Aren’t you tired of being told mortgage notes are a great way to achieve passive income but never told where to find them? Well, below are a few tips to help you get started. This is by no means a comprehensive list, but it will give you a launching pad.
How do you find mortgage notes?
There are several ways to find mortgage notes:
Online
Searching online is a good place to start to find mortgage notes. First, there are several online “marketplaces” or trade desks where people post inventory and sell their notes. Also, check-in on social media sites like Facebook and LinkedIn. There are several FB groups where you can not only network with note investors but many of those investors have inventory for sale. I always suggest following social pages and sites before investing in order to get to know those who are serious and those who are not. You will quickly know the real players.
Online trade desks or portals with inventory for sale:
Facebook groups:
Many of these sources will require you to sign a non-disclosure/non-circumvent agreement before you can do business. This agreement does two things. It stops you from going around their platform to go directly to the seller and it also stops you from sharing this information with other people and trying to profit off of it as if you are the broker.
Local banks and credit unions
Local banks and credit unions are a good place to start, as they often will have commercial and residential mortgage notes for sale; however, you can’t just walk into Bank of America or Wells Fargo and ask the teller if they have notes for sale. It doesn’t work that way. You need to find the right person and/or department; however, before you step into the big pond, check out your local community bank. Look for banks with a smaller number of branches (about 10-20 local branches) that may have a few to sell.
You may not receive an entire tape of assets or even a consistent amount of inventory, but they may have one or two every 3-6 months. Many people will tell you that you can’t get inventory from local banks, but the truth is, you can. You have to be consistent and stay on their radar and continuously connect with them, but they have inventory.
Check with the bank’s special assets department. If they don’t have a special assets division, then go straight to the top of the community bank. Pretty much every bank has multiple Senior VPs and it’s not unusual for those VPs at small banks to answer the phone when you call headquarters. They will happily put you in touch with the right person and/or department.
Other Note Investors
Other note investors have notes that they may want to sell. Connecting with individuals in the same field as you can be a great way to find the mortgage notes you are looking for. Again, network online through LinkedIn and search for note investors. Attend meetups and investor meetings and tell people that you are a note investor. I did that one time at a real estate meetup and there was one other person there who owned notes and asked me if I was interested in buying any.
Attending note conferences like Paper Source or Diversified Mortgage Expo are other ways to meet people and source inventory.
Conclusion
Like any other part of investing, finding the deal is essential, but while a handful may fall in your lap, you may have to do a little work to get the others. When you do, they can be a profitable part of your portfolio.
