Eddie Speed, founder of NoteSchool, recently conducted a webinar for members of the Five Star Institute’s FORCE entitled “Buying Real Estate Notes: The Ultimate Cash Flow Machine.”
Topics covered in the webinar include understanding the note industry, the unprecedented conditions happening now in the market, and how notes are priced.
“At this point, we are at an unprecedented market opportunity,” Speed said. “I’ve been in the note business since 1980, and I would tell you with a thousand percent integrity that I believe the market opportunity in front of us for the next three to five years is the biggest I’ve ever seen.”
According to Speed, banks can sell notes at a discount and the investor is still allowed to collect the amount of the note. Also, hedge funds are buying large packages of notes, and a percentage of these are getting filtered down to single investors.
On how notes are priced, with performing notes, passive investments cost between 60 and 90 percent of the value; with non-performing notes, active investments cost between 20 and 70 percent of the value. When a note defaults, the possibilities are a modification, foreclosure, a deed-in-lieu of foreclosure, or the investor ends up with the home.