Note Purchases - A Great Way to Buy Property at a Truly Rock Bottom Price and Win Awesome Cash Flow
Note purchases are not well known by most investors.
However, last year billions of dollars of notes were sold for below as 30 cents on the dollar.
Many assets were prime opportunities and investments could easily net 2x or even 3x returns for those with the resources and energy to pursue them.
The first major issue with these investments is access.
Banks don't advertise packages of notes in the same fashion that you would seek an apartment complex or buy a multifamily portfolio.
As an investor, we have to engage the banks.
The next issue is cash.
Typically buying notes requires having cash for an immediate close.
The banks are unwilling to provide lengthy due diligence and are expecting a quick close.
However, this does not mean the investor is entirely without ability to vet the investment.
First, the lender can provide payments being received, reports received at the original close and any recently received financial data.
Most of this can be reviewed with some level of accuracy within a few days.
At the same time, the buyer has a few other possibilities to study the assets.
The investor can visit the project as a shopper, check out the market, and complete some level of income, demographic, and neighborhood study.
These steps are critical as methods to contain risk.
Having taken these steps the investor must offer a price that protects them from risk.
Recent note sales have gon as slow as 33 cents on the dollar.
If you know the quality of the location, this can prove a reasonably safe risk.
What happens if you win? This is the next significant challenge.
As an investor, you must have the resources and skills to complete the foreclosure.
Also, flexibility is important.
Having completed the purchase at 33 cents on the dollar are you perhaps well served to work with the owners restructuring the debt, achieving immediate cash flow, and creating a performing asset while avoiding the headache of ownership in some cases.
Bottom line, have the legal resources to go to foreclosure and the investment agility to recognize that this may not be the very best alternative for you or your investors.
However, last year billions of dollars of notes were sold for below as 30 cents on the dollar.
Many assets were prime opportunities and investments could easily net 2x or even 3x returns for those with the resources and energy to pursue them.
The first major issue with these investments is access.
Banks don't advertise packages of notes in the same fashion that you would seek an apartment complex or buy a multifamily portfolio.
As an investor, we have to engage the banks.
The next issue is cash.
Typically buying notes requires having cash for an immediate close.
The banks are unwilling to provide lengthy due diligence and are expecting a quick close.
However, this does not mean the investor is entirely without ability to vet the investment.
First, the lender can provide payments being received, reports received at the original close and any recently received financial data.
Most of this can be reviewed with some level of accuracy within a few days.
At the same time, the buyer has a few other possibilities to study the assets.
The investor can visit the project as a shopper, check out the market, and complete some level of income, demographic, and neighborhood study.
These steps are critical as methods to contain risk.
Having taken these steps the investor must offer a price that protects them from risk.
Recent note sales have gon as slow as 33 cents on the dollar.
If you know the quality of the location, this can prove a reasonably safe risk.
What happens if you win? This is the next significant challenge.
As an investor, you must have the resources and skills to complete the foreclosure.
Also, flexibility is important.
Having completed the purchase at 33 cents on the dollar are you perhaps well served to work with the owners restructuring the debt, achieving immediate cash flow, and creating a performing asset while avoiding the headache of ownership in some cases.
Bottom line, have the legal resources to go to foreclosure and the investment agility to recognize that this may not be the very best alternative for you or your investors.