different from person to person.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Originally posted by Shanequa J.:
What would be a good interest rate, term length, and ARV to get an investor interested?
There are literally thousands of answers to these questions as every investor is different.
Instititional buyer or private buyer, performing, non-performing, buy to hold short term, buy to hold long term, buy to re-structure, buy to flip, and the list goes on. Within each of the many categories, you will find different criteria depending on each investor.
For me, I am interested in performing only (at least for now), term balances of 4 years or less, and notes that had large enough down payments/existing equity, plus I will buy to hold, buy to re-structure, and buy to flip.
Note Investor · Pasadena, CA · Member since 2009 · 849 posts · 544 votes
15y
Chris,
Note buyers in today's market are becoming more picky. Whereas a year ago they were buying entire notes, most are now only offering partial purchases.
Off the top of my head, here is how you get 75-80% of face on a note in today's market:
1. Equity!!! 20% down for owner-occupied.
2. Credit. 620 minimum.
3. Debt to Income ratio.
4. Full amortization, 10 years max. Impounded taxes & escrow. 3rd party note servicing. ACH payments.
5. Verified income of payor.
6. Verified value of property.
Seasoning: More is always better. But if you're looking to churn through your seller-financed flips, 3-6 months of seasoning is usually the requirement.
If you have a relationship and a track record, some note buyers will buy your notes "green."
Investor · Kalamazoo, MI · Member since 2009 · 1k+ posts · 495 votes
15y
Chris,
I am a note buyer as well as a note broker and this gives me keen insight as to what is going on in the secondary mortgage market as we are constantly buying and selling notes. We do some buying, some flipping and have worked with several members here on BP. [...]notes that have at least 3 months seasoning, 15% equity and credit that is 580 or higher. Please note that this is the minimum criteria, meaning you will take a larger discount. I am not sure what you are attempting to do or what your goals are but,
Investor · Succasunna, NJ · Member since 2008 · 19 posts · 1 vote
14y
Chris
Are you looking for information on owner-financed notes or bank originated notes? I am a note buyer, but I only buy loans from the bank, at discounts of course, and then work them to get the borrower to pay off or re-perform. I also service loans for private investors.
The best advice I can give you is to get to know your seller, if you are buying and get to know your buyers, if you are selling. Everyone has a different level of comfort when it comes to buying or selling notes.
New York City, NY · Member since 2012 · 1 post · 0 votes
14y
I know non-accrual commercial.
"The real players" - tend to buy through mission capital, debtx, cbre's loan sales group, and auction.com. They look for $10 million + sizing and have a mid-high teens return threshold. There is a lot of money slooshing around with these guys and I expect to see a lot of groups coming up short on return hurdles or blowing up investors. A lot of these guys tend to over value the collateral or underestimate monetization time frames or legal costs in order to place capital. We've never recovered more then par on a NPL, and typical shoot for 70%-80% recovery. We see guys paying in the 80s for loans that will take 2 or more years to monetize - hows that work?
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
14y
There are principles and brokers here that you can obtain bids from. You might also look for institutional buyers depending on the amount of business you expect to do.
As mentioned, there are those specializing in partical purchase as well as in whole. You can also sell a certain number of payments. Most will require you to seel with recourse and that should carry less of a discount if you are basically are to guarantee their money!
Another good reason to obtain an appraisal on any seller financed note as it is a plus for your loan package. Obtaining verifications as with conventional financing should also be accomplished....
and if your note falls under the SAFE Act better have a qualified originator sign off on your note, otherwise it could be worthless!
Another source could be your local bank, that can provide a commercial loan on your portfolio....several ways to work that out depending on your business. Good luck!
Investor · Succasunna, NJ · Member since 2008 · 19 posts · 1 vote
14y
Chris and all
there are different types of note buyers out there. Are you looking at NPNs, performing note, re-performing, commercial (apartments, mobile home parks, strip malls, shopping centers, office buildings), residential (single family, multi-family, mobile homes, condos). Fresh originations, seriously delinquent, good credt, bad credit, borrowers in BK, first position, second position, what locations, national, regional, what states or even counties and cities within those states?
There are a lot of parameters.
I'm not ashamed to admit that I am a bit of a bottom feeder and some of those have turned out quite well and others not so well, but then I like to spread my risk around with several lower valued properties than sink all my cash into one big property.
I've been in the business over 4 years and buy notes nationwide. I know you are in Memphis and I have bought notes there as well. Some good, some not so good.
Involved In Real Estate · Bethlehem, PA · Member since 2013 · 24 posts · 0 votes
13y
I am like beyond novice at this but my partner and I are thinking about starting to invest in notes. His son is an attorney and we have the financial backing to handle it.
Our initial thought was to purchase non performing notes, foreclose on them (where his attorney son comes in) and then flip them. Again, this is probably showing my low experience level but I just wanted to hear the groups thoughts on this strategy.
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
13y
Jeremy,
Call me and we can chat. I don't mind talking through a business model with someone who really wants to learn. I've made a lot of mistakes over the years. Our primary strategy is similar to yours, so I'm sure there are a lot of questions that we can answer for you as they come up.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
13y
@Jeremy Merwarth - unless your partner's lawyer son specializes in foreclosing, I would look to find an attorney who specializes in that area of practice. @Dave Van Horn deals in NPN and can give you some better insight into the qualifications that a foreclosure attorney should have.
I am like beyond novice at this but my partner and I are thinking about starting to invest in notes. His son is an attorney and we have the financial backing to handle it.
Our initial thought was to purchase non performing notes, foreclose on them (where his attorney son comes in) and then flip them. Again, this is probably showing my low experience level but I just wanted to hear the groups thoughts on this strategy.
Thanks.
Jeremy
That is certainly a very high level plan. Nothing overly complicated, folks do that everyday. However, this is also where folks divert into some misguided assumptions on the asset class.
I agree, the attorney in the group sounds great but if they have not practiced real estate law, including actual litigation, there might not be too much of an impact. That said, managing the legal vendors you use can be a full time job so it does depend on how you set things up.
More importantly and also less inquired about is the reality based questions that don't get enough initial attention. How will you value the asset? What type of discounts will you need to really make things work? What will you do better?
Often times I have heard the high level plan put on the table and then upon drilling into the plan find prerequisites on pricing or discounts to be unrealistic. In addition, expenses are commonly grossly underestimated. In addition, the probability of the real property reverting back tends to be over emphasized. Which in some misguided models inflates the real returns.
That said, there is a market for the new investor to carve out which has roots in a locally constructed niche. Street level knowledge of markets, being able to kick the tire and have face to face interaction with the borrower is powerful stuff. Hands on nimble management should outrun the more lethargic institutional counterparty in most situations. But who's game are you playing? Yours or the institutional seller? Are you setting the trend or following it?
So a newbie has to get comfortable with the industry and confident in their model including how they can internally exploit their model for better returns. I always like to say, no Seller is going to hand you an easy return. The easy returns stay on the Seller's book, the hard stuff get's sold off. There are always diamonds in the rough if you look but I am not sure by finding just those diamonds a robust business will emerge.
There are not too many 'new' ideas in the world of mortgage investing. There are ideas new to the person but not new to the industry. So I ask, what is thought below the high level idea of, "Let's buy foreclosures and sell off the REO". What will you do better than the instutional owner of said asset? And what will you do better than your neighbor competitor who competes with you to purchase said asset?
