buying and selling bad paper - Posted by Dwain Decell

Posted by Ronald * Starr(in No CA) on August 26, 2003 at 23:43:39:

Dwain Decell-------------

Your very first step, in my opinion, is to post this on the correct forum, if you have not already done so. That would be the “cash flow” forum on this CREONLINE.COM website.

I think that there is at least one course on the topic. I’m sure that John Bahle probably has some discussion of it in his educational materials. You might want to check them out.

Good Investing**Ron Starr

buying and selling bad paper - Posted by Dwain Decell

Posted by Dwain Decell on August 26, 2003 at 22:32:15:

I have the opportunity to buy notes on properties that are in default or are in forclosure. I am not familiar with doing this. Can someone help me with the nuts and bolts of buying and selling these notes. What are the risks? Should I inspect the properties? Many of these properties are in other cities.
Can I assign these notes before I buy? I am looking for real world, practical information that will help me effectivley implement a system of buying and selling these notes. Your advice would be greatly appreciated.

Thanks Dwain

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.

You ask…

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…


Re: buying and selling bad paper - Posted by Ben (Oh)

Posted by Ben (Oh) on August 27, 2003 at 07:34:37:

I do it all the tim.

where are you located?

Re: buying and selling bad paper - Posted by Scott

Posted by Scott on August 27, 2003 at 24:11:00:


Putting the right group part aside, this is what I
primarily do. Now I’m assuming that you don’t live in
my area, right? Because that type of investing just
doesn’t work out here :wink:

Buying notes can be risky. But what type of investing
isn’t? (ok - hold the responses on this one)

Some things to consider:

  • You buy a note of a property in foreclosure:
    a. Is there equity left in your position?
    b. Have you ever forclosed on someone if you
    needed to?
    c. If you forclose, now how to evict?
    d. Do you buy a note, and then get wiped off at
    the forclosure sale? (loosing your investment)
    e. Do you buy the note, and the homeowner files
    bankruptcy? What now?

There are a ton of scenarios, and questions that go
along with them. I’d suggest to have someone help you
on your first 5-10 deals. I’ve bought notes in other
states and if it weren’t for friends in the field, I
wouldn’t have bought them! In other words, I partner!

Also, before buying the note, know what you’re going
to do with it. Have an end game plan of how you are
going to get rid of it. That’s the best advice I’ve
ever gotten (I think)