How to Buy Mortgages from Banks – Different Deal Sources
Friday, April 3rd, 2009
Buying Mortgages from Banks, What To Do
Here is a question that is asked quite a lot.
“My understanding is the federal government is going to be offering financing to private equity and hedge funds to buy up the bad debt aka defaulted mortgages.”
It seems to me, that this would create more competition?
“What are your thoughts on this?”
Well, here are my thoughts:
How to Buy Mortgages from Banks – The Four Buckets
The competition is adding to the deal sources when buying mortgages from banks.
There are 4 “buckets” in the note buying industry:
a) Big boys – buying $100M and above
b) $20-100M – Big Boys
c) Small boys – buy $1-20M
d) Less than $1M – Mom and pops
A lot of the shifting is happening between the big boys and mid boy stage. That is just my opinion in terms of raw dollars.
So lets think about these investors financials for a second.
The only thing that they are hungry for is the yields on their note buying investments.
Defining Your Deal Sources & How to Buy Mortgages from Banks
If you fall into the mom and pop or small boy category, guess who just became your new deal source for buying notes? Yes, the mid and big boys.
They are looking for a huge internal rate of return (IRR) so they are buying more aggressively than what you will see compared to the small boys and the mom and pops.
View them as a note buying deal source, partner up with them, come up with some transparent “Cost plus 5? type of approach where you give them 5 points in exchange for cherry-picking their portfolio and piggy-backing off their due diligence, and why wouldn’t they be interested in selling notes to you?
So you don’t have to be worried about the the water from the your fountain being intercepted. All you have to worry about is repositioning yourself in a way so that the water still drips in your direction.
And you can always look for other opportunities to buy your non performing notes.
Hope this information helps you.
It’s time for some action!
