Improving Your Note Business

[Jamie Bateman]

Fellow note investors, I have read here (and I agree) that running an effective note-investing business essentially comes down to three things: 1) sourcing deals, 2) finding money to buy deals, and 3) managing the assets you have. Of course there is a lot more to this business, but most tasks fit pretty neatly into one or more of these three categories.

My question to you is: which of these three areas needs the most improvement in your business, and what do you plan to do about it?

I'd say for my business it is probably sourcing deals. I need to be more intentional about marketing and networking for quality assets to purchase. What about you? Also, has the pandemic changed the way you are approaching any of these three aspects of your business?

[Dave Van Horn]

It's funny, I don't think these 3 things are mutually exclusive to the note space. Capital, sourcing, and execution (or asset management here) are probably the three most important things to nearly any business! The thing I found over a decade in this business is that when one of these 3 aspects is more or less " solved", another one is in need of fixing or at least upkeep. When we started, our issue was we didn't have enough money to buy notes. Then when we were able to raise an ample amount of capital we couldn't find enough assets consistently. And then when we did, we had efficiency issues with executing on all of these assets while doing parts 1 and 2 effectively. Add in an evolving market with stricter compliance, and well we had quite a fun adventure :)

So i guess my answer is, I think we've done our best to tame all three with strengths mainly in capital. If you're looking at just a portfolio of notes or an investment in a note fund the above may not apply but as a business you'll likely never be free of issues with any one of the three aspects mentioned above. I think the key is to figure out what you're good at in that equation and outsource or build in-house what's needed to fix/maintain the other pieces.

As for the effects of the pandemic on our business, it's definitely had an impact but so far not as big a one as we think. At least currently. Mainly it effected the execution side a bit, slowing down exits in a way that's outside of our control with courthouses closures, moratoriums, etc. Knowing and staying on top of foreclosure timelines/matrix is what's crucial here. It also effects us in less tangible ways too of course, like not being in an office for 4 months and counting - what that does to a company culture, team building, etc. is tough to say right now but we try to stay in touch in some ways now more than ever with zoom, slack, and the like.

Last thing I'll say on the improvement front, if I could look back and change anything about those 3 things it would be how i look at them in relation to our overall business model. A lot of our issues and challenges within those three really came out of the question of "who do we want to be when we grow up?" and not knowing that answer either out of indifference, naiveté, or just being plain busy working in the business. But building to sell while tackling all three isn't a bad place to start.