When you get right
down to it, buying a non-performing real estate note is like buying a boat; the
two happiest days are the day you buy it, and the day you sell it! Investing in
a non-performing note (NPN-NPL), and cashing out for a profit, are my two
happiest days as a note investor.
You have heard the old
saying in real estate, the profit is made when you buy. How true that is,
especially in the note world! We have found that you have to take into account
all the costs you will run into from the day you buy it, until the day you sell
it, and use that to make sure you are not overpaying. If not, you can lose
money; sometimes a lot, sometimes all of it.
While there are some
warm and fuzzy feelings experienced when you own the boat, like taking it out
on the water for the first time, you are going to have a lot of ongoing costs.
If you store it in the water, there are dock fees, maintenance fees, insurance,
and if you financed it, monthly payments. If you store it at home or a parking
facility, you will have to protect it from the elements, possibly pay rent, and
you could destroy it in an accident towing it to, or putting it in the water.
With NPN's, finally
making contact with a homeowner who wants to stay, despite doing his best to be
invisible is equally as thrilling. This usually leads to either attempting to
work out a payment plan to get them repaying, or settling for a lump sum to pay
it off is a great feeling.
Otherwise, it's
practically death by a thousand cuts.
Sometimes I feel like
we are being nickeled & dimed to death by a plethora of service providers;
lawyers, note servicers, document custodians, rehabbers, lawn cutters, property
preservationists, appraisers, photographers, house cleaners, city agencies,
code enforcement, county tax collectors, Realtors, health inspectors, zoning
ordinances, Home Owners Associations, utilities, forest divisions, trash
haulers, flood areas, etc., that all want to extract as money from you as
possible every time they move or type something.
So the most important
thing I do now is come up with as many costs as possible before we make an
offer to buy a note, so we can factor that into our purchase price. One of the
biggest we have found in working out over fifty notes is the expenses are
usually higher, and it takes longer to exit in judicial foreclosure states. And
now that we know something about rehabbing real estate, we have been equating
possible home repair costs into our note buying bids now, so we know if we can
still make a profit, or suffer a potential loss.
Now is the time to
factor in the old carpenter's phrase; "Measure Twice, Cut Once." With
notes, you want to make sure you run the numbers inside and out before you
commit to buying a note with "Calculate Twice, Buy Right."
Christopher Winkler is
President of Silverwood Capital, LLC is a Texas based
Real Estate investment firm specializing in buying heavily discounted
residential and commercial distressed and toxic assets. Our focus is on
occupied 1st and 2ndLien position notes, performing and non-performing, secured
by the property, with up to eight exit strategies.
Article Source: https://EzineArticles.com/expert/Christopher_Winkler/93483
Article Source: http://EzineArticles.com/10279732
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