Welcome to the Note Business
We are based in Brisbane, Queensland Australia. Our focus is buying distressed real estate-backed assets in The United States of America. We buy performing and non-performing mortgages. These assets are unique. You have the security of the real estate, without the headaches of owning the real estate. The Note Business specializes in the acquisition, rehabilitation and management of distressed real estate debt. We help hedge funds and banks to move non-accrual assets off their balance sheets. We help willing borrowers (Homeowners) to re-structure these loans, to re-establish their sound financial footing and move forward into brighter futures. The rehabilitated loans are then serviced by fully licensed 3rd party servicers.
About the note business
What is a note?
A note is simply a promise to pay. For example, a personal check is a note. When real-estate is sold with financing there is a document called a promissory note which defines the terms of the loan, including the loan amount, percentage rate, payment amount, the number, frequency, and timing of payments, late payment penalties, etc. The note, by itself, is simply a promise to pay and is not secured by collateral. In a financed real-estate transaction, the note is secured through a security instrument. This is either a mortgage or deed-of-trust, depending on the state. The security instrument ties the note to the deed as a lien on the property as collateral. It also spells out the lenders recourse (foreclosure) should the borrower fail to pay, among many other details which we won’t go into here.
Non Performing Notes
Acquiring Real Estate
What is Due diligence
As with any asset acquisition the due diligence process is critical. Tax and title are key elements of due diligence for note investments. Purchasing a note without checking tax and title is gambling, plain and simple. While sellers of notes are generally well intentioned, their information with regard to lien position and taxes due should be taken at face value and verified prior to purchase of the note.
A Simple Explanation of the Most Secured Real Estate Investment
Many investors are looking for reliable returns that provide cash flow, rather than unpredictable variance. Investing in real estate notes is one of the most straightforward and secured methods of investment. Mortgage notes are a great way to diversify your portfolio and also provide cash flow.
Two or more partners agree to form a new entity to pursue a specific business opportunity. Sometimes partners in JV’s contribute equal amounts of cash to the new venture or one partner may contribute cash while another partner contributes their expertise and the personnel resources to operate the Venture. When we establish a joint venture, typically we take the role of the manager, using our experience and expertise to supervise all of the operations of the project, while our partner/investor provides the funding for acquisition and expenses.
Depending on the outcome/exit of the project, monthly cash flow from a restructured note and capital gain from the liquidation of the note or underlying property are split between each venture partner.
Typically the money partner receives 100% of the principal payment and interest income, or profit on the sale, is split 50% between Manager and Investor. We target real estate investments that we believe possess cash flow potential and may benefit from the implementation of a rigorous, value-added asset management plan. This plan involves due diligence, price negotiation, asset repositioning, and eventual sale through appropriately selected channels.
To learn more about current JV opportunities, complete the contact form. Thank You!
Memphis Case Study
Amount Owed: $ 57,850
As-Is Property Value: $ 75,000
Modified Interest Rate: 6.5%
Purchase price of note $ 28,327
Expenses: $ 3,470
Total outlay $ 31,797
Payments Remaining: 300
This is a 3-bedroom home in a “bread and butter” neighborhood in Memphis TN. The borrower had defaulted on his loan A loan modification with the borrower was negotiated to reamortize his loan over a new 30-year term at 6.5% and a monthly payment of 390.61. Which is $ 4,687.29 per year.
With a total outlay of $ 31,707 when we enter the figures into the financial calculator it gives a yield of 14.37 %. A Pretty good return. However let’s say we sell the note and give the purchaser a 9 % yield. The sale price would be $ 46,545 and this purchaser would have a asset to loan value of 62.06 %. An incredibly secure investment with a great return for the investor. Would Your retirement fund be better with an investment like this one ?
