As you may know, we at Bike Homes are avid cyclists. So this week, we decided to compare riding in your first century ride with investing in your first note.
So you might be asking yourself, what does a Beginning or 1st Bicycle Century Ride have to do with Note Investing. If you are new to real estate investing, or are a seasoned investor, a lot. Stay with me on this. So, when Bike Homes first began riding long distance bicycle rides, we had to train to ride the 100 miles for a true century ride. However, on that first ride, we really had no idea what to expect except to keep pedaling and hopefully get to the finish line. Well, that is similar to investing in real estate backed by notes. You have to start somewhere and that place is with investing in your first note. Now, this doesn’t mean you have to purchase it yourself, you can Joint Venture (JV) with a seasoned investor who can help you earn potentially double digit returns on your investment.
Pick Your First Ride/Asset
So in order to get started, you have to pick your first ride or in the note investing scenario, your first note. In deciding to complete a century bicycle ride, you have to determine what type of ride you wish to tackle for the first one. Perhaps, you want a flat ride, or some of you may like hills. It’s best to pick the ride based on your ability. Our first century ride was the Sea Gull Century in Salisbury, MD.
In notes, you also pick the first asset. For your first note, you may want to start with something smaller such as something with a Broker Price Opinion (BPO) of 55K or less. This will give you a chance to get your “feet wet” in note investing, but also have the potential for a great return on investment. You as the JV partner, can rely on the seasoned investor to select a great asset. Bike Homes regularly receives lists of assets from several sources. Once we receive those lists, we begin by performing our extensive due diligence on the assets to the best assets on which to make an offer. We have several YouTube Videos that we have done on the Due Diligence process: Have You Done Your Due Diligence Lately and 5 Mistakes To Avoid in Due Diligence I learned From my Mastermind. During our due diligence process, we analyze each asset and determine potential exit strategies for the asset as well as potential return on investment (ROI) for each exit strategy. In addition to our Due Diligence videos, we have also put together several videos on the various Exit Strategies (Part 1 and Part 2) available to note investors.
We select our assets based several key aspects: Return on Investment, Potential Exit Strategy, and Condition of the asset to name a few. We select the assets that will meet the strategic goals of both our own and those of our JV partners. Once we place and have our bid accepted, the “journey” begins.
Start the training / Board the note
In a preparing for the first century ride, one must train consistently and continue to increase mileage in training so that when the day of the century ride comes, you know you can make it to the end. In the note business, you board the note with a servicer. The servicer acts on the note holder’s behalf to perform borrower outreach and collect borrower payments. Sometimes, the servicer may also perform the loss mitigation on the note. This may be anything from a loan modification to a foreclosure. In addition, the legal team may also perform loss mitigation and prepare and execute the foreclosure process.
Continue Training / Working with the Borrower
As you continue to train for the first century ride, you may do shorter rides in order to build up to the 100 miles that a true century ride requires. There are organized rides that offer great scenery and organized support so that during the ride, you can stop and refill your water and get a snack if needed.
In the note business, the servicer and/or legal team tries to make contact the borrower to determine their intentions on the note. The servicer works on the behalf of the note holder to work out a payment arrangement to get the borrower to start re-performing on the delinquent mortgage. This could be in the form of a loan reinstatement and/or loan modification. Once the borrower has agreed to a payment schedule, the servicer collects the payments on behalf of the note holder. If the borrower cannot be reached or chooses not to reinstate or work with the servicer, the servicer and/or legal team can begin loss mitigation on the note. There are several exit strategies that are centered around loss mitigation such as: Cash for Keys, Deed in Lieu, Short Sale or Foreclosure. Even if we have to foreclose, we still make money for our investors because we take into consideration the need to foreclose in our bidding process.
Ride Day / Note Solution
Just like notes, every ride ends somehow. We may not end the way we intended when we began the ride, but we end. We may ride faster or slower, but for the most part, we cross the finish line with success. In the note business, every note has an ending as well. It may not turn out the way you initially thought, but it does come to some sort of conclusion. The borrower could re-perform in which the note then becomes a re-performing note that you could sell to an investor looking for a performing note, or you could hold on to the note yourself and receive returns year-after-year. The note could lead to an outcome where loss mitigation occurs: Deed in Lieu, Cash for Keys, Short Sale, or Foreclosure. Even in the worst situations, the potential to earn double digit returns is a true reality.
We are always looking for Joint Venture Partners who are looking to put their Self Directed IRAs or Investment Funds to work for them. Whether you are looking for a passive return on your money or a more active role in your investment, we have a wide array of investment opportunities available. By investing in notes backed by real estate, your investment becomes recession proof. We can help you turn your investments into win-win solutions. If your investment dollars are not performing to your needs or expectations, I encourage you to reach out to us to learn how you can earn potentially double digit returns on your investments.
So If you are looking to begin investing or are a seasoned investor, I encourage you to reach out to us. If you would like more information about Bike Homes or how we can help you turn your investments into profitable solutions, I encourage you to reach out to us at www.bikehomes.comor Stacey@bikehomes.com You can reach us on Facebook, YouTube, LinkedIn, and we just hooked ourselves up in Instagram. So, check us out.