The president of my local REIA advised newbie note investors to read Invest in Debt by Jim Napier. It was extremely helpful for me & very interesting IMO...in fact I just got it last night and have already read through it! I would definitely recommend it!!
Can anyone in the BP community provide another recommendation for a good book on note investing? I heard Smart Trust Deed Investment by George Coats is also very good (and I will definitely pick that one up eventually), but I would like something a little more contemporary. I know there are a ton of great books out there (I'm sure many have been recommended on these forums already), but I respect the opinion of the BP community more than random reviewers on Amazon for example...
I am not overly familiar with the books but I have certainly ran into many folks who have read them. I also not a fan of any gurus but I have ran in to a ton of folks who have paid for their service. My take on the lessons the folks walk away with from both sources, IMO, seem to point to a lack of proper understanding of the asset class in general. I think that is because most of these courses and books are modeled after the real estate (real property) guru genre and while indirectly related you simply have to know and understand much more to be good with notes.
I think you can see this if you take a step back and look at how notes in general are discussed, as if they are homogenous assets. They are not and that is the first key to understanding the asset class. The lack of homogeneity amongst notes is also what helped spawn securitzation and might be fuel for their exemption as a security. That is probably a topic for a different thread though. Back to my point, the discussion and request seem to be very broad in nature opposed to specific, which I think also illustrates a lack of acute understanding of those attempting to engage in a discussion about notes.
So can a book from 1999 do some good? Sure, some knowledge is better than none but many very influencing things have changed. Regulations have changed, investor participation has changed, origination has changed, mortgage products have changed....the list goes on and on. So from that type of publication or course if you can walk away and define an area of interest in more detail, I think that is a win. Then you need to follow up on that area specifically. That will take more specific topics and inquires and frankly research.
Just amongst the folks that Bill named in the above thread you have several different business models and market functions. We do not all seek the same note nor favor the same disposition strategies. Some of us have more exposure to first liens opposed to second liens or more institutional opposed to private or even specific collateral variations.
So when I see the question, what is a good book to read on notes, I sort of always want to say what type of notes, on what type of collateral, dealing with what type of borrower or origination source? A book written on commercial loans will be different than a book on residential loans. The learning curves are different due to the difference in collateral and borrower sophistication. Additionally, certain legal aspects are different. I know these are all things most people understand but it seems to never makes its way into these inquires.
Bill speaks to this and I agree when he says that some of these gurus 'sell' the foreclosure disposition as a path to riches or some magic short pay strategy, etc. Rightfully so, when he sees this he corrects it, as I do I. That is the dumb down marketing version of what they are selling which is only a small segment of the asset class and often times the take away is not entirely correct. People understand real estate investing in general so they lach onto that understanding and go to market with the book/course selling to some extent, what folks want to hear. "You can make money too this way....!" I always like to say there is no magic in mortgages. That is because it is true. There is no new disposition or strategy floating around on the street which has not been around for a long time nor pursued thousands if not millions of times.
As an investor do you HAVE to have this in depth knowledge of the asset class? No, I guess not, as suggested above you can subcontract it out. That said, not all brokers and advisors are made the same either, so one needs to be careful not be led by the inexperienced simply because they are more experienced than the pack of folks following them.
So what are good books to read? Well if you want to learn about the financial aspects of notes pick up a book on finance. You should learn to understand the time value of money and the math behind it. If you want to gain more knowledge about specifically investing in foreclosures, pick up some papers written on current foreclosure situaitons, perhaps even state specific to your desire. Additionally, reading some literature on contract law, as that is what the security instrument and note conform to will also help. After that, I would also suggest reading up on the more major headline events such as the Robo Signing and the MERs debate, I even suggest reading up on the Dobb Frank Act effect on the mortgage secondary market. That will start to prep you a bit for what the institutional climate looks like or at least expose you to may possible tangents of further learning.
The other problem that you run into, is reading up on it all is fine. Heck, I read a ton but in my very own opinion, experience is going to be the best source of education. The first question I tend to see from a new investor when I show them a loan or even a loan pool is, "Ok, where do I start?". There is a lot of data when it comes to loans and many fields have their own thesis to understand such as foreclosure events and bankruptcy events. I think having a supporting mentor, trainer or group will work wonders to help evolve skill sets. Make no bones about it, there is a lot to learn. Another good thing to remember, is everyone has an answer, but not all answers are right.
