All Forum Posts by: Mike Hartzog

Personally, I don't buy into the idea that gurus provide no value in the note investing space. One could make that argument much more convincingly for standard REI, given the number of books and online materials available, including the excellent resources available here on BP. In the notes space, there is little in the way of how-to information available for low cost. Sure one could piece information together from various sources over time and work to fill in the blanks by posting questions here, but if one desires to break into the space in a relatively short time period, finding a private mentor or using a guru program are the viable alternatives.

I do agree that guru training programs tend to sugar coat things to some degree, focusing more on successful scenarios and outcomes.  I think its also true that many folks spend money on these programs expecting that someone is going to give them the magic formula which will lead them to easy riches.  Smart people understand that they will not get all of the details they need from the program and nothing short of gaining solid knowledge and applying a lot of hard work over time will lead to success.  I personally know a number of very successful note investors who got their start with a  guru, and I know many more who have paid up for programs and have never moved on to purchased a note.  The individual determines whether or not value is derived from the program.

Guru bashing seems to be a sport enjoyed by many on this forum, and I must admit I sometimes find it entertaining.  But what's the point of bashing if we cannot point to a viable alternative?  I would encourage those on this forum who are knowledgeable to focus their energies on building that alternative.  Pick a topic and write a blog post, or write a book.

@Jay Hinrichs 

Good to hear your business is doing well.  I'm fairly busy myself.  There are certainly opportunities in non-performing assets, but not like there was a few years ago.  Prices of NPNs have gone up considerably and so investors looking to purchase NPNs one at a time must sift through many assets to find the small handful with solid profit potential.  So the heyday is over but the hype lingers on.

One could compare investing in a non-performing loan to investing in a property which requires some renovation before it is ready to rent or sell.  Successful RE investors are very selective about the properties they purchase.  You can't just buy any old property to renovate and expect to make a profit.  It's the same with notes.  We can buy notes with problems and work to fix those problems one way or another to create value, but we must pick our battles wisely.  I expect that this applies to your business as well.

@Jay Hinrichs 

Thanks Jay.  I have another one which discusses Tax & Title Due Diligence, which is part of the story but you are right, the topic needs to be addressed in more breadth and depth.  Perhaps a risk mitigation article would be a good angle on the topic.  My holiday homework assignment...

Here's a blog post which provides an overview of a few of the more common note investing approaches.

@Dion DePaoli 

Thanks for your detailed posts here.  This is good information for investors to be aware of.  Personally I haven't become involved with working 2nds.  I was merely pointing out that as a the owner of a non-performing 2nd lien, there are some good reasons to want to understand the status of the 1st lien.  As you mentioned, the borrowers credit report is probably the best source of this data.

Regarding Dion's question at the end of his post, I can think of one reason why a 2nd lienholder would want to know the balance on the 1st. The payoff amount can be much higher than the original balance if the 1st has not been paid for some time, i.e., accumulated interest, late fees, and property tax advances are added to the UPB. I would want to know what I am taking on with a foreclosure before I move forward. I have heard of scenarios where a 2nd lien investor believes they have some equity but finds after foreclosure that they are entirely underwater.

Sorry I should have addressed your question of other ways to get title.  There is quit claim, but it has the same perils as DIL. 

On the question of getting the property back at the foreclosure sale, you will have the opportunity to set the starting bid price at the sale.  If you want it to sell as the sale, you can set your bid at a price below market value enough to be attractive to investors bidding at the sale.  If you want to keep the property, you max out the bid by setting it to the full amount you are owed.  This includes the principal balance plus any interest accrued while the borrower was not paying, late fees, attorneys fees, etc.  The servicer should be able to provide all of these amounts except for the attorneys fees.

The summary final judgment sets the sale date and judgment amount, and getting to this point is the majority of time and expense involved in a judicial foreclosure.  Because of this, I would be inclined to follow-through with the foreclosure sale if I owned the note 

A deed-in-lieu conveys title too, but the borrower must agree to and sign the agreement, there are legal costs involved in  putting the agreement together, and deed-in-lieu does not wipe out junior liens as a foreclosure sale would.  Foreclosure is far better than DIL in that you are ensured to have a clean title if you are foreclosing from 1st position.

I would do the following:

1) Ask the seller for a copy of the final judgment, then contact a foreclosure attorney to review and tell you if you can still move to sale based on this.  (You might consider contacting the attorney who handled the foreclosure previously.)

2) Get an O&E report to verify ownership and the actual lien position of the note you are purchasing.  You will also be able to see any junior liens or judgments that are on title.  (More times than not there are other encumbrances.)

Thanks Rick.  I'll check these out.

Hi Bill - Sounds like you are talking with the wrong company here.  I can provide a couple of references for you.  Shoot me an email.

Mike

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