Non-Performing Real Estate Notes can be a Goldmine if you know how to invest in them.
Thanks to HUD and the Banks thinking they are now Real Estate Investors, and selling their foreclosed properties at or close to 100 ARV, real estate investing has taken on a new look. Buying with cash for the cash flow is still great. Having little or no equity isn’t a problem for us since the cash flow is so high, and values are climbing steadily again. Financing, when you’re in need of 90-100% LTV is a problem, so for now, as investors, we need to go with Plan B. Enter the Non-Performing Note.
Now I know what you’re saying, probably the same thing I’ve always said when I was told how good Distressed Notes were as an investment. “Why would I want to buy into someone else’s problem”? The answer is simple, “ROI”. If you’re creative enough and have an action plan to put in motion including all the players needed from “entrance strategies” to “exit strategies”, note buying is a great opportunity.
Here is one way how Note Buying works when done properly:
Since most note buyers are not real estate investors, as in “they don’t really want the property”, a non-performing note is pretty much a complete loss to them. If the owner vacates the house, there’s no mortgage payment being made, and the only recourse is foreclosure. So the note buyer now has possession of the property…now what? What they want is either someone paying on the note, that “ship has sailed”, or someone to take this “paper” off their hands…like you, like us, and at a severe discount.
Can you say 10 cents on the dollar?
That’s not a typo. These notes can be had, in many cases, for around 10 cents on the dollar. So, what do we do with it? Again, the answers are simple. Notice I said “answers” as in more than one. That’s because there are more than one exit strategy than can be applied to these investments.
Here are a couple of examples:
1. Foreclose on the mortgage and get the property (cheap…very cheap).
2. Rehab the note into a re-performing note and sell it as a re-performing note on the note market.
3. Rehab the note, and keep it for the cash flow.
4. Rehab the note, and get full payoff when the note is re-financed, and your position is “taken out”.
Notice I said, “rehab the note”. We rehab the note much like we would have if we owned the property with the same end result…an increase in value of the asset. Flipping the note instead of flipping the property can get you the same or better profits…without the tenant/owner of the property calling you to fix the toilet, the roof, the driveway or having to pay the taxes and insurance. These expenses are the responsibility of the owner or tenant…not the note holder…unless you foreclose and take position of the house.
Wait until you see how great the ELF Program works for this, not to mention a new funding program we are getting ready to roll out soon. I think the numbers will surprise you…and I can’t wait to present this to you. As always, members of the REcapS Classes will have some added bonuses available to them.