And with that, I will plug BP as probably one of the better sources of current in depth information on whole loans that I know of currently. And I think it's great. There are real folks here with real experience who participate often on topics. However, with as much interest as notes have started to garner and in tandem with the multiple times I have seen this exact question come up over the past months, it seems nobody wants to use the resource they are currently using. Which I suppose is slightly humorous. So there in lies the conundrum, for those newbies who want to learn more, where are your questions? I know I am happy to type a thesis on whole loan topics as many of the other guys are as well, but it seems we have to build the body of what information is being sought in order to get it out. In that sense, if we get more specific questions on the topic we can give specific answers or have valued in depth discussion on various legitimate topics.
Ramble, over.
Great question, I too am interested in the BP community recommendations for books on note buying, I just ordered two books yesterday on the topic on Amazon, wish I had thought to ask here first.
I based my purchase on publication date being newer than 2010 and number of positive reviews, kind of a sketchy criteria I guess.
I also read Invest in Debt, went and bought a financial calculator, and read it again, really interesting read.
Rick
I have a "note owners handbook" e-book that with an email address I can send on to you to read.
@dale osborn Please forward that my way. I would like to read that. Thanks!
I doubt it, based on this detail for the book: "Publisher: Jim Napier Inc (June 1983)"
Correct, the copyright date is 1994. It's fairly old, but very good for newbies like myself who are trying to learn about the subject. This is exactly why I started this discussion though...wanted to find some material that is more up to date...
Jason, going through a broker, at least for now probably worth the extra expense he might add. You should have all the laws accounted for and it is a good way to learn the ropes.
It used to be you could do anything you wanted and if you got burnt it was your own fault and problem. Now in this regulatory landmine if anything goes wrong, and it will sooner or later, you can be accused of wrongdoing and the next thing you know you are having to defend yourself.
California has lots of note brokers. Good luck.
@Dale, if not too much trouble, could you forward to me as well?
Thanks.
Hi folks, Jeff S. is absolutely correct. The best book hasn't been finished yet (LOL) and the reason is that we have two issues, the SAFE Act and the CFPB a new agency that will be regulating all financial transactions.
We really don't know what the extent of these new regulations and regulatory issues might be. IMO, if you get involved with a note dated after the effective date of the SAFE Act (last July) or your state laws as adopted, there had better be a broker's/originators seal on the note......down the road, you could have an illegally originated note!
IMO, buying a BAII calculator and a book does not put you in a position to be "investing" in debt and I agree with Jeff that you should be doing your due diligence on a broker to work with.
Bill,
Would you get lasik surgery without reading up on it? Would you plant orchards in a hot house without studying up on it first? Of course you might, but I like to read up, study and be informed before I jump into anything. While you give sound advise to use a broker, and that is appreciated, I could have done without the insult. Some of us are here to learn and ask questions, not be treated to your elitist attitude. But that is just my opinion, while I was not the original poster I was very interested in the responses, so I was taken aback by a respected poster such as yourself offering up such an unnecessary comment.
That said, are there any other contributors to BP that have any new reading recommendations on note buying?
Dale Osborn could you forward to me as well please
You chose the best two books, Jason T. Though dated, both are still relevant and excellent. If you got through Invest in Debt in one night, read it again!!
The Noteworthy store, offers other books and the main site itself is a great resource. The PaperSource store is another resource.
You can
Check out @DawnRickabaugh Seller Financing on Steroids. It's an easy, short read and talks about what to look for in notes. www.notequeen.com
Also, I hear Dean Engle is good. Invest In Debt is awesome!
Woooooha, there Rick. My comment was only saying getting a calculator and reading all the old "note" books wasn't going to prepare someone nowdays.
It wasn't intended to single you out at all!
I consider much of what I say to be on a humorist side, not meant to be elitist.
BP is full of posts, many are mine, concerning the note business and I have tried to convey an honest, eye opening awareness to new investors, especially to the points about attempting to acquire a property by buying the note. Reality is far from the guru speak.
