All Forum Posts by: Dave Van Horn

Hi @Michael Zagorsky

I'm actually hosting a free Note Investing Q&A call tomorrow night, that you're welcome to attend. My partner and I will be discussing a variety of note topics (including how to acquire properties with notes) as well as field any and all questions from the audience.

You can find out more info on it here:

https://www.biggerpockets.com/forums/521/topics/33...

I also have recently completed an Introduction to Note Investing E-book that's due for release very soon. It could definitely give you some more info on the business and point you in the right direction. If you're interested, I could PM you a free advance copy.

Best,

Dave

Interested learning more about notes? Or just have a note question you want answered?

If so, join us for our FREE Note Investor Q&A Call on July 19th at 8pm EST! 

On this call we will be discussing how to acuqire property as a junior lien holder WITHOUT paying off the first mortgage. Plus, bring any note related questions (whether general or deal specific) and run them by two note investing experts (PPR President, Dave Van Horn, and PPR’s Director of Borrower Management, Bob Paulus).

To tune in or ask a question on the call, register here:

http://www.pprnoteco.com/call-signup-july-2016/

Call-In Information will be emailed to you immediately following registration.

Hi @Juliette V.

I'll have to PM you a copy of my new Introduction to Note Investing E-book. It should be able to answer some of your questions and point you in the right direction.

Best,

Dave

Hey @Jay Hinrichs

No problem, happy to do it. 

To answer your first question, since we warranty the purchase price less payments received, our performance warranty is only applicable until an investor's investment principle is no longer at risk (which is typically for the first 4 to 7 years from when they purchased a re-performing note). Plus knowing what our re-default rate and our buyback rate is, we know that we owe note buyers less and less on their notes as time goes by. So fortunately for us, unlike with malpractice insurance, our warranty doesn't have to last a lifetime!

And you're right, with our low default rate and the lower price point on 2nds, buying them back is certainly an expense but not a major one. Plus the rewards certainly outweigh this cost. It's a great form of marketing and definitely differentiates us in the marketplace. At the end of the day, at the risk of sounding cheesy, it's really about keeping our investors happy. To put it simply, we want our note buyers to make money - if they do, they'll invest with us again and if we have to refund them because a note doesn't perform, they're likely to buy again knowing that their principle investment is safe. So it's really a win-win. And with 1st liens, our warranty works the same way but some investors choose to keep the property over getting their money back, so our buy back rate can even be lower with them. But hey, the warranty is always there if they need it.

As for the future of 2nd mortgages, it's tough to say for certain. Although supply and demand of 2nds ebbs and flows, we're still finding that there are plenty of 2nds out there today and expect more to come. Many banks have been sitting on 2nd liens for awhile now due to compliance, regulations, and other third party risks. Some of these banks were more inclined to liquidate their 1st lien portfolios before their 2nd liens. We're also noticing they are starting to write 2nds again. Now of course their underwriting is stricter so there may not be as many as before and we probably won't be seeing these re-defaulted ones for a few years. Personally for our company, since we entered the 1st lien space a few years ago, product availability with 2nd liens isn't a huge issue. If we can't buy 2nds, we just buy more low balance 1sts.

There are data service providers, such as DistressedPro.com that can give you some more color on what product is currently in the marketplace (and who owns it).

Best,

Dave

Hey everyone, 

Saw this post today in the forums and I wanted to chime in to clear up some confusion.

Our current fund offering operates as follows:

- The Fund invests in 1st and 2nd position liens nationwide, backed by hard real estate.

-  Investors may participate by purchasing individual shares at $5,000/share. 

- The minimum investment is $10,000 (or 2 shares) so small-balance IRAs, HSAs, and Coverdell ESAs may participate. And it makes it easier for an investor to roll their preferred returns back into the fund if they so desire.

- Our current preferred return is 12% a year, for a 3 year term (keep in mind these funds along with the notes that they purchase exist within a marketplace so returns fluctuate depending on the offering). 

- ACH payments are received by investors on the 1st of every month, so participation in our fund is a purely passive investment vehicle that's open to accredited investors only (and like Patrick said above, accredited or not, anyone can purchase a note).

As an added bonus, investors in our fund can redeem shares to purchase notes upon availability. 

