Creating a Business Plan for Non Performing Notes
Creating your business plan for your performing note business will act as your map for your journey. It will list crucial information that you and your private lenders will need to see. In this article, I'm going to go over a very simple business plan that you can mirror in two hours or less.
Start with the states you want to invest in. I choose five states and work with them until I scale my business. The resource I use to see these timelines is http://www.realtytrac.com/real-estate-guides/foreclosure-laws/ . This website gives you each state and the foreclosure time lines. I encourage you to avoid states like New York and New Jersey. They take forever to foreclose, and there is plenty of opportunity in other states right now. Choose states that are investor friendly and take a year or less to foreclose. This will churn your money faster so you can scale your business faster.
Choose the fair market value (FMV) of the properties you want. I’ll explain why I chose my fair market values so you can get a clue on how to choose market values. We look at market values between $50,000.00 - $150,000.00 knowing we only pay fifty percent of market value respectively. After conducting hours and hours of research on what the average person can afford in this country, the price range that we picked serves the business well. If we had to foreclose on a property, we could easily sell it in any given market. Sure there are nicer homes that we sell for higher, but for the most part the prices are in the lower one hundred thousand dollar range.
Choose if you want the property to be vacant or occupied. No matter if the property is vacant or occupied, you can make money from the deal. In our business model, we stick to occupied assets because the owner will generally keep the property in better condition than the otherwise. This benefits us when we need to foreclose because the property is in better shape. If the property is occupied, the loan modification or reinstatement works too because the person wants to stay.
Pick three exit strategies you will use on each of the notes you buy. The investors are going to be interested in how they are going to be making money with you, so you need to pick exit strategies that will not only help the homeowner, but make both parties lots of money. The three that we picked were a loan modification, reinstatement, and foreclosing on the property. Each of these strategies have their benefits and can make you and the investor lots of money.
This in essence is what you can start using as a map to work your business and show other investors. Take two hours and make one for yourself. This plan will change over time as your business grows so save it in a place you have ready access to.
To Your Success
Matthew Hell
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