As an example, buying a note originated prior to the land mines being tossed out, would be fine, understanding the process which is not difficult but it is the valuation and collateral assessment that needs to be studied and understand that you may not be able to modify that old note, as a new modification or extension of debt can be seen as making a new loan or lending arrangement. These types of issues I doubt you'll find in any note-book.
I'd say before you begin buying notes you need a great understanding of applicable rules and regulations. If anyone is easily riled and they attempt to collect payments and get hot under the collar, realize you can lose your investment.
Anyone can buy a note, using thier own money for thier own portfolio, no license required to do that, that I know of. Anyone can sell a note out of thier own portfolio as well, again, no license required that I know of. But when you buy a note and then in a timely manner sell it and profit from it, you then appear to be in the business of dealing in notes, license required. If you use or comingel other peoples money to buy a note, license required. If you collect payments on a note for another note holder, license required, you are a loan servicer. If you modify, originate or service any note secured by residential property you need a license.
Saying that, the note business now is very limited without having a license, limited to acting with your own money and holding in your own portfolio. And, BTW, if you do that I'd suggest you look to some professional loan servicers and contract with them to do the leg work for you.
While there may be some good books out there that hit on how to negotiate a note purchase, how to find notes and what all can be accomplished with a note, much of it may be outdated.
So, back to my comment, having a wad of cash, a calculator and any how to book won't really get you prepaired for the note business, IMO, but by all means, read all you can, every book should have something noteworthy, just beware of what Jeff mentioned above.
WhileI don't know this, I would think the few brokers on BP wouldn't skin you alive working with them, guys like Marc Faulkner, Loc R., Will Barnard, Dion DePaoli or others, so I'd suggest you guys interested in getting involved pick the brains of those mentioned, you can alway ask me as well, but remember, I'm retired and not doing partnership deals, LOL. Good luck, and again, Rick Bradd that comment was not meant in that way friend! :)
I am not overly familiar with the books but I have certainly ran into many folks who have read them. I also not a fan of any gurus but I have ran in to a ton of folks who have paid for their service. My take on the lessons the folks walk away with from both sources, IMO, seem to point to a lack of proper understanding of the asset class in general. I think that is because most of these courses and books are modeled after the real estate (real property) guru genre and while indirectly related you simply have to know and understand much more to be good with notes.
I think you can see this if you take a step back and look at how notes in general are discussed, as if they are homogenous assets. They are not and that is the first key to understanding the asset class. The lack of homogeneity amongst notes is also what helped spawn securitzation and might be fuel for their exemption as a security. That is probably a topic for a different thread though. Back to my point, the discussion and request seem to be very broad in nature opposed to specific, which I think also illustrates a lack of acute understanding of those attempting to engage in a discussion about notes.
So can a book from 1999 do some good? Sure, some knowledge is better than none but many very influencing things have changed. Regulations have changed, investor participation has changed, origination has changed, mortgage products have changed....the list goes on and on. So from that type of publication or course if you can walk away and define an area of interest in more detail, I think that is a win. Then you need to follow up on that area specifically. That will take more specific topics and inquires and frankly research.
Just amongst the folks that Bill named in the above thread you have several different business models and market functions. We do not all seek the same note nor favor the same disposition strategies. Some of us have more exposure to first liens opposed to second liens or more institutional opposed to private or even specific collateral variations.
So when I see the question, what is a good book to read on notes, I sort of always want to say what type of notes, on what type of collateral, dealing with what type of borrower or origination source? A book written on commercial loans will be different than a book on residential loans. The learning curves are different due to the difference in collateral and borrower sophistication. Additionally, certain legal aspects are different. I know these are all things most people understand but it seems to never makes its way into these inquires.
Bill speaks to this and I agree when he says that some of these gurus 'sell' the foreclosure disposition as a path to riches or some magic short pay strategy, etc. Rightfully so, when he sees this he corrects it, as I do I. That is the dumb down marketing version of what they are selling which is only a small segment of the asset class and often times the take away is not entirely correct. People understand real estate investing in general so they lach onto that understanding and go to market with the book/course selling to some extent, what folks want to hear. "You can make money too this way....!" I always like to say there is no magic in mortgages. That is because it is true. There is no new disposition or strategy floating around on the street which has not been around for a long time nor pursued thousands if not millions of times.
