My good friend Mark failed to mention that he was one of the top producing brokers in the business (at least from my office’s viewpoint). He had the drive and determination and succeeded. What he found out, however, is that he would be happier not tied to his desk and phone and could apply his understanding of notes to a broader business of general real estate investing. Owner financing should be one of many techniques understood well by investors, and he has a leg up on most others because of his successes in the note business.
Notes sound great, but whats the downside? - Posted by Ed Eaton
Posted by Ed Eaton on January 30, 2001 at 22:52:47:
Buying and selling notes sounds like something I could really get into. Sounds like a lot less hassles and a lot less messy than rehabbing, flipping properties, renting a place for $200 a month cashflow and being a landlord, etc. In fact, this note business almost sounds too good to be true. How about a reality check here … I see the pros … what are the cons and downsides of the note business?
Ed:
The seminar promoters do a good job of selling the “sizzle” about notes and seller financing. However here are a few issues to consider:
this is a highly specialized “niche” market within the mortgage industry. It can take years to truly become proficient with evaluating, structuring, and pricing notes
Money sources come and go. Years ago names like; Wells Fargo, Security Pacific, Chrylser First, Fleet Finance, Signal, etc. all bought “paper” - often these investors are out of business all together or not in the business any longer of purchasing notes
the good news is that there is still plenty of money out there to purchase good paper
Finding the notes or Marketing is the #1 problem most individuals encounter when trying to have a go at notes. It takes know how, money, and marketing savvy to attract existing note holders to call you or to become instrumental in assiting others to create their own paper.
The learning curve involved in packaging, presenting, and underwriting deals can take as long as two years or longer
Hope this helps shed some realities about this busines
Posted by Ed Eaton on February 01, 2001 at 14:32:23:
Let me ask you this. If one was relatively sharp and devoted themselves 100% to this business, could that person expect to start making some decent money within a few months if he used all the tools and resources available to him? He could spend 8 hours a day learning the business and has money to grease the wheels. I’m looking at getting into this business too but a good friend of mine wanted me to ask the above questions. Thanks!
Posted by Mark-NC on February 04, 2001 at 08:32:49:
Ed,
Michael is absolutley right. To be honest, this is a very competitive business. I have been involved in the note business for a few years and in my opionion it will take a lot of time and effort to be able to make a fair living at it. In fact In the last 6 months I have pretty much droped the buisness because I found much easier ways to make more money with much less effort using real estate.
One of the reasons is, there is a lot of competition in the business for existing notes. You will spend a lot of time and money chasing down these notes. You will be compeating against big compainies that send out mass mailings to existing note holders. You will find that the amount of time you put into trying to locate and buy these notes will not be that big of a payoff.
If you are thinking of brokering new notes with simultaneous closes, you can probably find more of these but the restrictions are getting tighter on this type of note and there are only a couple of National Note buyers even buying them.
I have seeen many people come and go in this business in fact I would say the failure rate is over 90%. I am not trying to discourage you. By all means if you think you can, go for it, but be ready for some major disapointments.
Ed:
I would not “quit your day job” if that is what your are asking me. I beleive that with a sound marketing plan in place (remember the KEY is in finding the notes)and then learning how to handle those inquiries to maximize your time spent working on viable opportunities and not time wasters, it might take a good 8-12 months before you will see some steady income. However each person and scenario is different, this is a question that is almost impossible to answer earnestly. Your knowlegde base, stick to it ness, drive, gumption, marketing savvy, geograhic location, phones skills, calculator skills, etc. will all interact in determing how one performs and over what period of time.