How to Find Notes

Over the years I’ve been asked, “Troy, I’ve got some money and I’m interested in investing. How do I find one of these notes?”

There’s a couple of things that people need to understand about buying notes, and part of it has to do with the marketing side of it and part of it has to do with the research and discovery side of it.

When we’re looking for notes and we’re speaking about single family residential performing first lien notes, in this particular case, we’re looking for things that would be marketed in the open marketplace on a nationwide basis here in the U.S. They would be marketed as owner will carry, owner financing, owner carry back, seller carry back, seller financing and seller will carry.

This may shock you, but one of the best places to find real estate notes is through an evergreen marketing system, like Craigslist. Craigslist is that overlooked portal that people tend to forget because it’s not nouveau anymore, it’s been around for a long time and people know it’s there, they use it, but they don’t really use it to its potential.

So, what we’ve learned over the years is that when we’re looking to deploy capital in the space, and if we have a lull in our business, or even when we’re showing people how to get started, we point them directly to Craigslist. There’s a good reason for that. People are constantly listing properties for sale, both residential and commercial. The words that I just shared with you, “the seller will carry” and “owner financing” are key words that they’re using to market their properties. These are people that are ready to sell their property. They are looking for buyers and they are looking for people to purchase the home and then ultimately, they’re going to sell the note.

Now the beautiful thing about that is that there are two ways to look at this. One is when you work with these people on the front side you can help them structure deals exactly to your liking, so it gives you that insight to guide them to put together a note that you can purchase and put in your portfolio that performs and creates the returns that you’re looking for. Most of the time, when people don’t have that guidance, they put their best foot forward, but they will leave out key details like they will do a low interest rate, or they will do a low-down payment where they forget to check the borrower’s credit, or they put extended terms on the loan, or they do interest only.

And a lot of those types of details are what affect the overall quality of the paper, or the note, that they’re creating. So that’s a great place to look, not to mention that it’s kind of a revolving door in the sense that the properties fall off at about the 45-day mark, so you’ve got new fresh opportunities coming to you on a daily/weekly basis, depending upon how aggressive you are in buying product.

I want to mention, too, that these tend to be direct seller contacts rather than going through an agent, which is much, much easier to work with if you can get that third party out of the way and directly deal with who’s going to be the note owner. A crucial detail in creating success in a transaction is if you can talk directly to the note holder or note seller. You’re going to get a much clearer message about the overall quality of the property and the overall quality of the paper or note that they’re creating, and so you are going to get firsthand information versus having it go through a chain of people.