Buying notes

I have never done this before - have someone presenting a small package of 1st mortgages in IL and IN; $1M face value/selling for 15 cents on the dollar.

Is this good?
If so, what advice do you have for a newbie to pursue this?


Have them present you with the full package…i.e, copies of the notes, mortgages, credit reports of the borrowers, etc.

Take the package to a local real estate lawyer who is familiar with the laws in those states.

There are so many things you want to check…especially when someone has approached you with “a deal”.

15 cents on the dollar is a deep discount for “performing” secured 1st lien notes.

This could be a really good deal where you could make a quick profit or it could be a complete scam.

Thanks for the response.

Like I said - I have never worked with notes. Do you “flip” them essentially - I mean, how does one make their money from them?

As with any real estate you make your money when you buy. If these liens are in the first position and ARE PERFORMING then its a great deal. Personally I see red flags all over this one. Hell even performing second liens can capture more than 15 cents on the dollar. I have never seen a performing first taken at 15 cents on the dollar. Essentially you will buy this package, become the bank, and then collect payments on the notes till they mature or you sell them again on the secondary market.


I have to concur here. 15 on the dollar is a steep discount. You will need to know a bunch about these properties.

  1. The LTV and CLTV of each item in the portfolio
  2. The position of each of these loans on each property
  3. The status and seasoning of each loan in the portfolio
  4. The history and credit worthiness of each note payer.
  5. The type of properties the liens are against. (Mobile home notes aren’t worth much these days).


Where in IL are you? or is that just where the notes are located?

It all depends on the criteria that consist in the actual portfolio! I am a current investor and it is a shrud and lucrative business! You have to know how to properly analyze what you have on hand to determine a purchase or sale! Deal with figures that high takes some creative financing! I can point you in the correct direction!