As an investor do you HAVE to have this in depth knowledge of the asset class? No, I guess not, as suggested above you can subcontract it out. That said, not all brokers and advisors are made the same either, so one needs to be careful not be led by the inexperienced simply because they are more experienced than the pack of folks following them.
So what are good books to read? Well if you want to learn about the financial aspects of notes pick up a book on finance. You should learn to understand the time value of money and the math behind it. If you want to gain more knowledge about specifically investing in foreclosures, pick up some papers written on current foreclosure situaitons, perhaps even state specific to your desire. Additionally, reading some literature on contract law, as that is what the security instrument and note conform to will also help. After that, I would also suggest reading up on the more major headline events such as the Robo Signing and the MERs debate, I even suggest reading up on the Dobb Frank Act effect on the mortgage secondary market. That will start to prep you a bit for what the institutional climate looks like or at least expose you to may possible tangents of further learning.
The other problem that you run into, is reading up on it all is fine. Heck, I read a ton but in my very own opinion, experience is going to be the best source of education. The first question I tend to see from a new investor when I show them a loan or even a loan pool is, "Ok, where do I start?". There is a lot of data when it comes to loans and many fields have their own thesis to understand such as foreclosure events and bankruptcy events. I think having a supporting mentor, trainer or group will work wonders to help evolve skill sets. Make no bones about it, there is a lot to learn. Another good thing to remember, is everyone has an answer, but not all answers are right.
And with that, I will plug BP as probably one of the better sources of current in depth information on whole loans that I know of currently. And I think it's great. There are real folks here with real experience who participate often on topics. However, with as much interest as notes have started to garner and in tandem with the multiple times I have seen this exact question come up over the past months, it seems nobody wants to use the resource they are currently using. Which I suppose is slightly humorous. So there in lies the conundrum, for those newbies who want to learn more, where are your questions? I know I am happy to type a thesis on whole loan topics as many of the other guys are as well, but it seems we have to build the body of what information is being sought in order to get it out. In that sense, if we get more specific questions on the topic we can give specific answers or have valued in depth discussion on various legitimate topics.
Ramble, over.
Good thoughts Dion.
While our OP was asking a good question about seeking information, you were right, many don't put enough effort in to asking a question and the answer has usually already been given here on BP.
Dion, Aside from that, I have always been interested in performing brain surgery, I understand there is some really good money in being a surgeon, where should I start without using my money? Think I'll search for a doctors forum on the internet and ask there. :)
Bill Gulley, Dion DePaoli Good feedback, of course your correct about BP Being a terrific source for information, I personally have learned a lot from some threads, specifically "Mr Notebuyer what do you want" and others. I tend to be very methodical in how I learn, while I do appreciate reading posts here, I do not want to ask random questions that I could dig up the answers myself, I especially like to read and highlight parts that interest me, that's hard to do in a forum. As soon as I am done with my elementary learning then I will post specific questions if I have any. I sincerely appreciate the time and effort you more experienced investors put into helping others here on BP, I have said it before, its a testament to your character, please keep it up.
When this OP came out 6 months ago, I had just gotten my BA II, so I was a little butthurt when you suggested I was not going to conquer the investing world. I have to admit this, I love this BA II, I play with it all the time, and that is one reason I am so enamored with notes. That probably is a terrible reason to want to get involved with notes, but I love working out different scenarios etc.
Bill, you would make a fine brain surgeon.
Rick
Bill and Dion contributed excellent posts. I would only add that, IMO, one of your first reads should be your state law regarding SAFE and its implications on mortgage notes. Also knowing how your state Commissioner of Banks will interpret the SAFE Act is very important. You should also read up on your state foreclosure processing requirements if your note goes bad or you intend to focus on NPN. For instance, by statute NC law exempts the licensure requirements of 'casual' note investor of 5 or less notes/year. But the Act introduced material changes to the state foreclosure laws which may impact an individual note holder's ability to proceed with foreclosure on a defaulted note.
