When I heard about the Note Business, I was convinced this was my next step in Real Estate Investing strategies. I attended seminars, classes, networked with a local Note Broker and took that deep dive into exploring how the Note business worked and how I could fit in.
You may remember some of my older posts regarding Notes:
The bottom line is that it wasn’t really something I wanted to do. It didn’t feel right to me to be a “bill collector”, the “being the bank” isn’t really an admirable status while trying to get legal support and, well, I didn’t really feel right about the whole thing and I can’t really put my finger on it. So I continue with my buying houses, rehabbing and selling or renting.
Understand the Note Business to Make Better Offers
Little did I know that my exercise in learning about the Note business allowed me to negotiate better offers with sellers!
Knowing what goes on “behind the scenes” in the Note Business gives me the knowledge I need when negotiating payoffs of lien holders, thus maximizing MY PROFITS. For example, let’s say a second position non-performing loan has a face value of $50,000. Legally that is what is owed on the note..BUT, that is most likely NOT what the lien holder paid for the note, especially if it’s in a Non-performing status.
Note transactions are recorded in the official public County records as an “Assignment”. What this means is somebody SOLD that note to another and it’s expected that note sold at a hefty discount. Given the date of that sale, you can have a “gut feel” of what someone paid for the note. I asked in one of my online groups, “What would a 2nd non-performing note have been sold for in 2009?” The experts told me 10% of the value. Wow. So another company bought that note for 10% of the face value, or in our example $5,000.
OK, Now I’m Getting Excited!
Without understanding the note business, I NEVER would have thought to determine how to position myself with negotiating with a lien holder. Knowing someone probably paid $5,000 for that note, I’m in a good negotiating position when trying to remove that lien. Sure, they will insist on the $50,000 face value, but I know better (wink, wink). If I paid $10,000 to get that note (or get the lien removed), they would double their profits and we can both win. Without understanding the note business, I would have thought I got a good deal if I negotiated at $40,000. Right?
So Where can YOU Learn More About the Note Business?
I was fortunate enough to have a Note Broker in my weekly networking meeting (Robert Young, The Texas Note Co), so I got a little bit of perspective on Performing Notes, and how he made a living brokering performing notes. Getting that little bit of insight was very helpful, talking about discounts, effective interest rates, etc. Even then, I would discuss the possibility of obtaining a non-performing note at a heave discount, getting the borrower to sell their home via short-sale (because as the note-holder I can approve the short-sale), and make a profit, all the while saving the homeowner from foreclosure.
My next involvement was with The Paper Source and Bill Mencarow – they hold seminars twice a year and the information was incredible! The networking incredible! And the cost was reasonable – both the seminar and the hotel. In fact, he just shared a discount code with me “jeannorton” if you decide to go to the upcoming seminar in April 28-30, 2016 – he will give you a $50 discount. I held a call with him some time ago and the recording is still online at RehabbingRemotely.com – but remember this call was from a few years ago, but still well worth a listen.
I left there with an incredible amount of knowledge, but still something was stopping me from going forward. That’s when I heard of Scott Carson, of We Close Notes and luckily he was holding an event in Austin and he invited me to come. He gave me a lot of tips and tricks for getting into the note business. and some insight on how the internal departments work inside a bank. I walked away with some little known strategies for negotiating short sales and added that to my bag of tricks.
I even looked at some notes for sale from hedge funds, but I STILL didn’t move forward in the Note Business. I would say partly because I was doing OK with what I was already doing, and nothing really motivated me to make such a strategic change in my at that time.
I may never buy notes, but I’ve NEVER regretted my exercise in learning that side of the business. I highly encourage anyone wanting to learn more to consider going to Bill Mencarow’s Paper Source Note Seminar this April in Las Vegas – and don’t forget to use the discount code “jeannorton” to save $50 off the entrance.
The last time I went to his seminar, I positioned myself as a rehabber that will buy note-holders foreclosures after they foreclose. I mean, they don’t want to start Rehabbing Remotely®, so I was there to solve their problems – a new lead source for me :).
Tips, explanations, encouragement and advanced strategies are often discussed in the Rehabbing Remotely Club. CLICK HERE to learn more.