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Investing in RE notes

TheTicket

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Hey guys - I'm curious, do any of you have experience with purchasing existing real estate notes? I've got a number of related questions, but am having a hard time finding someone with much experience.

thanks
 
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reipro

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Yes we have been purchasing notes for years. What do you want to know
 

TheTicket

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Man, where do I start? :smxB:

I'd be interested in hearing your thoughts on the following questions:
  1. how are you finding the opportunities?
  2. are you originating the note, purchasing an existing note, or doing both? and, do you have a preference of one over the other?
  3. for you personally, what type of return do you look for in order to make the risk worth it?
  4. when analyzing a note, are there any aspects that would immediately disqualify it from further consideration? (I guess this would go into a quick, back of the envelope type analysis...)

I've got plenty more, but I'd be happy if you would touch on any of the above...

thanks!
 

reipro

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  1. how are you finding the opportunities?
We buy notes 2 ways. 1) we have relationships with banks that send us lists. We buy only non-performing notes as we can get them at the biggest discount. 2) we follow notice of defaults and buy loans that way also.

  1. are you originating the note, purchasing an existing note, or doing both? and, do you have a preference of one over the other?
We stricly buy notes. We have orginated a few notes, but for the most part we only buy.
  1. for you personally, what type of return do you look for in order to make the risk worth it?
We look more at the LTV than the return. Most of our deals can return 20% on the low side to several hundred % on the high side. We also only but notes secured by real estate
  1. when analyzing a note, are there any aspects that would immediately disqualify it from further consideration? (I guess this would go into a quick, back of the envelope type analysis...)
Yes the LTV if we are not getting in at 65% or less we are not interested.

Hope this helps!
 
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TheTicket

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For starters, thanks for the above!

1) we have relationships with banks that send us lists. We buy only non-performing notes as we can get them at the biggest discount.

If you are buying non-performing notes, is your goal to adjust the terms and bring the borrower back into good standing or are you planning to foreclose and take control of the property? (to be honest, I have no idea what the expenses would look like to follow through with a foreclosure, so I'm not sure if this is a viable strategy)

How big of a discount are you talking about? 50 cents on the dollar? More? Less? I would assume that when I start, since I won't have the cash to buy more than one or two, I'll be less likely to negotiate to the same degree that you are able to right now.

We look more at the LTV than the return. Most of our deals can return 20% on the low side to several hundred % on the high side. We also only but notes secured by real estate

Are you also limiting these purchases to notes in first position?
 

andviv

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there was a thread where reipro answered all these questions already. Do a search and you can read a wealth of information from somebody that makes a living out of this.
 

Mental Rental

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Buy real estate notes is not for the faint of heart or inexperienced. Do you have any experience in a mortgage lender's office?
In my experience, a better starting place is buying a rental property or two and signing a rental agreement to get some real estate investment experience, and bring in a good cash flow every month. I used to work with a hard money lender who traded in some real estate notes, but we ended up repossessing a lot of them, which is a lengthy process.
Anyway best of luck,
 
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100k

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  1. how are you finding the opportunities?
We buy notes 2 ways. 1) we have relationships with banks that send us lists. We buy only non-performing notes as we can get them at the biggest discount. 2) we follow notice of defaults and buy loans that way also.

  1. are you originating the note, purchasing an existing note, or doing both? and, do you have a preference of one over the other?
We stricly buy notes. We have orginated a few notes, but for the most part we only buy.
  1. for you personally, what type of return do you look for in order to make the risk worth it?
We look more at the LTV than the return. Most of our deals can return 20% on the low side to several hundred % on the high side. We also only but notes secured by real estate
  1. when analyzing a note, are there any aspects that would immediately disqualify it from further consideration? (I guess this would go into a quick, back of the envelope type analysis...)
Yes the LTV if we are not getting in at 65% or less we are not interested.

Hope this helps!

Is this a good deal? @SteveO


I'm still trying to get my head around all this stuff.

Could you buy that note for $600k from the bank (I presume) ... kick out the tenants ... refurbish it a bit ... get some new tenants into the property (turn it into a performing note) ... and re-sell the note for some $2,5 mil ?

Or just kick out the tenants then sell the property to a developer for $1.5 mil ?
 

SteveO

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All of those look like options. If you wanted to turn it into a performing note, you would want to work with the current owner. The interest rate is low though. It may be a better play to foreclose.

Of course you need to understand the market and all the laws in this municipality. If there is truly that much equity, this looks like a good deal.
 

Tourmaline

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Uh wow @100k that looks like an amazing deal?

But goodluck kicking people out of their place in NYC. I'd say that's almost impossible...at least without using less tasteful methods...
 
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100k

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Uh wow @100k that looks like an amazing deal?

But goodluck kicking people out of their place in NYC. I'd say that's almost impossible...at least without using less tasteful methods...

Beginners luck I suppose.
Is NY that unfriendly to landlords/owners? That's pretty lame... but I wouldn't be surprised by it. Bet California is the same way :p
 

100k

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All of those look like options. If you wanted to turn it into a performing note, you would want to work with the current owner. The interest rate is low though. It may be a better play to foreclose.

Of course you need to understand the market and all the laws in this municipality. If there is truly that much equity, this looks like a good deal.

Thanks for your insights.
I'm not even in a position to move on it - I'm in the UK, but I've been reading up on notes and wanted to see what someone that really knows he stuff thought.

Thanks Steve.
 

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