Written by Jeffrey R. Armstrong – President/Owner of Armstrong Capital
Your favorite Master Note Buyer – Straightforward, Honest, Fair…
Hot Market, Cold Market or True Market
I just have to giggle when I get a call from a newbie note broker asking me what’s the hottest market to go after so they can get deals right away OR from a note broker who stopped doing business a few years back and wants to know what’s hot now and if it is a good time to get back in the business. I giggle because for me the question has never been whether it’s a hot market for notes, or a cold market for notes. What matters is, what the true market for notes is right now for yourself as well as what has happened in the last several months and what may happen in the immediate future for you and your business. With that said, following I will explain what the hot, cold and true markets for notes are in my opinion and for myself right now.
If I had to say what the Hot Markets for me are it would have to be more of a general statement. There is not one specific city or even state that is hot. What I can tell you is this – in my personal note business every single year without fail, close to or over 50% of the notes that we have purchased and brokered have been secured by mobile homes with land. Thinking about that statistic, where would you market to attract note holders that are receiving payments on a note secured by mobile homes with land? Think about the type of property and where mobile homes with land might be. Think about the area you are in and where there are mobile homes with land near you. You can start with the outlying areas around major cities where there are lots of mobile homes with land, Then think of other states or regions across the nation that have lots of mobile homes with land. One of the first places that comes to mind is “Tornado Alley” in the central US that includes Oklahoma, Missouri, Kansas, Nebraska, Iowa, etc. Other states such as Florida and Texas come to mind as well. So as far as what it hot, or what has always been hot for my note business, are these types of areas and type of property that the notes are secured by. You will have to determine for yourself what is hot for you by tracking your marketing efforts and keeping accurate statistics of your responses and deals closed.
The same goes for Cold Markets in that it will be more of a general statement. Due to the down turn in the real estate market and economic conditions things just are not what they used to be. I can remember 3 years ago at least a third of my business was generated from Rehabber, Fix-n-Flip, Real Estate Investor paper. Rehabber paper is created when a real estate investor (and I use that term loosely) purchases a property for much less than market value (as a foreclosure, REO, bulk discounted purchase or other) then they might fix up the property and within a few months resell the property for way more than they bought it for and carry back the note to facilitate the sale of the property. Well these types of notes were easily purchasable when real estate values were going up but in the down market it is tough to get the sales price to appraise and come in as the true market value with all of the foreclosures and REO’s in the same areas. In addition, note buyers have discovered after years of buying rehabber paper that seven out of ten rehabber notes that were purchased in those years went into default and eventual foreclose within the first 12 months! Just to be clear, note buyers do not want the property. They want the cash flow to keep coming in. With that said because of these things Rehabber paper is very tough to sell these days unless they have at least 12 months of seasoning and verifiable records of what was done to the property to make the value worth more than what they purchased it for (in addition to all of the usual due diligence requirements). In general rehabber type notes in particular are a pretty cold market in any state. There are definitely areas of the country that are much tougher to get a note sold. A few of the states that are extra tough are MI, OH, IN, FL and NV (especially the Las Vegas area) too. I’m not saying notes in these areas notes are not purchasable, I’m just saying that true note buyers will do their due diligence on this type of paper in these types of areas with a fine tooth comb and if they don’t feel warm and fuzzy about the deal they will pass.
The True Market for notes is in essence what is working for you right now. I do not think that every note broker and note buyer sees things the same as I do, yet I know I am not in the minority. I’m sure there are a few note buyers that may think the exact opposite of my opinions although I wouldn’t be able to tell you who they are. Note brokers get business in many different ways from many different areas all over the country. There is not one way or area that is the best. You need to find out what works for you and define for yourself what is your personal true market as well as what are your hot and cold markets in your own note business? With your own statistics and personal data it will help you to change your marketing methods, refine your note business and succeed for the long term.
Remember, success demands action! Keep on marketing, it’s going to work! TWITA! (That’s What I’m Talking About!)