February 2016

“This business is like lots of businesses. Not every business has the same credibility,” he said.

“Even if you have a first lien, which is all I buy, real estate taxes are the one thing that is going to go in front and could completely wipe out your mortgage,” he said, providing an example of a recent loan he purchased where it looked initially like the unpaid property taxes were $8,000 but turned out to be $18,000. “That mortgage is gone. It’s now worth zero. Whoever bought that property at tax auction owns a property free and clear.” “There are three things that can make you make a bad buy: blighted property, tax and title,” he said. “There’s lots of loans that are sold in the market that are lost to taxes. … We see spreadsheets every day, and nobody ever mentions the taxes. … Yes this loan looks cheap, but if you pay the taxes it isn’t.” Speed acknowledged that not all players in the NPL space are trustworthy players. Speed, the founder of NoteSchool, echoed Woods’ advice.

Silver, the Southern California note buyer, agreed.

“The first step is finding a trusted seller of notes,” he offered as advice for new NPL investors. “A lot of it is word of mouth or asking around … I’ve heard of some people who have had really bad experiences.” Hill, the Austin note buyer, advises new investors to find mentors to guide them. “Align yourself with people who already know and have already tested the waters: have tested these servicing companies and attorneys,” she said, adding that there are unscrupulous note brokers out there. “You always want to cover your own fanny.”

SOURCE: RealtyTrac


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