Latest / Real Estate Note Investing / Episode 55: Finding Deal Flow

Transcript

Episode 55: Finding Deal Flow · Real Estate Note Investing

• 0:00
  SPEAKER_00: Welcome to the show, where you'll learn how to invest in mortgage notes, the savvy real estate investor's secret weapon to create cash flow without tenants and property acquisitions for pennies on the dollar.
• 0:12
  SPEAKER_00: My name is Robert Haitha, founder of Fix Notes, and my mission is to make note investing ethical, profitable, and accessible for you.
• 0:20
  SPEAKER_00: In every episode, we're democratizing the industry to put these powerful Wall Street assets into the hands of Main Street investors like you.
• 0:29
  SPEAKER_00: So without further ado, let's get into the show where you're in good hands with my AI clone.
• 0:34
  SPEAKER_00: Let's go.
• 0:37
  SPEAKER_00: This program is for informational purposes only and should be independently verified before taking action.
• 0:44
  SPEAKER_00: The single biggest constraint most note investors face is not capital, not knowledge, and not time.
• 0:51
  SPEAKER_00: It is deal flow.
• 0:52
  SPEAKER_00: A consistent pipeline of loan acquisition opportunities is what separates an active note investing business from someone who bought a few loans and is waiting to see what happens.
• 1:01
  SPEAKER_00: Building that pipeline is a deliberate, ongoing effort.
• 1:05
  SPEAKER_00: And understanding where loans come from is the foundation of that effort.
• 1:09
  SPEAKER_00: The best way to think about deal flow sources is through what we call lead avatars.
• 1:14
  SPEAKER_00: These are the different types of sellers in the secondary mortgage market, each with their own motivations, their own process for selling, and their own level of sophistication as a counterparty.
• 1:23
  SPEAKER_00: Knowing which avatar you are working with changes, how you approach the relationship, and what you offer them.
• 1:29
  SPEAKER_00: At the top of the food chain is the institutional lender.
• 1:32
  SPEAKER_00: Community banks, credit unions, regional banks, and savings institutions that have originated loans which have since gone non-performing.
• 1:40
  SPEAKER_00: These lenders have what are called non-accrual assets on their books, which are loans they have stopped counting as income because the borrowers have stopped paying.
• 1:48
  SPEAKER_00: Regulatory pressure creates a strong motivation to clean these assets off the balance sheet.
• 1:52
  SPEAKER_00: And that motivation makes institutional lenders some of the most consistent and reliable sellers in this space.
• 1:58
  SPEAKER_00: The decision makers at these institutions carry titles like special asset manager, charge-off loan manager, loss mitigation specialist, or secondary market operations director.
• 2:09
  SPEAKER_00: Those are the people you want to reach.
• 2:10
  SPEAKER_00: A tool called Bank Prospector, built on top of publicly available FDIC data, lets you identify which banks are carrying the most non-accrual assets in their portfolios so you can prioritize your outreach intelligently.
• 2:22
  SPEAKER_00: One step down from institutional lenders are hedge funds and private equity firms that have acquired large pools of loans from Fannie Mae, Freddie Mac, or from institutional lenders in bulk.
• 2:32
  SPEAKER_00: These firms may sell loans for various reasons.
• 2:35
  SPEAKER_00: Their fund is winding down, they are arbitraging between wholesale purchase prices and retail resale prices, or they have determined that certain assets no longer fit their fund strategy.
• 2:45
  SPEAKER_00: Relationships with the managing partners and portfolio managers at these firms can be highly productive deal flow sources, though the competition for their attention is greater than it is with smaller community lenders.
• 2:55
  SPEAKER_00: Family offices occupy similar territory.
• 2:58
  SPEAKER_00: These are privately run investment vehicles, vehicles managing capital for a single family or a small group of principals.
• 3:04
  SPEAKER_00: They can range from very small to quite large.
• 3:06
  SPEAKER_00: And because they are not subject to the same external reporting and regulatory pressures as institutional lenders or public funds, they move on their own timeline.
• 3:15
  SPEAKER_00: Building a relationship with a family office noteholder often requires patience, but the deal flow can be very consistent once you are on their radar as a trusted buyer.
• 3:24
  SPEAKER_00: Private lenders, individuals who have originated loans by taking back seller financing when they sold properties, are a distinct segment that requires a different marketing approach.
• 3:34
  SPEAKER_00: Many of these lenders do not think of themselves as loan sellers.
• 3:38
  SPEAKER_00: They are homeowners who agreed to carry the financing when they sold their house and have been collecting a monthly check ever since.
• 3:45
  SPEAKER_00: When those loans go non-performing, private lenders are often motivated to exit because they did not sign up to become a lender dealing with a delinquent borrower.
• 3:54
  SPEAKER_00: Reaching these sellers requires direct mail marketing using lists purchased from data providers that compile privately originated mortgage records from public filings.
• 4:02
  SPEAKER_00: Notebrokers and loan sale advisors represent the most accessible entry point for new investors.
• 4:08
  SPEAKER_00: These are marketplace platforms and advisory firms that aggregate deal flow from multiple sellers and present it to buyers.
• 4:14
  SPEAKER_00: The advantage is volume and variety.
• 4:16
  SPEAKER_00: You will see a lot of product and can hone your due diligence skills quickly.
• 4:19
  SPEAKER_00: The trade-off is that pricing is more competitive because you are not the only buyer being approached and you are one step removed from the original seller.
• 4:28
  SPEAKER_00: Beyond identifying the source types, the key to building a pipeline is consistent outreach and nurturing, offering a complementary portfolio analysis, a no-obligation review of a seller's assets that tells them what their loans might be worth on the secondary market, is one of the most effective ways to get a portfolio on your desk without putting any pressure on the seller relationship.
• 4:48
  SPEAKER_00: It positions you as a knowledgeable resource rather than a hungry buyer, and it gives you a legitimate reason to be in ongoing contact with potential sellers.
• 4:57
  SPEAKER_00: The public record is one of the most overlooked deal flow tools available.
• 5:01
  SPEAKER_00: Searching recently recorded assignments of mortgage in the counties where you want to buy loans reveals who is actively transferring note ownership.
• 5:08
  SPEAKER_00: If the assigner, the party selling the loan, is an entity you have not spoken with before, they are a live lead.
• 5:15
  SPEAKER_00: You already know they sell loans because the public record proves it.
• 5:19
  SPEAKER_00: Conferences and industry events are where many of the most productive deal flow relationships begin.
• 5:25
  SPEAKER_00: The note investing industry is small enough that the same counterparties appear repeatedly in the market.
• 5:31
  SPEAKER_00: Being visible, building a reputation as a fair and professional buyer, and following up consistently after meeting a potential seller at a conference is one of the most reliable long-term deal flow strategies available.
• 5:42
  SPEAKER_00: Next time, we are going to cover how to evaluate a seller and what trust but verify means in practice when you are working with a new counterparty for the first time.
• 5:51
  SPEAKER_00: Thanks for sticking around to the end and thank you to my trusty Robot and the Fixed Notes team for putting together another episode.
• 5:58
  SPEAKER_00: If you want to learn more and hang out with the real, not AI version of me, join our free school community at school.com slash fixed notes.
• 6:08
  SPEAKER_00: That's s k o L dot com slash F I X N O T E S.
• 6:13
  SPEAKER_00: In the meantime, we'll see you in the next episode.