If you are thinking about investing in a non-performing note but want more information about how to find and purchase it, then you’re at the right place. A non-performing note is basically a note that hasn’t been paid 90 days over the due date.
Why You Should Buy Non-Performing Notes
There are basically 2 reasons to buy a non-performing note:
A non-performing note can be sold at a very good discounted price, mainly off the Unpaid Principal Balance.
· Control of Assets
Buying a non-performing note puts you in the position of power over the assets. You get all rights and responsibilities of the lender.
Where to Find Non-Performing Notes
You can find non-performing notes from the following sellers:
· Private Equity or Hedge Funds
These sellers sell non-performing notes via note brokers or exchangers; they also use private email lists to get a note buyer for non-performing notes. They sell some assets first and then put it out for note buyers.
· Independent Investors
The independent investors purchase non-performing notes from banks or servicers. They then take the valuable assets from it and resell the rest.
· Banks And Servicers
Banks and Servicers sell the non-performing notes not completely but partially. The reason for selling off the notes is because banks want to recapitalize and do not want to own any real estate.
How You Can Buy Non-Performing Note from Banks
To get started, you first need to focus on banks that are in close proximity, which means local and community banks. Once you find a few banks, you have to carry out research to identify which banks can sell non-performing notes.
Once the research is done, you can call the decision-makers of the bank to have a word with them about the non-performing note and why you would like to purchase it. Although banks have all types of non-performing notes, it is important to invest and focus on an individual asset.
How to Value Non-Performing Notes
In order to value any non-performing note, you first have to understand the nature of the note. This will include the interest rate and principal balance. For the collateral, you can consider the location of the property, its value, and the borrower’s information.
How to Start Investing In Non-Performing Notes
Here are simple points that will help you get started with investing in non-performing notes:
· Use email and phone calls to source notes for an investor in the beginning
· Create a list of note buyers and note sellers that you know
· Learn your due-diligence for every note that you invest in
This was a quick guide on non-performing notes and will definitely help you in getting started!