Investing in Non-performing Loans


Investing with Non-performing Loans

Investing in Non Performing Notes can be one more revenue stream to use in your real estate business. You can purchase some notes for 50 cents on the dollar or less. Buying notes at 50 cents on the dollar does not guarantee a good investment, but if you can buy a note cheap enough, you may be able to get a very high return on your investment.

Since the notes are non-performing, you can usually purchase them at a large discount. After an investor purchases a non-performing loan (NPL), the investor can take many different avenues to profit on the loan, from loan modification to foreclosure.

There are many different ways to make money with non-performing notes. In some cases, you may even end up with a very cheap rental property. It is worth looking into.  Troy Fullwood knows that not every deal that comes across his desk will be alike.

Once an investor purchases non-performing loans, they have to decide how to make money on the note. The borrower is not making payments and they may or may not be living in the home anymore. There are many options to pursue with these notes, all of which can be very profitable. Since the investor owns the note, they can be very flexible working with the homeowner to help them stay in the home or allow a short sale.

How to make money on non-performing loans

  • Quick Flip: Purchase the property at a discount, improve it and sell quickly.
  • Cash for Keys: Purchase the property from the former homeowner who is going through foreclosure. You give them a certain amount of money, they sign the Deed in Lieu. You will avoid any fees attached to the property and the homeowner avoids having a foreclosure on their record. You can then either sell or rent the property.
  • Reduce the Principle Balance: Negotiate with the homeowner to pay the non-performing note, writing a new and more reasonable mortgage for the homeowner. Once you have a record of timely payments, you can resell the note to an investor.

Making sure you obtain advice from your attorney prior to making any moves on a non-performing note or loan is good business sense and will protect your interests.

Understanding the process of REO and non-performing notes can be a lucrative and rewarding investment practice. For more information you can always reach out to Pinnacle-Investments to schedule a call.