Good afternoon!
I am in the Philadelphia area and I am interested in advice concerning the note business. My questions essentially are:
Thanks for your input.
1) Is there anyone in the Philadelphia area that is currently doing it willing to give advice?
A. I don’t live there but I give advice about the business to many people daily.
2) Are lead lists the way to go and if so what are the best sources of leads by experience?
A. Depends on your desired approach of working the business. Ultimately I think the best way to find notes is to make contact with Local Professionals but that takes time to develop. Sending mailings will work but it takes a consistant approach over time to make it work. Some companies I tust are www.totalnotesolutions.com and www.dataquick.com There are many companies out there selling such information for marketing. No matter who it is they get their info from the same place, public record. You will have undeliverable mailers come back in the range of 10% to possibly as high as 30% with a good list. Lower amounts with the better lists.
3) What is the best business entity to create for this type of business? Sole proprietorship to begin will be fine and then you can upgrade to your preference but this is really a question to ask your accountant.
Thanks for your input.
Nice post Meridian.
I will echo some of that sentiment. We have been in the business for years and have mentored many new Note Brokers. The one thing we see is that with the evolution of the Infomercial for Russ Dalbey and even the American Cash Flow Corporation, individuals, think they can get in, do a small amount of work and be rich instantly.
Do not believe the hype!! Yes there is money to be made in this industry, I will not argue that. However, as Meridian said, the best way to to work to put relationships into place. WORK.
Expect to put in time. The people in the infomercials had 1 or 2 big deals from previously existing relationships. But once that deal was done, what did they do? How did they continue to get the stream of income?
That is where you need to work with note buyers that have been in the industry for years.
Just my $.02 worth.
srabed
I am interested in your posting but am curious as to what sort of note brokering you are looking to do?
what do you bring to the “table”
a) do you have buyers
b) do you have sellers
what makes a good note
a) are your prospective buyers of existing notes interested in yield or in repoing property
b) are you seeking or aware of notes that need to be refinanced?
Note brokering is very complex. It should be left to seasonal pros such as millionaire and big banks. Note brokering is used to leverage and diversify ones wealth. Notes can be performing and non- performing notes.
Here is a basic overview. All notes are securitize by real property.
For example. My client’s buys bulk notes (blocks). He is able to pick up at 35- 40 cents on the dollar. Why? Banks are regulated to have so much at the bank so they can lend, remember the Depression. Bad debts on the books affect their bond rating. So by discounting the notes, the banks are cutting their loss, this frees up the money to lend ( cash flow). Note are sold on the secondary market to buyers such as private investors, Hedge Fund, Mortgage REIT or Wallstreet investors. Client A buys it at 35-40 cents on the dollar from banks.He in turns sell to Client B (Mortgage REIT) at 60 cents on the dollar. Clients B sell to Client C ( Hedge fund group) at 70 cents on the dollar.
Same scenario. Banks take your money to Mutual fund companies, they make anywhere from 18-30 %. Mutual funds takes that money into the American Economy making 30-60% .Amerciacn economy put it into Wall Street making 60-90% return.Leveraging and diversifying the portfolio ( John Paul Getty). You as the cusomer makes whatever the bank gives you minus inflation. That is my understanding of note brokering. If I am wrong, please correct me.
Note brokering has nothing to do with reserve requirements within the bank. A bank is not going to sell it’s notes at a 60-70% discount unless they are in serious financial trouble…ie liquidity issues. I have worked with and had a business partner sell notes to the the 2nd largest notes buyer in the country (Friendly Note Buyers). The WACC (weighted average cost of capital) for private notes is based on credit score, LTV and appraised value. The note broker will quote you on a cents per dollar typically from 80-95 cents depending on the deal. These are packaged and sold to the secondary market but, not with the deep discounts the prior poster was talking about.
It sure sounds to me like the people answering these posts are not seasoned in the note “broker” business.
Brokering notes is not something the big money guys do. Those who have big money typically buy notes from brokers. They often will broker them themselves but the real money is made on buying them.
