All Forum Posts by: Gail Greenberg

@Joseph M., I own 1st lien notes on several houses in the Midwest and, though the house values are around $40K-60K, they are NOT in bad neighborhoods. There are many $50,000 houses in the Midwest. They can't all be in bad neighborhoods. Many are in solid blue collar neighborhoods. 

I invest in non-performing notes and, since you asked about the returns, most of my associates only keep as cashflow the ones that are returning 25% or more. They sell the others for an even bigger one-time ROI.

@Rashad S. Hello, Rashad - performing notes usually trade at 85%+ of UPB. So the trick is to identify ones that are likely to KEEP performing. Because you're buying at such a high price, your exit strategies will be more limited than those you have with a non-performing note.

With an NPN, it's often possible to make money in several ways depending on how the deal goes: you can get the borrower to reperform, then keep the note for cash flow or sell it or keep it and sell a partial. OR, if they don't reperform, you can foreclose and get a full payoff when the property sells at foreclosure sale OR, if it doesn't, you can keep the property as a rental. OR you can sell it outright for a windfall profit or sell it with seller financing to create a new performing note.

With a performing note, you're paying so much that not all those strategies will be profitable. So choose wisely!

If they want to keep the property, they will just set the highest possible price - a combination of the full unpaid legal balance + late fees + legal costs to do the foreclosure and anything else they're allowed to throw in there. But many banks don't generally want to keep properties. They walk the line between setting the price so high that they get stuck with the property and setting it so low that they're giving it away. I've noticed when shopping for flips back in the day that many bank owned properties - REOs - that didn't sell at foreclosure sale are listed pretty close to retail price. Just goes to show there are some very unrealistic banks out there trying to get top dollar for houses in very poor condition. So you just don't know what they will do.

@Neil Sinha the lender will set the opening bid at whatever they are willing to accept for the property. As long as it is the first lien that's foreclosing, you're fine bidding up to what you're willing to pay. If it's the second foreclosing, you buy it subject to the first, meaning you have to keep paying it even after the sale.

@Mazen Al Ashkar how did you arrive at $400 as the proposed PI payment? My mortgage calculator shows a $30,000 balance at 6% gives a $394 payment if the term is 8 years. Is that what your term was? I also understand CFDs in Alabama - if buyer won't sign a cancellation of contract - require full foreclosure. True?

Oh and why do you even have to board an REO at a servicer? You're saying it became an REO while the service transfer was underway?

Hi @Eric Jones would be happy to talk and answer your brand new guy questions.  Oh, and not that note buyers feel they have to invest in their own areas but Cleveland is a hot bed of notes, hahaa!

 If you want to PM the identity of this person/entity I could tell you if I know anything about them.

@Jeff Montanya

@Eric Hyde and @Dave Blackman Marc Gold's event that you're discussing is great - you'll meet note investors and also see some hedge fund managers who sell notes. He does the same event in Newark, NJ in January for those on the East Coast. 

@Jeff L., I don't think you should focus on what interest rate the borrower is paying as it just makes it more confusing. You don't care what THEY are paying - you care what YOU are making - cash on cash return right? You seem to be saying you're giving the borrower $10,000 and then he's only paying you $8000 as a quick payoff but that's not really what happens. Here are more typical scenarios: 

* You buy a non-performing note with a face value of $10,000 for $5000.  The borrower offers $8000 as a payoff rather than starting to make monthly payments again. You accept and now you've received a $3000 profit on your $5000 or a 60% cash-on-cash return. 

* Or, here are actual numbers from a deal I'm doing right now. I acquire a house worth $50,000 for $20,000  (I was the lender and I paid $15,000 plus costs for the land contract and forfeiture).  I re-sell the house with owner financing to a borrower for $55,000 (you can sell properties for more than market value when you offer seller finance). 

I get $3000 down and finance $52,000. If the terms are 20 years at 10%, the monthly PI payment will be $502.  I now have $17,000 invested in this deal and I'm getting $502/month or $6024/year.  $6024/$17,000 = 35.4% cash-on-cash return.

If this person wanted to pay me off at 80% of face value of the note - 80% x $52,000 = $41,600  WOULD I MIND?  No, I would not.  

@Sandy Uhlmann you would need to consult an attorney about that but keep in mind an MLO only costs about $350 and it's well worth it to have a solid note deal that will hold up in court or enable you to sell the note later if you wanted to.