A service of The Paper Source, Inc.

August 30, 2014

 

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In this issue: 

 

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Hi ,

 

Many people believe that non-performing notes (NPNs) are the real estate and note investing opportunity of the decade. 

 

In this issue is part I of my interview with Jack Krupey, an expert in NPNs.  I hope you benefit from it.

 

Cheers,

W. J. Mencarow

President, The Paper Source, Inc.

 

 

Recently I told you about our new event Profits In Non-Performing Notes: Turning NPNs Into Cash Cows Nov. 20-22 in Las Vegas -- 2 days learning from and rubbing shoulders with the #1 experts in both 1st and 2nd lien NPNs...networking with your colleagues...private consultations with the experts...open bar receptions...continental breakfasts...elegant luncheon...even an optional post-seminar canyon hike...all included for just $297.00!

 

What's definitely NOT included:  sales pitches or professional speakers.  These are experts who DO every day what they rarely teach.

 

I know Nov. 20 seems like a long way off.

 

But what ISN'T a long way off is the deadline to save $100.00 on your registration. 

 

 

To take advantage of the discount, visit 

or call Alison or me at 800-542-2270.

 

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Bill Mencarow:  Jack, the obvious question is:  Why would anyone want
to buy a note when no payments are being made?

 

Jack Krupey:  There are a couple of reasons.  Number one is pricing.

We're buying these notes, bank loans, at a discount to current market

value. It doesn't matter if they owe $400,000 and the house is

worth $200,000.  We're going to be buying it at a discount to the

current value of the property. We're able to get it at enough of a

discount that even if we do have to foreclose we'll be able to

liquidate the property and make a profit. 

 

On the simplest level it is a secured investment. We feel we

underwrite our purchases well enough that even if it is a tough

foreclosure -- which they aren't always -- we can handle it.

 

We really look at four or five different exit strategies when we

buy these. One thing to keep in mind is that on many of these

just had a rough time. Maybe they lost their job and got a few

months behind. In many cases, they want to pay but they don't have

the $10,000 or whatever to reinstate and bring their loan fully

current. They get caught up in the bureaucracy of these big banks

and servicers that lose their loan modification paperwork or they

just make the process so difficult that people get stuck in a black

hole. They just can't get current. We've had loans where the people

tried to send in payments and the bank returns their payments

because they don't have enough to make a full reinstatement.

 

When we buy these loans there are times that we can work out a

deal very quickly that a big corporate bank could not work out.

That could include doing a modification or forbearance agreement

and getting a borrower paying right away. 

 

We're buying at a much bigger discount than you'd buy a performing

loan. If we start collecting the original payment or an affordable

monthly payment in some cases the yields are well into the teens

and sometimes into the 20%-plus returns. We're very happy to modify

a loan if the numbers make sense. 

 

On some of the vacant properties we can get a deed in lieu of

foreclosure. We've certainly had many cases that we make one phone

call and the person who owns the vacant house says, "Yeah, I'll send

you the keys. I don't want it." Not every deal is that simple or

easy, but there are plenty of deals that ARE that simple or easy.

 

The bottom line is that there are multiple exit strategies,

ranging from modification, to deed in lieu of foreclosure, to being

the bank and doing a short sale where you're the one that can

decide if you're going to accept a short payment or short payoff. 

 

What's great about this business is there are so many different

directions and angles and strategies you can use. These aren't

the traditional cookie-cutter performing loans that you might be

able to broker to an institutional seller-financed buyer.  But on

some of them the story makes really good sense and the cash

flow is good. 

 

On some of the notes the borrower has made four or five payments

and you can't bring it to an institutional buyer but you can sit on

the loan for six months. Then after it has 12 months' seasoning,

you may be able to bring it to a buyer that you could sell the loan

to at a profit. 

 

Every fund has a different strategy, and if you are an investor,

depending on what your strategy is, there's probably a fund that

wants to sell loans to you and is motivated to sell loans that fit

your criteria, whether it's performing or non-performing or whether

it's regional, etc. 

 

Everyone wants California, everyone seems to want South Florida.

But if you're willing to look at loans in the Midwest or Texas, or

areas outside of the prime resort areas of the country, there are a

lot of funds that don't really want to hold loans in the Midwest

and they'll sell them at a bigger discount than they'd sell a prime

California loan.

 

I think anyone who's tired being a landlord, anyone that's looking

for deals and can't find deals at the courthouse steps anymore

because the big hedge funds are now buying at the courthouse steps

in some markets, should look seriously at investing in NPNs. It's

getting harder and harder to find a traditional real estate deal

that makes sense. 

 

I'll be going into much more detail at the Las Vegas seminar

Nov. 20-22.  And I'll be glad to sit down with anyone and help

them with any questions they have.

 

We expect a strong turnout of real estate and note investors and brokers, 

private lenders, hedge funds and people who just want to learn more

about non-performing loans, whether they are interested in brokering, 

investing, or both. 

 

This will be a tremendous learning and networking opportunity!