What the Heck is Passive “Note” Investing?-On the Hunt

I last left off with you on the quest to find how I could buy directly from lenders. This was by far one of the most difficult things I have done within the note industry.  I have worked in the financial industry for nearly 20 years, and I thought through my connections I could easily find the right individuals to speak to.  I was sorely WRONG!  I started by calling connections that worked in collection departments.  They knew what I was talking about, but did not know who I could speak to.  Then I started reaching out to mortgage brokers I knew and they pointed me to speak to individuals that handled REO’s (Real Estate Owned) for lenders.  When I was able to reach these individuals (Yes, reach!), these individuals are very busy and have very little time to talk.  After I spoke to several of these individuals I found out I was not prepared.  I was not asking the right questions.  I regrouped and came up with 4 questions to ask.  I started dialing for dollars like I did when I was a collector when I started in the financial industry.  I set a goal to reach 5-10 lenders and ask them my 4 questions.  I was able to get a hold of 7 lenders, and I was able to ask 5 out of 7 my 4 questions.  What I found out there was another department that handled the sales process of non-performing mortgages “notes”.  These individuals had titles like, “Asset Manager”, “Secondary Marketing Manager”, “VP of Special Assets”, “Special Assets Manager”.

I was really excited that I found these individuals and just wanted to start calling them, but I took a step back and decided to put a game plan together.  By now you are probably asking yourself- What does this have to do with passive note investing? These relationships are what makes passive note investing possible.  Being able to purchase notes directly from lenders at a 30%-50% discount has a huge impact on our investors’ returns.  As we cultivate more relationships it allows us to grow our base of monthly volume, which in turn allows us to offer you “our investors” bespoke passive investment opportunities based upon your specific financial requirements.   In my next installment, I will share with you my marketing plan, successes, and failures.  Have a great week ahead!  Let’s work together to bring Wall Street to Main Street!


What the Heck is Mortgage “Note” Investing? The Start of a Journey

Have you ever heard of people talking about note investing? Probably not! It is not a topic that you are discussing over coffee or at a social event.  Would you be surprised to know that note investing has been around since the 1950’s.  When I first heard about note investing 4 years ago I had no clue what it was and I was skeptical just like you are.  Since note investing is not part of the mainstream investing conversation, people do not believe or understand how they can invest in notes passively.  What is a note? Instead of giving you some crazy definition from Investopedia I wanted to share my definition with you: Notes are financial instruments that are used to secure loans against real property.  These instruments can be used on just about any type of real estate.  Additionally, notes play a critical role in the housing market in the form of land contracts, owner financing, trust deeds.  These forms of mortgages “notes”, are utilized for homeowners that do not qualify for financing from traditional brick and mortar banks.

Now we got the boring stuff out of the way let’s start talking turkey!  We all remember the last recession and how bad the housing market was hit.  Housing prices in some markets dropped 30% in value, and foreclosure rates were in the double-digits.  The American Economy was a disaster and there was no relief in sight.  Just like you, I do not want to go through another time like that again without being prepared.  This is where note investing comes into play for all of us. In 2016, banks/lenders sold $116B worth of non-performing notes (1st trust of deeds on Single Family Residences).  This number does not include purchases by hedge funds like Black Stone, Fortress, and GCM Grosvenor to name a few. These hedge funds are buying directly from Freddie and Fannie, and are paying between 20%-40% of the Current Market Value of each property.  When I first learned about all this I could not believe it!  I did my homework on the offerings, and I wanted to find out how I could buy directly from banks/lenders.  This is where I will leave you on this posting and on my next posting we will talk more about the journey and how banks/lenders operate in this space. Let’s work together to bring Wall Street to Main Street!