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 How to Profit from Non Performing Notes
                  
                       The Quick Flip Approach

The most desirable option when buying Non Performing Notes is typically to buy properties at favorable discounts, and sell them quickly for an acceptable profit. We can finance these transactions as well up to 40-50% of market value (!) in bite size chunks and can supply our clients nationwide non performing note products direct from our asset management group. We deal with direct buyers and sellers of NPNs. And offer financing as well. Or you bring us product and we finance it based on asset values. Cash out is fine. With this method, you’ll have the luxury of avoiding delinquent homeowners. Let’s say you buy a $1 million property at 20% of the unpaid principal balance (UPB), and swiftly sell it at 30% of the UPB. You just made $100,000 profit.

      The Old "Cash for Keys" Approach

A second possibility may be “cash for keys”. With this method, you can buy out the former homeowner who still lives in the property. For example, you pay off the homeowner by giving them $10,000 cash; they will sign a Deed in Lieu, and shortly after, leave the home. As the owner of the NPN, you were able to avoid fees attached to foreclosing on the property, and help out the former owner by not placing a deficiency judgment on them, or reporting a foreclosure to their credit report. Now, you can quickly list the property for sale on the market, or rent the property to a tenant for a long term hold strategy.

Reducing the Mortgage Principle Balance Approach, our approach
 

The third approach is to negotiate a deal directly with the homeowner, and bring the property out of its non performing state. And lower the loan amount to reflect the current market value of the home. This option is the most challenging and rewarding. It requires a homeowner who wants to live in their current home to work with the owner of the note. For example, let’s say you purchased a non performing note for $50,000 but the unpaid principle balance (UPB) is $200,000 with a 10% interest rate on the mortgage. As the NPN holder, you can opt to cut the UPB in half ($100,000) and decrease the interest rate to 7%. You have now written a new, and more affordable, mortgage to benefit the homeowner. After 10-12 months of timely payments from your homeowner, your once distressed asset is now likely a performing note, ready to be resold to an investor.  

Some investors focus on one niche, either REO’s or Non Performing Notes while others, invest in both sectors. Choosing the right niche depends on several things; your short and long term investment goals, how long you can commit your money into an asset before you need to recover those funds (typically, it may take longer to get your money back if it is invested in an NPN); if you prefer to own the paper (mortgage note) as opposed to the tangible assets (deed); or what your exit strategy entails.
For more information please phone Dan to see what he has to offer!   858-204-6209

Or email DCassel@CasselFinancial.com