Bad Paper… or… Collectable Asset…? - Posted by JT-IN
Posted by JT-IN on August 27, 2003 at 22:52:00:
You have to be able to… in advance… determine the difference. If you can’t, then you pass on making the purchase.
What are the risks…? Loss of your principal investment if you buy paper that is not collectible.
Should I inspect the proeprties…? Do you pick up a .69 cent tomato at the grocery store before buying it…? If so, then I would recommend either you… or someone who you trust in the case of a remote investment, to be your eyes and ears, to make the inspection.
Can you assign these before you buy them…? Not to someone who knows what they are doing… You may be able to garner some interest, and get a preliminary committment prior to owning it, but hardly going to get someone to pay you before you own it… unless they are GREENER than YOU.
Real world practical experience is here on this site, however someone will be hard pressed to teach you all you need to know via posting on this site. What I recommend is a course or two, that will teach you to think properly about defaulted paper, so that you can understand what is needed to know prior to sticking your toe in water that you perceive is warm, but turns out to be ice cold… (uncollectible or unsaleable note).
I buy some mortgages and judgments periodically, mostly on property that is in foreclosure, that I intend to purchase the underlying property. This is a little different technique than you are asking about, but the fundamentals are basically the same when it ocmes to analyzing the deal. I just completed a deal where I purchased 3 defaulted mtg’s on the same property, then took the property via a deed in lieu agreement, and acquired over 300K in equity in the process.
The 3 mtg’s totalled 1.3 mil, which I bought for 188K. The property is worth about 500K. Of course it may be next decade before I could ever duplicate this deal, but the reason that it happened is because I understood how to proceed, after analyzing the deal and visualizing a clear-cut way to the profit potential. If it had fallen short, I would not have been obligated and would have lost nothing but time ivested in many negotiating phone calls with Bankers.
Hope this helps in some way… and wish you luck on embarking in the business. Be sure to log onto the cash flow section of creonline, as there are some real experts that hang out there…