The Perfect Note To Buy

Chris SeveneyBusiness Member

Moderator

OP

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

@V.G Jason

Absolutely agree. People think “oh I want to buy your loan which is very low risk and want 18%”

Sorry it does not work that way and oh by the way letting your money sit idle for another six months is 10x worse than not buying a loan because it’s 1% less than what you want, especially on lower balance loans where a 1% difference in returns is a few hundred bucks

7e investments53 Reviews

Chris SeveneyBusiness Member

Moderator

OP

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

Quote from @Account Closed:

Quote from @Chris Seveney:

@Ken M.

What state is property in and what is the value of the property ?

It was just a general question to see if it's anything worth keeping an eye out for.

The reason I ask is those are also major factors in pricing a loan. Personally if a loan is at 6% and two months behind I do not even look at it as the sellers pricing expectations compared to where I will be will not be one in the same.

7e investments53 Reviews

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

Quote from @Chris Seveney:

Hello fellow BP Members.

As a buyer and seller of loans (and real estate), trying to find the perfect note is like trying to find the perfect spouse. If you truly want to tie the knot, you have to realize that no person is perfect, and if that is your search - you will always end up with nothing.

The same goes for note investing, we see a lot of newer investors seeking high returns on performing loans but want the perfect note (borrower high credit, all payments made before they are due). If that is what you are looking for, that is great but your returns are going to be 6-9%. If you want the double digit returns, you have to take on some risk and realize these loans the borrower may miss a month and catch up, there credit may not be the greatest. Does this add risk, yes it does, but that is where to evaluate risk vs reward.

There are plenty of loans out there to buy as an investor, but I see far too many people complaining they cannot find anything because they are looking for that "perfect spouse"

yes i am wondering too why people doesn't understand the lowest risk borrower has 6% rate....

Eric Gerakos

Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes

2y

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

4 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

That’s the basic investment principle in there , basically we are chasing the spread between asset and bond spread lol

Chris SeveneyBusiness Member

Moderator

OP

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

Great philosophy with no headaches.

I had someone this AM bid on a low balance loan we have ($15k remaining on a $100k property). Rate on loan is 9% and they bid $6k (40% of UPB). Basically they wanted a 35% return... Either someone is getting taught wrong how to crunch numbers or lives in lala land.

7e investments53 Reviews

Eric Gerakos

Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes

2y

Quote from @Chris Seveney:

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

Great philosophy with no headaches.

I had someone this AM bid on a low balance loan we have ($15k remaining on a $100k property). Rate on loan is 9% and they bid $6k (40% of UPB). Basically they wanted a 35% return... Either someone is getting taught wrong how to crunch numbers or lives in lala land.

Thanks! You're the note master.

Chris SeveneyBusiness Member

Moderator

OP

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

Quote from @Eric Gerakos:

Quote from @Chris Seveney:

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

Great philosophy with no headaches.

I had someone this AM bid on a low balance loan we have ($15k remaining on a $100k property). Rate on loan is 9% and they bid $6k (40% of UPB). Basically they wanted a 35% return... Either someone is getting taught wrong how to crunch numbers or lives in lala land.

Thanks! You're the note master.

nope. just a dude who likes notes and have been told I am ok in math.

7e investments53 Reviews

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

2y

Quote from @Chris Seveney:

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

Great philosophy with no headaches.

I had someone this AM bid on a low balance loan we have ($15k remaining on a $100k property). Rate on loan is 9% and they bid $6k (40% of UPB). Basically they wanted a 35% return... Either someone is getting taught wrong how to crunch numbers or lives in lala land.

Man I am interested :) so how the good transaction should be in this case ?

Eric Gerakos

Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes

2y

Quote from @Chris Seveney:

Quote from @Eric Gerakos:

Quote from @Chris Seveney:

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

Great philosophy with no headaches.

I had someone this AM bid on a low balance loan we have ($15k remaining on a $100k property). Rate on loan is 9% and they bid $6k (40% of UPB). Basically they wanted a 35% return... Either someone is getting taught wrong how to crunch numbers or lives in lala land.

Thanks! You're the note master.

nope. just a dude who likes notes and have been told I am ok in math.

Wait, that's exactly what a humble note master would say, lol.

Dolly Caswell

Investor · Eagle River, AK · Member since 2015 · 121 posts · 45 votes

2y

Quote from @Chris Seveney:

Quote from @Account Closed:

Quote from @Chris Seveney:

@Ken M.

What state is property in and what is the value of the property ?

It was just a general question to see if it's anything worth keeping an eye out for.

The reason I ask is those are also major factors in pricing a loan. Personally if a loan is at 6% and two months behind I do not even look at it as the sellers pricing expectations compared to where I will be will not be one and the same.

Well, my problem is, I can’t figure out how to get started investing in Notes. I live in Alaska and feel like I would be better off with payments from locals who have property there as collateral. I’ve tried a few postings on craigslist and marketplace and got nowhere. I did talk with one local Hard money lender a few years ago, but even at that time, I realized he was taking the vast majority of the value and leaving me with not much. However, I don’t know The documents I would need, I don’t know what to ask, I don’t know so much. Is there such a thing as a step-by-step, booklet or procedure for buying notes? Any help or advice would be greatly appreciated. Thanks.

