All Forum Posts by: Gail Greenberg

@Christopher Jenkins I think it's pretty normal that people have to try out different types of real estate to find their sweet spot - that area of real estate that propels them toward their goals but is also enjoyable and fits your skills and interests. I flipped, did multi-family investing and bought and managed student housing for investors before finding non-performing notes. Never say "never" but I think I'll never do anything else. To have the best chance of long-term success and contentment, you need to find what suits you. The fact that you haven't pulled the trigger yet also suggests you're a bit scared - also very reasonable. This is a high-stakes game. I'm a hypnotist and used self-hypnosis to get over that myself. Would be happy to tell you how that works - I don't sell that as a service but I can certainly share with you what worked for me. 

Well, one big piece of info you left out is what did you pay for a note with a face value of $10,000? If you didn't overpay, an $8000 payoff is going to give you a profit immediately AND why would you forego the extra $2000? Velocity of money. You build wealth by taking your profits and redeploying as fast as possible. My fellow note-investors all have a standard - if a performing asset is paying them, say, a 25% ROI, they keep it. If not, they sell it. It's important to have defined goals and a system that guide your decisions.

I would sell them on a "Contract for Deed" or land contract. Depending on the state, this would vastly simplify taking the home back if the borrower defaults. Under this structure, you retain ownership of the home until the borrower finishes making all the payments - like a car loan. Many states have a "forfeiture" process to end a CFD - it's essentially just cancelling the contract. But some states require full foreclosure even for a CFD under certain circumstances. Important to know - even though this is a simpler transaction than creating a note and mortgage, you should still use a Mortgage Loan Originator to insure you're fully compliant with the Dodd-Frank rules for making mortgage loans to borrowers.

Hi @Lucas Mills, the notes version of using the same money over and over is:

* Buy for 50% of the unpaid balance an owner-occupied 1st lien that shows signs that the borrower wants to stay.

* Get them reperforming (making their mortgage payment regularly again)

* Collect 6-12 months of payments to "season" the note.

* Sell it as a reperformer for 85% of unpaid balance.

So, say the unpaid balance for simplicity's sake is $100K and the monthly payment is $800. You buy the note for $50K, and you have maybe $2000 in expenses for legal, loss mitigation and servicing. Here's what your numbers look like at the end of a year:

$52,000  - note purchase and expenses

INCOME:

$9600 - 12 months of $800 payments
$85,000 - sell the note for 85% of UPB

$94,600 - TOTAL INCOME
 -52,000 - NOTE PURCHASE & EXPENSES

$42,600  TOTAL PROFIT IN A YEAR

That's without any of the complexity of flipping a house. And you can buy a note anywhere in the country because you don't have to be in the area to supervise it in any way.  

Cheers!

I'm not in St. Louis but I do love talking notes and strategies. You want a buddy on the ground - I get it. Will pass this on to note investors in the area.

Hey @Hardik Patel, it is several different sources. I own Contracts for Deed as well as some conventional notes. Several are reperforming, one small one just went to forfeiture and we're now getting the house ready to sell - with owner financing. I have one that became a rental. The $150K that's invested doesn't even count a $27,000 bump I got when I bought one note for $15,000 and received a $42,000 full payoff when the house burned down after just a couple months. The borrower also did really well and was very pleased with her outcome that time. So, yes, I am a very happy note investor. ;-)

Hi @Samuel Rogers funny you should mention $150,000 to invest. That's exactly what I've invested in notes over the past 7 months and although they're not yet all performing, I'll be getting $4000/month income from them once they are. Then, reinvesting all the income that comes in for a compounding effect. Without any of the work of flipping. I was about to say also without managing a rental but, one of my notes did become a rental.  

Ooh - just saw your first sources of notes you're looking it. I have some tips and cautions for you. Agree with the other posters - get educated first or team up with an experienced note investor. 

There's a lot of debt out there that could eventually be up for sale: credit card debt, medical debt and - another big kahuna - student loan debt. It will be interesting to see how these all develop.

Hi Chatree,

There is not really a note servicer that will take responsibility for educating and guiding you about notes, particularly before you purchase one. They can be helpful once you buy and board the note, but they can't help you avoid buying a bad one.

Most note investors who accept JV partners have the partner fund the note while they do all the work managing the deal. The two parties then split the profits. If you can find an experienced person who will take the time to teach you on top of doing the actual work - or maybe let you do the work under their supervision - you've got the proverbial "earn while you learn" situation.

Cheers!