Why do I want a Non performing Note

I talked to one of my partners today after I gave him a list of NPAs (non-preforming Assets). His comment to me after he talked to a client was, "These properties are all listed with other agents!" Yes that is true and so what! You always get a better deal in markets like this by buying the notes!

When you buy a note you are purchasing paper that secures a trust deed or some comparable interest in real estate. The properties are listed at retail sales values, see example below:

Hotel for sale for          $10,000,000

Potential sales price       $8,000,000

Potential savings                 20%

Hotel (NPA) 1st  value    $7,000,000

Banks discount 68%        $4,760,000  

Potential saving               MORE THAN FIFTY PERCENT!

You or I can have the hotel for 4.76 million and work out a deal with the current holder of the property or you can foreclose and take the property and wipe out all the 2nds liens and other with a new line of cash or credit.

It is far more likely that you can do this now and the hotel will make money provided it is well  managed with the new cash flow reduction.

Have a great day!