I am writing from Note Summit 2, in Denver Colorado.

This afternoon’s session covered topics related to performing notes, which we in our circles tend to not discuss much. (We mostly look for non-performing notes that we can buy at a discount.)

Today’s speakers were Gerald Lemoine and Bill Mencarow.  Gerald buys re-performing notes from a large investment company and Bill buys performing notes from private note holders.

Miscellaneous notes:

When buying non-performing notes, we don’t uinderwrite the borrower, only the property. 

If the borrower is underwater, we don’t care about UPB.

Both men talked about selling streams of payments. Fascinating option that we note investors need to be more familiar with. For example….buy a note, sell the first “n” payments to another investor for the amount you paid for the note. You have all of your capital back, and all the remaining payments belong to you even though you have no money in the deal.

This is a second mortgage on a beautiful near-waterfront property, with docking rights, in southeastern Connecticut. The house has 3 bedrooms, almost 2200sf of living space on 3/4 of an acre. The property is currently for sale, listed at nearly 600k, which I think is way too high. I have talked with one local realtor and intend to talk with another, as part of my due diligence to determine the property value.

The first mortgage payoff is 322k, and the second payoff amount is 82k. I am looking for a passive JV partner to invest 13,900 for an 80% share of this second mortgage. To protect our respective interests, the mortgage will be recorded in both of our names.

If the property sells for anything north of 430k, we would get a full payoff of 82k. Even if the property sells for 375k, we would more than double our investment.

If the owner’s financial situation improves and he begins making payments again, it is likely that our cash-on-cash return would be well above 20%, but in that scenario we might choose to re-sell the note (for a healthy profit) to an investor looking for cash flow.

The loan we are buying is non-performing, but the homeowner is current on his first mortgage, which tells me he has income and is trying to protect his credit. Since this house is on the market, I have seen photos of the house, including the interior, and the property appears to be very well maintained.

If you are interested in discussing this opportunity, please contact me ASAP. There are at least 20 other investors looking at the pool of mortgages in which I found this one, and I think it will go fast.

Self-directed IRA offers investment alternatives.

This article on BankRate.com talks about self-directed IRA’s.

It is true. You can invest part or all of your IRA in promissory notes backed by Mortgages or Deeds of Trust.

The reason most people do not know this is that most IRA’s are held by custodians who don’t support such investments. Therefore, many believe that their IRA’s can only be invested in stocks, mutual funds, and low fixed rate funds.

To invest in notes (or real estate, or just about anything else) you must simply transfer part or all of your IRA to a custodian who will support such investments. Typically these IRA accounts are called “self-directed IRA’s” or even “real estate IRA’s.” (See the links on this page for note-friendly IRA custodians.)

Of course, there are limitations. Your IRA cannot own your own house, for example. I won’t go into detail on the limitations in this post, but what you need to know is that, as long as you are looking at a note or real estate purchase purely as an investment, you can hold it in your IRA.

Purchased and managed properly, the returns can be fantastic. If you would like to work with NoteBuyingPros to grow your retirement fund, please contact us.

U.S. FORECLOSURE ACTIVITY DECREASES 10 PERCENT IN JANUARY

January foreclosure filings took a nice dip vs. December, but still up 15% vs. January 2009.

Nevada continues to lead the way as the states with the highest foreclosure rates. In January, one of every 95 Nevada households received a foreclosure notice, compared with the national average of one in 409 households, according to RealtyTrac.

Follow the link above for details.