Passive direct mail to a purchased leads list is the most cost effective, time-efficient way to find and nail down seller-financed note deals…. and notes secured by lower-tier properties, i.e. manufactured homes, represent huge, often overlooked opportunities.
There is actually a ton of opportunity today in purchasing (or brokering, for that matter) seller-financed notes. And at high yields, no less. There is such a wide range of opportunity out there but I tend to gravitate towards the smaller-tier (in terms of price) single-family homes– in large part because that is where the bulk of my experience lies but also because of the sheer numbers of these potential deals out there (at the moment, don’t have current real figures in terms of percentages of owner financing to bank financing in this area but it is significant).
Let me give you an example of the kinds of opportunities that are out there. A fellow investor that I know recently purchased a seller-financed note secured by a small ($60,000) manufactured home in one of the southern states (BTW there are tremendous opportunities in notes secured by manufactured homes). The owner took back financing with a $5,000 down payment. The buyer had already made 60 monthly payments of $657.29 with 84 payments remaining. That’s a solid payment history– very well-seasoned. Very little chance of the buyer defaulting, as he was already almost halfway through the term of the loan. Any way you look at it, that’s a very safe investment. (BTW this home was in a gated community with a golf course. There are some really nice manufactured home communities out there today and I believe this area tends to be overlooked by note investors… may be because there seems to be a perpetuating image or stigma attached to this type of property which tends to cast it in a [for lack of a better word, ‘junky’ or ‘lowlife’] negative light…. kind of like mobile homes which also present huge opportunities as well.
Anyway, the note (after performing all due diligence, running buyer credit check, etc) was purchased for $29,407.72, reflecting an ITV of less than 50% (fantastic) with quite a high yield… 20.24% in this case. I love deals like this. Anything above 20%, I tend to vibrate. Although I can do much better in many cases but I digress..
I could run a couple of other recent examples but I wanted to make this a short post. I just wanted the above example to be reflective of the type (or genre) of deals that I like to be on the pulse of and tend to go after. (I can bump my yields even higher by using more advanced techniques like partials, for example but that is subject matter for another day.
And I like my note investing activities to be passive as I tend not to have a lot of free time (I think many of you are probably in the same boat).
With this in mind, it’s been my experience that passive direct mail to a purchased leads list is the most cost effective, time-efficient way to find and nail down these deals.
Just try to find deals like this on FCI exchange. (You probably won’t)
Direct mail is really a science (and I many cases relatively predictable in terms of projected to actual results) once you’ve been doing it long enough to get a solid program going.
One more thing– I find that beginning direct mailers fail to follow up. And, that’s a huge mistake because most of the deals are unearthed on the follow-up.