Chris SeveneyBusiness Member

Moderator

OP

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

@Dolly Caswell

There is a ton of information out there for free

I had a podcast good deeds note investing that talked about note investing

We rebranded it to creating wealth simplified by first 150 episodes are on note investing

There is also a ton of YouTube content and CJ tent here as well

Happy to provide you with more info on where to start

7e investments53 Reviews

V.G JasonPro Member

Investor · Member since 2022 · 3k+ posts · 3k+ votes

2y

Quote from @Eric Gerakos:

As a conservative investor, I love my “perfect notes “ that pay 9%. In more than 20 years I’ve never had a late payment or default. I buy notes when rates are relatively high and buy more properties when rates are low. I was able to retire the first time at 35 using this strategy.

Literally the perfect example of buying debt when its right and owning debt when it's right.

Most REI now look pass owning debt, I am not sure why. They will hope for similar returns in any other field, but the last 12-15 years of this heloc, scale with 0 money down, etc., nonsense still appears to be applicable today for no other reason besidses a google search and/or a guy from BP saying he did in 2016 so he'll do it in 2023.

I went into 2023 thinking I'll buy 1 house every quarter, once I realized I had (family-related) others deeply interested into this I went full time REI and as we got past the 6.5 mark in mid q2, I started scaling back some of the extra REI funds and starting buying into private debt(from large funds that I invest with). Still intend to be a large REI but private debt took a massive allocation increase from me. I did not go too much into equities this year.

Chris SeveneyBusiness Member

Moderator

OP

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

2y

Quote from @Erika Garcia:

@Chris Seveney I have a great note for sale

Is it at a great price though?

7e investments53 Reviews

Dolly Caswell

Investor · Eagle River, AK · Member since 2015 · 121 posts · 45 votes

2y

@Chris Seveney, thanks, I found some, however, still haven’t found the step-by-step I think I need.

Brett Burky

Investor · Orlando, FL · Member since 2014 · 110 posts · 90 votes

2y

Quote from @Dolly Caswell:

@Chris Seveney, thanks, I found some, however, still haven’t found the step-by-step I think I need.

Step by step for the process? What are you trying to figure out exactly?

Dolly Caswell

Investor · Eagle River, AK · Member since 2015 · 121 posts · 45 votes

2y

If you haven’t figured out by now, I am dreadfully new at this. What I believe I need for buying Notes is a step-by-step process sort of like this. #1. somehow get information about a specific note and the seller. I have no clue how to find a note and or a seller. #3, (this is out of order). Make the calculations that I can live with and plan for negotiating with the seller. #2. review the existing loan documents for ?…?……? #4. Make The calculations that will work with my financial goals and present this to the note seller. #5. Negotiate this or that part of my offer, come to an agreement.#6. 7. 8. 9. Need this legal document and that legal document. #10. Take them to..?..???..etc etc. I don’t think I could sound any less knowledgeable about this, but I have been encouraged to seek help on BiggerPockets, so here I am.

Don KonipolBusiness Member

Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes

2y

Quote from @Chris Seveney:

Quote from @Erika Garcia:

@Chris Seveney I have a great note for sale

Is it at a great price though?

There’s no reason investors in real estate related assets shouldn’t concentrate, as stock and bond investors have for years, on asset allocation. I invest almost all my assets in four general asset types; real property equity; real estate debt (high yield or discounted mortgages), REITS (equity REITS only), and short term money market or short term income funds. But, the allocation is of utmost importance. And that shifts depending on “what’s hot” at the moment. I tend to invest more heavily in asset types that are “out of flavor” at the moment as there is where I find the best risk related returns. At this stage of my life (71Years old) I invest much more conservatively than I did years ago. I’m still willing to take a calculated risk - speculation - on a relatively long shot - but with a much smaller percentage of my portfolio than I was when I was in the “wealth building” phase.

Not much has been written about asset allocation as it applies to real estate related assets - reading some authors you’d think all real estate assets were created equal. For example take two portfolios with 50% invested in real estate equities. One owns 5 apartment complexes across the country all with positive cash flow and debt less than 50%. The other owns distressed shopping centers purchased at a huge “discount” with negative cash flow, needing repositioning and 85% debt. Although asset allocation for both appear the same by numbers, the risk factors are far apart - as are the expected returns.

Investing in debt instruments you’re looking at a top limit on ROI, often with an investment with a finite life. Investing in real estate equity you may “hit a home run”. As people who invested in “rough” areas that became gentrified did. Also, you may elect to own the property literally “forever”. Collecting positive cash flow, amortizing the loan paid for by tenants, enjoying increasing inflationary related value increases, and enjoying partially tax deferred income.

Asset allocation for real estate is best utilized by investors with a passive or partially passive portfolio. When too much personal involvement as in flipping, rehab, wholesaling, syndication is added to the equation, the business aspect is hard to separate from the investment aspect and returns attributed to business effort vs returns attributed to capital investment become blurred.

Or you can forget the whole analysis and just go by gut feel!

Private Mortgage Financing Partners, LLC