Re: Expected yields? - Posted by John Behle
Posted by John Behle on March 23, 1999 at 16:05:06:
Yes, the days of 18-24% yields are gone - for the average note buyer and broker.
When I began buying notes, the yields were actually higher than that on a regular basis. Are they gone? No - I still get those types of yields today. It’s a matter of marketing, being creative and finding and funding notes in a different manner than most.
Sometimes that looks like hard money loans and sometimes it is defaulted or “problematic” paper. Sometimes it is smaller notes and deals that have to close quickly.
The only way most people know how to do notes is to either sacrifice yield or safety. Right now institutional buyers are doing both. There is a lot of competition and the funding sources are pushing the boundaries of good sense.
Some are going higher on their LTV’s that they will accept. Take advantage of that right now. I predict it won’t last, but who knows.
I deal with local deals and local funding. Outside investors and brokers would not and could not do the deals I do. Most are too slow, so that is a part of it. I’m in and out before they know a note is available. Some are too hung up on credit. I’m hung up on LTV ratio. The property will always pay me. Never bet on the people - bet on the collateral.
Most are left out of the loop because of marketing and creativity. The national funding sources are pretty much dependent on the “Flippers” out there that are being churned out of the week long infomercials. Without them and the national conventions, they would not exist.
Most of the people churned out of the seminar mills have little clue how to really market their services as a note broker. Few have any knowledge of how to market themselves as a full service funding source for real estate and financial services.
Most of the best note deals are created not found. There is no competition if you are creating the paper and there is little competition of any kind on “problem paper”. Be a problem solver and you have the edge nobody can beat.