If we did sell this at the 9 % yield for the $ 46,545 it gives a profit of $ 14,838 or a return on capital of 46.79 %
Ohio Short Sale Case Study
Amount Owed: $ 50,866
As-Is Property Value: $ 50,000
Loan $ 36,383
Arrears $ 9378
Acquisition cost $ 26,928
It had over 5 years had 2 modifications. The borrower owed $36.383 plus arrearages of$ 9,378. Due borrower’s continual default , it was not acceptable to accept another loan mod and due to some subordinate liens, taking a Deed In Lieu was not a possibility. A foreclosure was filed and the borrowers placed the home for sale on the MLS. They ended up with a short sale offer of $40,000 which was approved and received a net payoff of $36,383 and the arrearages were forgiven. The borrower was able to move on without a foreclosure on their credit record.
So this resulted in a profit of $ 9,455. Which was a 35 %return on capital
Charlotte Deed in Lieu Case Study
Current market value $ 70,000
Original loan balance $ 59,377
Acquisition cost $ 32,250
Deed in Lieu $ 5,000
Total outlay $37,250
Sold for $ 50,000 net (1 week after having deed in hand)
Profit $ 12,750 a 34 % return on capital
Selling a Partial Case Study
A non performing note with a balance of $ 52,367 was acquired, on a property that has a current market value of $ 77,000. The acquisition and other costs for the note, and getting it modified was $ 30,268.
The house owner had lost their original job. The original payments were $ 537.57 per month. With the job loss they had fell behind on the mortgage. They had got a new job, yet the new income was lower than previously, so to make it affordable for them.
The loan was modified to:
Loan amount $ 52,367
Interest 6.5 %
Term 229 months
Payment $ 399.64 per month.
The owner was happy to stay in their home, that they could now afford.
To redeem capital it was decided to sell a partial.In this case 12 years of payments were sold to a investor, who purchased it through their self managed retirement fund.
This investor paid $36,820.32 the next 144 payments. Putting these numbers into the financial calculator gives them a 8 % yield. With great security and the likelihood of regular payments. And no property management, or tenant issues.
For the note purchase it is also a good deal. They got all their capital back and made a s profit on the sale of the partial of $ 6,552.32, which is actually a 21.64 % return on capital. Then at month 145 the monthly payments revert back to them. So they will then receive another 84 payments of $ 399.64 per month.
These payments have a return of infinity, because they have all their capital back and they are still receiving the payments.
Peter serves our private money and joint venture partners. His main focus is to source, and manage, massively discounted real estate notes, in the United States of America. These notes have very high collateral and deliver regular cash flow. So our investing partners have both great security, and high yields. In the process bring a very rewarding opportunity, to our private money and joint venture partners. He is also responsible for selecting and leading the team.
Peters background includes having lead many sales teams and also owning several businesses over the years. In particular he was a partner in a large commercial finance brokerage. This was a great training ground for understanding notes or paper assets. He has also owned businesses where the main focus was in finding and negotiating real estate deals for investors. In the note investing space having a deep, hands on knowledge of real estate and also of notes is of high benefit to the business. He also has a trough understanding of the various strategies involved with investing in real estate and notes. Providing Our Private Money Partners with a consistent, generous returns, is a game we love to play. for our private money partners can be exceptional.
Director of Asset Management and Research
Catalina Adarme-Vega, PhD
Catalina has a science background. However the halls of academia.and the businesses that operate with science were unfulfilling. So she transitioned to business and investing. With an eye for detail, and a love of critical and systematic thinking, she took to investing like a duck to water. She applies the mindset of a scientist to the processes of investing. She is a prudent investment manager who naturally creates systems where assets grow.
While is is tough with asset management and expects and creates very high standards with professionalism, she is at the same time very nurturing with people. Her passions include animal welfare and care for the environment.
Our Advisory Board
Chairman: Colin Coverdale
With a background that includes being a Specialist in business recovery and change programs, former KPMG Director Business Strategy, Former CEO of retail chain of 39 franchised book & stationery outlets; trained merchandiser & retail equipment manufacturer and Senior Manager in Oil Industry – International experience. As well as finance and banking and currently being the Chairman of a Australian company that is listing on the Canadian stock exchange Colin brings a wealth of knowledge to the business. His council is always wise.