The Secret to Buying Notes and Who You Choose to Invest With
One of the more common problems that we repeatedly see in the real estate industry, whether it be traditional real estate investing or investing in the distressed note industry, is that investors are hesitant to purchase outside of their own backyard. Sure, investing in your own city has the benefit of driving to the property, seeing the condition of the home, looking at the neighborhood or seeing the crime area. Even these seemingly “beneficial advantages” have drawbacks. Ultimately, you are still using your valuable time and resources to complete these tasks. There are ways that you can work smarter instead of working harder, and the many benefits extend farther than simply “living within driving proximity to your investment property”.
The secret to buying notes and which investment company you choose to utilize is within their network of vendors.
Over the last ten years of our experience, we have cut our teeth on utilizing many different companies on exercising the day-to-day needs of the business. National vendors that can run title, national vendors that have access to 65,000 real estate agents across all 50 states that within a 3 day period can get you back pictures (exteriors or interiors depending on the occupancy) within 3-5 days. Simply put, having an extended nationwide network of vendors allows you to scale your business, increase your profit margin and become a more passive investor. If you’re wondering how you have come to the right place.
Using national vendor databases will increase the opportunity to invest outside of your own backyard. For example, if you’re in California then the discounts that the banks are selling distressed loans are much less than either Michigan or Ohio.
If you have the right ecosystem in place, which we give to you here at Revolve Capital, to help you turn a profit quicker…. investing outside of your own backyard almost feels normal. We’re located in Anaheim, CA and most of our product is in the mid-west and the East coast. That is not just by design, it’s because the discounts are far greater in that part of our country and our national vendors give us the ability to expand our investment portfolio to areas that provide steeper investment discounts.
National vendors assist with big tasks such as making the cold-calls, taking the property photos or even construction needs for home rehabilitation and renovation. Simultaneously, the same thing goes for smaller tasks such as documentation. At the end of the day, most investors do not want to house the documents in their personal files that their children, wives, or even a potential natural disaster can effect. Having those documents at a company that can take on the responsibility of storing those and inventory those. By allowing them to file your documents you will decrease personal responsibility… and ultimately you can free up your resources and focus in other areas, such as growing your investments.
Allowing the vendor to be the direct contact for the homeowner will defer accountability. What is your plan regarding who will communicate with the homeowner? Who will make the cold calls? Who will adjust the interest rates? By using a vendor you can take the pressure off yourself and defer these tasks to a servicer.
These vendors, as a part of the on vetting process of bringing you aboard, will determine your needs by going through a KYC (know-your-customer) evaluation. To use an analogy, comparing a landlord to a renter is the same thing that could happen from a lien lord (or note holder) to an occupant/homeowner. If the loan goes from non-performing to re-performing then these vendors will handle that entire process at your instruction. At times, you may not want to give too low an interest rate. They may have been asking 8% interest rate and they’re asking for a 4% interest rate and the vendor will come back to you (the owner of that deal) and ask your approval and proceed per your requests. In this example, you may consider that 4% is far too low, even lower than today’s 30-year fixed interest rate. Therefore you might deny the interest reduction. The KYC evaluation allows you to get to know the vendor, and the vendor to get to know you and your wishes for your investments.
The price point to utilize a servicer is nominal in the swing of things, and using outside sources can allow scalability for your investments. Ultimately, it’s less a function of finance and more a function of time. We believe if you have a full-time job and you invested in real estate on the side, you absolutely need to be accessing vendors because that’s a scalable way to do business. It’s a scalable way for you to have a side investment vehicle. If you would prefer to do this full-time, then you could still quarterback the vendor to carry out the decisions that you’re making but they’ll come from your instruction. Otherwise, if you do it as an alternate business (or as a side business) the vendors will take your instruction, but they will be working nine-to-five every single day. The vendor could be working your files with or without your instruction essentially.
Vendors have experience, knowledge, and resources available to facilitate functionality. By becoming a more passive investor and taking a step back to allow the vendors to take care of the process start-to-finish you are essentially allowing the backend duties to function optimally. Your work-flow will be streamlined and with everything being directed by the vendor, you can focus your attention to other aspects of your business. However, if you would prefer to learn, roll up your sleeves, and do it all yourself then you also have the opportunity as well and the vendor will allow you to do that. Depending on how “fast you want to dive the boat” is how fast the captain will give you the wheel to take over.
We believe one of the single most important factors you need to take into consideration when choosing the right company for you to invest with lies within their network of vendors. By utilizing outside resources, you can benefit from increasing opportunity, decreasing personal responsibility, deferring accountability, allowing scalability, and facilitating functionality.
Our vendor network is something that we give our clients that is a tried and true test over the last 10 years of companies that carry out the infrastructure of this business. Unfortunately, there are not too many firms, companies or note sellers that will instruct you on who to use as a vendor to operate this business. They expect you to already have that handled. The mindset of “you’re already coming to us for product so you should already have your ducks in a row”. There is not an “educational book” out there that teaches everybody A-Z. This is why we tried to separate ourselves by offering this network of vendors/servicers for free.
Now you can play a part in the exact systems we have put in place to create Revolve Capital. So you can feel comfortable expanding your investments using our established national vendor network.