All “notes” are not secured by real property. There are all kinds of notes and cashflows that are unsecured or secured by other types of property. Real property indicates real estate such as a house or land. There are notes secured by cars, personal loans, mobile homes, boats, airplanes…etc. It is not limited to RE
There is a discusion here about bank notes and such. Banks sell to other banks and institutions. That is not generally what we are talking about with the “note brokering” business. We are talking about the Private sector. Private sellers. Private note holders selling to private investors. It is a very different industry from the banks and institutions.
There are 5 or six things that private note buyers look at when deciding if they are going to buy a note. Sometimes all are important and other times one or two may outway the rest. Credit is expected to be bad. Equity is a powerful factor. Seasoning carries some wieght and collateral and intereset rate are very powerful factors as well. One other thing that is looked at is position. It is silly how many people think this industry only deals with seconds. There are plenty of good first position private notes out there. Many investors will not buy seconds at all.
Get educated on the industry. Read the articles and material out there that is actually related to this industry. check the articles on www.totalnotesolutions.com and www.creonline.com and www.noteworthyusa.com and there are others. Don’t pay the big gurus good money because what they usually sell you is garbage. Noteworthy has a great seminar each year for very little but otherwise careful where you spend your money.
I am finished ranting. Have a nice day all. 
Have a deal in play now. My contact moves about 245 million worth of notes a month. I do know his figures, on what he buys. My other contact has a 2 billion dollar line of credit to acquire notes/ properties. I do know what he looks for.
Brokering notes is not something the big money guys do. -I have to mention it to my guys- Johnny Q
A bank is not going to sell its notes at a 60-70% discount unless they are in serious financial trouble… Johnny Q- Banks are in trouble.
I need to clarify that I am referencing institutions instead of the private sector. I should apologize for not being more in detail when I discuss this.
All “notes” are not secured by real property. There are all kinds of notes and cash flows that are unsecured or secured by other types of property. Real property indicates real estate such as a house or land. There are notes secured by cars, personal loans, mobile homes, boats, airplanes…etc. It is not limited to RE
You are right in this aspect. But, my client’s only takes notes secure by real property
I need to clarify that I am referencing institutions instead of the private sector. I should apologize for not being more in detail when I discuss this. Please do not get upset, I am not here to hurt anyone feelings. Again I do apologize if anyone is offended. I am just here on this post to share my experiences.
We are talking about real estate here. Not annuities, structured settlements…etc. Seasoning has little to do with the cents on the dollar. There is a 6 month title seasoning that is required…typically…
One does not need to be a seasoned pro with millions of dollars to broker notes since a broker does not usually buy the notes .The note broker is actually the middle person between the investor(s) who buys the note and the note seller. I would wanna agree with Meridian,wether its real estate notes or other kinds of cash flow that are being discussed here by Srabed. You can broker individual notes that are held by individuals, not institutions. These are notes which are created when a property is sold and the owner finances the mortgage. Some individuals also purchase these notes for their individual portfolio. The notes are discounted sometime but the amount of discount varies just like the amount of discount that a seller of real estate is willing to offer varies according to the sellers need and level of urgency among other factors. Some note buyers like to buy seasoned notes because the usually offer more discount, but there are investors who will buy the note the minute it is created.That is, you can sell your property using owner financing and as soon as you close that sale you can sell the note.Some people on here try to answer to every post even when the know little about the topic being discussed. I dont think you should answer to a post if you are not sure of what your are saying since the people who asked questions may unknowingly accept these advice as being correct.
WEll yes to many people try advising when they do not know or giving there thoughts as the facts
Careful on this. I am not sure what you ae saying here but typically a note that is seasoned has a “Higher” value than the same details on an unseasoned note. The new note will be “discounted” more than the seasoned note becasue it does not have as much of a track record. The note that shows the history will be more valuable than the note that does not have a pay history unless that new note has some other factor (such as a huge down payment) that will outway the need for seasoning.
Unseasoned notes can be valuable but if I have the choice of two identical notes save one has 6 months pay history, I will buy the seasoned note.