@Jay Hinrichs @Patrick Desjardins

We rep and warrant all notes (both re-performing and non-performing) to be a valid lien and to be in the lien position as disclosed at the time of purchase.

Our current performance warranty on re-performing notes is as follows:

"In the event that a re-performing note becomes delinquent, or enters non-performing status, PPR’s Loss Mitigation Department will notify the note investor within 30-60 days and then attempt to address and correct the payment issue prior to the loan becoming 120 days past due. At 90+ days past due, the note investor will be eligible for our buyback option, wherein PPR offers to issue a cash refund for the note purchase price less payments received (payments include principal and interest) in exchange for the non-performing note. This offer extends through to 120 days past due."

Jay's correct, warranties and fund investments are only as good as the company you're working with. The good news is we've been in business for close to 10 years now. In that time, we have always honored our reps and warranties for every note purchase and have always paid our preferred returns, never once being late or missing a payment. 

If anyone ever has any questions about fund investments or notes, please feel free to contact me here on BP.

@Nik Krohn  As always, the answer to note questions like these really depend on quite a few factors and can be tough to answer generally. Are loan modifications the best strategy? Well, it all depends on the borrower. What do they want to do and what can they afford? So for example, if the borrower wants to leave the property, it wouldn't make sense to try and do a loan modification. Or let's say the borrower absolutely can't afford to stay, again a loan mod wouldn't be the best exit strategy in that scenario.

As for the percentage end up as loan mods, that answer depends as well. In our experience we've found the majority of NPN 2nds that are current on the 1st lien end up as a loan modifications. Generally speaking this is because if the borrower is paying the 1st, they most likely occupy the property (and care about staying there) and they most likely have a source of income (because how else would they be paying the 1st?). Now that's sort of regardless of equity, but if the borrower has equity in their property and realize it, they may be more inclined to do a workout so as not to lose it. Also a 2nd lien that is current on the 1st AND has equity is the safest bet because if you can't complete a loan mod and you have to go down the foreclosure path, you can still turn a profit at sale. But keep in mind these high equity current on the 1st liens understandably demand higher prices.

As for loans that aren't current on the 1st, if they're occupied you have better odds of completing a loan mod. And if a loan is vacant and not current on the 1st, the percentage of doing a loan mod drops dramatically - then again, a note like that might only cost 3 cents on the dollar, so it's not like you're investing much in the first place.

And like I stated in the beginning of this post, there are other factors that go into the amount of modifications you may see - such as how good are you at completing a loan modification, what's the quality of the loan mod, how many loans are you working, etc. The example you gave from the podcast is certainly possible and it's possible to do again but I don't have enough information on the deal itself that would determine that probability. Did the investor buy multiple notes in bulk to get that 10 cent price? When exactly did the investor buy the note? There were definitely more notes like that in the recent past when we were in a down market but it's a bit different today as we start to enter an up market. We're also not factoring in location of the note either since some states with a longer FC timeline are less expensive. So it could all depend on when they bought it, how long they've owned it, as well as where/how they purchased it.

@Account Closed Not sure why you have such a bias, I've been investing successfully in NPN 2nds for over 10 years. There are also others on the site that have had much success as well. In fact, I'll take a delinquent 2nd that's current on the 1st, than a NPN 1st because it's probably a cheaper price and more likely a higher yield.

Best,

Dave

These aren't all Sacramento locals, but there are definitely people in CA/Pacific Northwest area that I wouldn't mind catching up with at the event if they can make it! @Dmitriy Fomichenko @Chuck Van Court @Scott Malkin @David Greene @Ellis San Jose

@J. Martin We're seeing 12% -18% all day, depending on the type of note. No deals drying up in our space! We have more product than we can buy, wish I had more capital!

And the last event was incredible. Looking forward to catching up with everyone mentioned above, and meeting new people as well @Rachel Bier

@Arthur Mayer

It sure is, once a 2nd becomes unsecured your only recourse is through the borrower.

Best,

Dave

Hey @Arthur Mayer, not sure where the email was sent, no one on our end ever received anything. Tried following up but didn't hear back. 

It sounds like you have an unsecured note, I'd suggest talking with a collections attorney in the state the note is located in.

Best,

Dave