Many people are looking to residential real estate is an alternative to more traditional investment. What many may not know, is that people have been buying the paper, rather than the property, in the form of promissory notes.
Eddie Speed, of Colonial Funding Group says that most people have never considered buying a note. Performing and non-performing are two kinds of notes, Speed says more knowledge is required in buying non-performing notes. One can own a performing note and have it third-party serviced and have it be a lot less labor than owning a rental property. Speed says that the question is simple - would you rather be the landlord or the bank?
Eddie Speed
Colonial Funding Group
Source: linkedin.com
To make it work and make it pay, Speed buys loans secured by real estate at a discount, meaning he pays less for the note than what the customer owns. When buying non-performing notes, you're paying 30-50% of the value of the property. This, he says, is why people are buying the note instead of the property. When bidding for a non-performing note, it's a percentage on the value of the house, not what is owed on the house. Speed believes this is something the average person can invest in successfully.
If you're buying performing notes and you have enough evidence to believe the customer has been making payments in the past, there's a 98% chance or greater that no legal action would need to be taken in the future. When working with people with Self-Directed retirement accounts, which is a huge part of Speed's business, he finds they have less trouble and aggravation than with other investment.
Investing in non-performing notes, where the upside can be much higher, is a detailed business that requires a knowledge of real estate appraisal techniques and strong familiarity with the real estate and finance laws in your state. You will also need the resources and willingness to take legal action to protect your interests if necessary.
Eddie Speed, of Colonial Funding Group, spoke with Alternative Investing News providing online alternative investing video news content. Alternative Investing News is a featured network of Sequence Media Group. This video was brought to you by Vantage Self-Directed Retirement Plans.
