About Short Sales

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!

How to Buy Real Estate Notes, A Personal Experience

Consider this – I spoke with a note broker friend of mine about a $3 million 23-note pool of nonperforming loans (1st and 2nd mortgages).

I review all the loan documents and submit a bid to buy the real estate notes the day, and I find out the day after that I had won the bid with a $1.1M offer.

I know what you are thinking “that’s great for you but I can’t spend any more than $20,000 right now, I’m out of my league…”

My bid was for 6 non-performing notes in the pool, putting me on a short list.

Bid on what you want. If you only want 2 real estate loans at $50k per note, submit that offer.

My Tip On Real Estate Note Buying

Most times you won’t know in advance whether you’re allowed to bid on a small chunk of the pool, so just make an offer anyway.

Ok, back to my story…

A day later the bank called me regarding a real estate note pool that they had for $8 million. They were trying to sell me more non performing notes and also let me know that there would be more within the next month. Do I think I’ll be able to pick the notes I want and bid on just those? My answer is yes.

Do you see why I enjoy note buying?

Instead of having to run after all your real estate note investment deals, (buying/finding properties) you can build one relationship that keeps generating more business.

Key Point On How To Find Real Estate Notes

As long as your do what say in the note buying business, you will establish great relationships with investors. Close your deals when promised and have your funds ready. Your track record counts and I can assure you that the next note buying deal that comes across these investors desks, you will be the one thats’s favored.

That’s an efficient way to build your pipeline of note buying deals – and that’s what makes the non performing note business so attractive – for this fraction of Real Estate Investors out there who understand how to buy real estate notes.