Shifting Gears: Is It Time to Buy Notes Instead

Editor’s Note: this article is excerpted from the February 2013 issue of RealtyTrac’s award-winning newsletter, the Foreclosure News Report.

It’s been a good run for real estate investors over the past five years. Thanks to the subprime fiasco the nation’s economy tanked, home prices fell, interest rates took a nosedive to historic lows, and inventory was plentiful — especially in the foreclosure market.

But the shifting market in recent months presents investors with an entirely different scenario: available inventory of affordable properties is in short supply, sales volume is headed upward, prices are rising again in many markets, and there’s a good chance that interest rates are headed upwards later this year.

That may force real estate investors to search for alternative investing opportunities.

“I believe that a real estate investor in the next five years has to either add defaulted notes or seller financing to their bailiwick. They can’t survive if they don’t,” said Eddie Speed, founder of NoteSchool and president of Colonial Funding Group LLC in Southlake, Texas.

Ugly Homes to Bad Loans
Speed has shifted gears in his career many times since he was first introduced to buying notes and seller financing back in 1980 when he was just 20 years old. At the time he was earning $1,000 a month working for the Mississippi Board of Animal Health as a horse inspector. He met a couple of people who mentored him in the note-buying business, and he never looked back.

“They gave me the right principles and foundation in the business. It’s been a learning curve; school of hard knocks. It’s the best life decision I ever made,” Speed said. “One of the guys told me I could make a lot of money buying notes. One problem, I didn’t have any money to buy notes with. The guy said no, no, no. What you learn to do is you learn to use other people’s money to buy notes. You become the connector. You find the seller of the note, you find the buyer of the note, and you connect the dots. That’s how I got started.

Read the full article in the February 2013 issue of Foreclosure News Report. If you subscribe before March 15 you’ll receive the February issue free!

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