My view is that the SAFE ACT is to note investing as 9/11 is to air travel. The deals I did before SAFE... ancient history.
I am reviving this thread only to get a better understanding. I am still learning on investing in notes. I dont want to keep reading I want to go ahead and get my feet wet but with everything going on especially with the SAFE Act what is the safest way for me to go about getting started. I am looking at investing out of my retirement account (which I am moving to either a solo 401k or a self directed IRA) and have about about 50k to start with. What are your suggestions to get started
@Dion DePaoli I am looking at starting with residential notes but moving with time to commercial. Commewrcial hasalways interestedme but not as familiar in that space as I am with residential.
@Bill Gulley I always look forward to your advice, even though it isusually a tough pill to swallow for newbies as sometimes it shoots us down. Its still very much needed from a veteran so that we wont go out there and make costly mistakes.
Your will likely have less regularory risk if you acquire a performing note from a reputable broker, rather than originating a loan.
Research does have it's limits before you have to eventually put a toe in the water and learn how to swim. Start small so that that you don't drown and watch out for sharks.
@Ellis San Jose thanks for your response. Do you have any reputable brokers you could suggest.
Not in Georgia specifically. I do know a few investors out there I will ask them who they would recommend.
Well, I guess it's because I hate typing really so I'll say many things as quickly I can to make the point, I don't mean to discourage.
Advice to newbies to get into notes....positive reinforcement......wow, I have taught the art in person to several investors, tough to do on the forums.
By default more than by design, I ended up in a position by education and experience to be in lending and investing in debt. When I was younger I wasn't much of a planner, I can be impulsive and I'm willing to accept risk quickly, a "Charge ahead!" mentality.
The biggest issue as Dion mentioned back there, where to start? I can't expect others to have been through the path in life to be at some point where note investing is a natural progression.
Reminds me of the game "Pick up sticks" where you dump sticks on a table and then attempt to pick them up without moving any other stick. Consider that each stick is a regulation or some law, a prudent lending aspect, a strategy, an equity amount, a collateral value, an option or other opportunity. As you pick up one stick you may move one of these factors......your turn can be over.
To get to the last stick you need a strategy and you need to understand how one stick may move another and which way it may move.
In other words, you really need to know a heck of a lot more than real estate to operate in notes, there are many moving parts or aspects to be aware of. When you buy a note you really need to be able to see how all the parts will operate under different conditions to the last dollar being received. What happens if? How could I lose my investment? If I do this how does it play on that? Is this legal, how can this be seen by a judge if I do this? Can the borrower actually perform? The "what ifs" are almost endless but you assess many of them to manage your risk. :)
Georgia is a state with some pretty preventative laws in place for simply anyone to get involved. To own a note in Georgia you have to hold a state issued license. So as Chris suggested, a good place to start is with the state laws around mortgages and license. If your are not sure call the department of finance and ask. Speaking to an experienced RE attorney can also be helpful.
Investing in loans is not a riskless enterprise. Loans are risky. You may lose all or some of your money. You can find yourself in hot water with regulators.
Bill's analogy about pick up sticks was probably one of the best and most accurate analogies I have personally heard. (nice one Bill)
In regards to jumping into commercial. Those who lend on commercial are comfortable with the collateral. Without an understanding of how the collateral will operate it becomes hard to evaluate the collateral and loan itself. If you don't know what good ADR's for hotels are or lease rates for retail space or how some of those lease works in a contractual sense, you should be very cautious. If you cast too big of a net, you might end up with a shark instead of tuna. (not as good as Bill's I know)
One last point I will make in regards to use of brokers or any other party for that matter. Again, the risk is ultimately the investors. There can be conflicts of interest when dealing with brokers and sellers for that matter. One of the drivers of the mortgage crisis was the US model of origination with intent to distribute the risk. Investors bought into mortgages that were originated with a sole intention of selling said loan to another investor. The end investor is who suffered as prudent lending practices took a back set as the one making the loan was not going to be the one holding the loan. Moral of the story, take time to understand who you are working with and be mature about reality to some extent, the broker wants to make a fee, the seller wants to sell at a high price. Recognize those conflicts with your intentions and ensure only to extend reasonable expectations on to the other party while the rest rests on your plate.