Buying Mortgages from Banks, What To Do

Here is a commonly asked question.

“From what I understand about the bad debt a.k.a. defaulted mortgages situation, is that the government is going to be offering financing to the private equity and hedge funds so they can buy it up.”

It seems to me, that this would create more competition?

“What do you think about that?”

Well, here are my thoughts:

How to Buy Mortgages from Banks - The Four Buckets

In terms of “competition” it just adds to the deal source for buying mortgages from banks.

There are 4 buckets that exist within the note buying industry:

a) $100 million and above - Big Boys

b) Mid Boys - buy $20-100M

c) Small boys - buy $1-20M

d) Mom and pops - buy less than $1M

It seems to me that the shuffling is taking place around the big boy and mid boy state, and this is in terms of raw dollars.

So lets think about these investors financials for a second.

The only thing that they are hungry for is the yields on their note buying investments.

How to Buy Mortgages from Banks, Your Deal Sources Definted

If you’re a Mom and Pop or a Small boy, the Mid and Big boys are now deal sources to buy notes for you!

They’re looking for a big IRR (e.g. quick flip on their real estate notes) and they’re buying more competitively than the small boys and the mom and pops.

View them as a note buying deal source, partner up with them, come up with some transparent “Cost plus 5? type of approach where you give them 5 points in exchange for cherry-picking their portfolio and piggy-backing off their due diligence, and why wouldn’t they be interested in selling notes to you?

So if you’re worried about the drip from the water fountain (or the firehose!) being intercepted in some way, just shift yourself a little so that you catch the drips from the guy who just got in front of you.

And you can always go look for another water fountain to buy mortgages aka nonperforming notes.

Hope this information helps you.

It’s time for some action!

Related Articles