Buying Defaulted Mortgages – Don’t Focus On One Exit Strategy
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.
Don’t get me wrong. I’ll be the first to admit that Humanity counts. But…
Don’t forget about the bigger picture here.
One Exit Strategy Is Not Enough When Buying Defaulted Mortagages
It will not work.
You see, you may WANT to pursue A SINGLE exit strategy for the defaulted mortgages you purchase (in this case, he was looking to re-perform all the notes he bought – possibly by modifying them all – and then to hold them for cash flow).
Mulitple Exit Strategies Are Need When Investing In Defaulted Mortgages
In order to invest successfully in defaulted mortgages, you need to be like Rafael Nadal.
Nadal can do it all. He has a great serve, an awesome forehand, and can play an excellent game on both the grass and clay court.
You should have the same approach when you are buying defaulted mortgages. Have the ability to pursue multiple exit strategies at once in your note buying business.
Don’t get stuck with just one note buying strategy.
Buying Defaulted Mortgages – Using Foreclosure as a Tool
One useful tool to get a borrower to cooperate with you in getting a loan modified can often be to start a foreclosure action.
And you might ask 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.
Don’t fall into the same trap the investor I talked to did.
If you want to be successful in your Defaulted Mortgage Buying business, 1 Exit Strategy is not enough.
You really need to be a jack of all 5 Exit Strategies to do well in the note buying business.
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