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Friday, February 27, 2009

Buying Defaulted Mortgages - Don't Focus On One Exit Strategy

By Dean Engle

The other day I had a conversation with a new Note Buyer who informed me that after a long career in wholesaling properties, he was going to start investing in buying defaulted mortgages.

The thing that worried me was when he made the following statement. He told me that the reason why he was getting into the business of buying defaulted mortgages was not only for some good cash flow, but also to keep people in their houses.

I do admit that Humanity counts, don't get me wrong. But...

Make sure you are looking at the bigger picture.

One Exit Strategy Is Not Enough When Buying Defaulted Mortagages

It doesn't 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).

How To Buy Defaulted Mortgages: Multiple Exit Strategies Are Needed

In order to invest successfully in defaulted mortgages, you need to be like Rafael Nadal.

With an amazing serve, grass court and clay court experience, and a great forehand, Nadal is a well balanced tennis star.

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

When trying to modify a loan, sometimes the only way to get a borrower to cooperate with you is to start the foreclosure action.

And Why?

Because for someone who has been missing payments regularly and hasn't been current for a while, sometimes a wake-up call with a foreclosure notice (combined with a helping hand from you to help them with a loan modification) is what prompts them to get their act together, take control of their situation, and to work their way out of their delinquency.

Be careful not to fall into the same trap as the investor I talked to.

1 Exit Strategy for your Defaulted Mortgage Buying business will not work. It will not be enough to make you successful.

To do well in the note buying business, know all of your 5 Exit Strategies.

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