Evaluating Your Options
In today’s volatile economy, most of the mortgage note holders are seriously evaluating their options whether to sell their mortgage notes or not. It might be common these days to see a sign that reads “mortgage notes for sale,” however, since this is all about money and business, things can happen and could get very tricky. Here is a commonly asked question.
“My understanding is the federal government is going to be offering financing to private equity and hedge funds to buy up the bad debt aka defaulted mortgages.”
How to Buy Mortgages from Banks?
Here are the Four Buckets. The competition is likely to add to the deal source for buying mortgages from banks.
There are 4 buckets in the note buying industry:
- a) Big boys – buying $100M and above
- b) Mid boys – buying $20-100M
- c) Small boys – buying $1-20M
- d) Mom and pops – buying How to Buy Mortgages From Banks, Defining Your Deal Sources
How Does the Note Buying Works?
If you belong to the Mom and Pop or the Small boy bucket, the Mid and Big boys are now deal sources to buy notes for you. This is simply put that the people who belong to the Mom and Pop or the Small boy buckets are likely to be getting mortgage notes unless the first two, Big and Mid boys have crumbs left for them to catch.
They are looking for a big IRR or Internal rate of return and they are obviously buying much more competitively compared to the small boys and the mom and pops buckets.
How to Find Notes to Buy?
View them as a note buying deal source, partner up with them, come up with some transparent Cost plus 5 type of approach where you give them 5 points in exchange for cherry-picking their portfolio and piggy-backing off their due diligence, these are the practical reasons why they will be interested in selling notes to you.
What to Do to Get Notes to Buy?
So if you feel worried about the drip from the faucet is being intercepted in some way, try to shift yourself a little so that you will be able to catch the drips from the guy who just got in front of you. And you can always go look for another faucet to buy mortgages, or those so called non-performing notes.
Non-Performing Notes
This will make sure that the Mid and Big boys are NOT out there building relationships with the 8,000+ FDIC insured banks. Even at this very moment, those 8,000 have a few non-performing notes in their portfolios!
The opportunity of buying mortgage notes is all out there for people who choose to see and act on the buying notes opportunity. Nevertheless, competition is always very steep. Keep a watchful eye and be alert all the time.
