During a conversation the other day, a new Note Buyer told me that he decided to start investing in buying defaulted mortgages. He had been wholesaling properties for a very long time prior to this.
What worried me was when he said: “Dean, I want to get into buying defaulted mortgages in order to keep people in their homes and get some good cash flow.”
Please don’t get me wrong, of all people I would be the first to admit that Humanity does count. But…
Make sure you are looking at the bigger picture.
Don’t Try to Use Only One Exit Strategy For Buying Defaulted Mortgages
It will not work.
A SINGLE exit strategy for the defaulted mortgages that you buy may be what you want to pursue. (in this example he was looking to hold all the notes as cash flow by modifying them and getting them to re-perform).
Buying Defaulted Mortgages: Multiple Exit Strategies Are Needed
You have to be like Rafael Nadal in order to invest successfully in defaulted mortgages.
Nadal can do it all. He has a great serve, an awesome forehand, and can play an excellent game on both the grass and clay court.
You should follow the same idea when buying defaulted mortgages. Pursuing multiple exit strategies will make your note buying business more profitable.
Don’t get stuck with just one note buying strategy.
Using Foreclosure as a Buying Defaulted Mortgages Tool
One useful tool to get a borrower to cooperate with you in getting a loan modified can often be to start a foreclosure action.
And you might ask why?
Sometimes people need a wake up call, like a foreclosure notice to get them to take control of their situation. If they have been missing payments on a regular basis with no real threat, why take action? The notice combined with your help to modify their loan may be just what they need.
Don’t fall into the same trap the investor I talked to did.
If you want to be successful in your Defaulted Mortgage Buying business, 1 Exit Strategy is not enough.
If you want to do well in the note buying business, you need to be a jack of all 5 Exit Strategies.
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