All Forum Posts by: Alecia Bolton

It's a bit of a long game, but you buy your house with seller financing and make sure you put in a first right of refusal. Wait a couple years and approach them about selling the note, and get a discount. Since you were performing, you probably can't expect more than 80%, but who knows. They might need the money and you could get a bigger discount.

People can be weird about property, especially if i'ts been in the family for a long time.  It's family property and so they can't lose it or sell it, even though they don't want to keep it or maintain it.  Sentiment can be a huge driver for irrational decisions.

Agree with @Jamie Bateman.  Having it seasoned with a servicer will make the note a lot more appealing on the secondary market and help you get that 80-85% you're looking for.  It'll also take the headache of managing it off your hands and manage the tax filing side of things at the end of the year.

You can also sell it on the BP marketplace.  You probably won't get as many eyes on it, but it's an option.

@Bradley Ritter PM sent.

The return on partials is generally measured in yield, not ROI. Yield is the amount of cash flow you're getting each year in relation to your investment. On a performing note with no discount, it's the rate on the note.

One of the great things about partials is that you can, to a certain extent, get any yield, because it's based on the number of payments you buy and what you buy them for.  You would just have to get the person selling the partial to agree to your minimums.

It's going to beat the stock market for stability and it's backed by the asset.  So if it goes non-performing during the partial period you've purchased, you'll get the house and still have the potential to be made whole...depending on the contract you signed.

My general rule of thumb is no less than a 7% yield.  But I don't buy partials anymore, I only sell them.

@Andy Mirza Given the banks write-off bad debt, I wouldn't expect to see a lot of Covid defaulted paper until closer to the end of the year.  It'll definitely be interesting to see if there are any stipulations around what we can do with them.

One of the beautiful thing about notes is the number of exit strategies available to you.  Some of the downsides have been articulated above.

I second the suggestion to network with NPN investors who buy in the areas that you want to rent in. That way, they can take down the foreclosure and wholesale the property to you if they end up getting the house back. Personally, I buy mostly nationwide (there are some states I won't at this point) and have access to a trade desk that is nationwide. I'd be happy to put you on my list and keep an eye out for properties in the area you want.

If you do want to go through the NPN process and manage it yourself, rather than partnering, there's a lot of education out there. You would want to filter the notes you look at with an eye on your exit strategy. A note that is only 6mo-2yrs late might still modify rather than foreclose. Getting a deed in lieu can work, but that's completely dependent on the owner.

Some of what I've been reading wrt non-performing notes is that we're not really going to see a lot on the market from the current situation until the end of the year, due to how quickly banks are doing write-offs.  Then the timeline is all about how far you are from the source of the notes.

I'm closing on three notes this week, one non-performing, 2 performing.  I'd be happy to chat about partials as that's a part of my business model.

@Nathan Frey

Another option if you can't find/don't want a fund, but want the same level of effort as you'd be putting into a fund, is to create an entity with someone experienced who can manage the portfolio of notes (fund) and handle anything that comes up (PN goes non-performing, servicer errors, etc).  That way, you're as hands off as you would be with a fund, but still getting the returns and potential diversification of notes.

All the note funds I know about require you to be accredited.  You could joint venture with a note investor.  You bring the money, they bring the skill set, you both profit.  That's something I'd be happy to talk with you about.