Keep the Ball Rolling with 6 Creative Exit Strategies

When our clients purchase a distressed mortgage note, they generally have an idea of what they plan to do with the note. However, like with any plan, sometimes things do not pan out as expected. You may not be able to get ahold of the homeowner, you may not be able to come to a financial agreement or you may want to foreclose but after hearing the story of the family you decide to work with them to keep them in their home because you choose the ethical investing route. If you purchase a distressed mortgage note that does not align with your original game plan, there are multiple exit strategies available to keep the ball rolling. After all, you are now the bank and the ball is in your court.

One key benefit when investing in the note industry is you are not “married” to any note. If it is not working you have options…

Keep Circulating Your Investments

If you purchase a portfolio of loans, you might have (for example), 8 non-performing and 8 re-performing loans. Your original plan was to renegotiate the terms with the homeowner, however, you could not come to an agreement with 4 of those loans to start paying again. Now that you have 4 loans that do not align with your initial investment strategy, did you know you actually have the option to put those loans back on the market? You can either sell the loans privately or find a broker to sell the deals for you. When purchasing one of our bank direct assets, it is not uncommon to receive 20-40% ROI. Meaning, you are still potentially able to turn a profit. Whichever you choose, if you play the game right you can grow capital while circulating your investments.

Utilize a Creative Exit Strategy Approach

Before deciding to continue circulating your investments by selling off your loan, you can also choose to take an alternative or unconventional approach.

If you keep up with our educational blog posts, we tend to compare the traditional real estate industry vs. the distressed real estate industry. Typically, a traditional single-family home real estate investor has two main exit strategies. You are either going to decide 1) Am I going to put money into this property and dump a bunch of money with my contractors/construction crew, then renovate this as low as possible so I can eventually re-flip it and turn a little profit, then rinse and repeat and do this over and over again -or- 2) Am I going to clean this property up a little bit and create a rental play as a landlord.

By putting a new spin on the way you invest, you are talking about buying distressed notes (the mortgage debt). Generally, you have about 5 or 6 exit strategies to start with, then there could potentially be more depending on if you are a short-term investor looking for capital growth, or are you a long-term investor looking for consistent passive income.

What creative exit strategies are available to you?

  1. You can try to avoid foreclosure altogether
  2. You can convince the homeowner that foreclosure will affect their credit for the next 7 years, and to avoid it you will rid the debt entirely if they sign the deed over to you. You could even offer the homeowner a first and last months rent at a new place, this is called a deed-in-lieu or cash for keys
  3. You can convince the homeowner that we can do a short sale on the home and approve it within 48 hours
  4. You can give the homeowner a modification that allows them to stay in the home and continue to pay
  5. You can work a deal with the homeowners friends/family members to purchase the home at a reduced payoff, and the homeowner will make subsequent payments to the friend/family member which they will then be off the hook with you
  6. You can work with the homeowner if they went ahead and filed bankruptcy
The Ball is in Your Court When You are the Bank

When you purchase these bank direct assets, you can make these kinds of decisions. The ball is in your court when you are the bank. Furthermore, these are the same offerings that the bank can offer its customers but because they have not set up an infrastructure to carry out loss mitigation and debt collection loans that they originated, it is not in their business model to offer creative financing. The quarterback doesn’t run down the field and catch it. The functionalities are separate. At this point, a firm like Revolve Capital would come in and alleviate the bank’s issue by not being able to collect on a debt that is not paying them. We offer the bank a bump above 0, which clearly is an incentive for them to sell it.

There are a handful of different ways that we can look at buying a mortgage for a steep discount. Depending on which route we want to take, all of those routes mentioned to you are profitable and if you bought that loan for $50K, but it is worth $100K, all of the routes we just walked through would sell that deal for much higher than the $50K price you bought it for.

When you are “the bank”, the sky is the limit because you do not have traditional or expected rules to follow, you can utilize a creative exit strategies… and if you decide the deal you purchased from us is not panning out how you expected there is the option to sell the whole loan (private party or with the use of a broker) and keep circulating your investments, then move on to the next portfolio of assets.

Keep the ball rolling by expanding your note investments. If you’re interested in expanding your note portfolio and utilizing creative exit strategies, get started now by clicking here.

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The Challenge of Ethical Investing

In the investment world there are times when things do not go exactly as planned. As an investor, sooner or later, you may be faced with ethical dilemmas bringing you to that moral fork in the road. Do I foreclose on the homeowner or do I put more energy into the deal? This is a very real-world decision you may have to make.

Picture these scenarios:

When a monthly payment is missed, whether it be a mortgage payment, car payment, student loan, etc., you will soon be getting a call from the owner of the debt. You can surely hop into the seat of the homeowner receiving the call from the bank asking “where is our money?”. You can also imagine being the bank needing to collect money from the homeowner.

Sometimes, we will takeover a file from a company who was working on a modification with the homeowner. The company that sold it to us did not finish their discussions before closing the deal. We inherit the file and take over contacting the homeowner. If the homeowner answers, they usually have their guard up. In some cases they were talking to previous note holder just weeks prior. Unsurprisingly, they are confused that we are now claiming to own the note. This becomes a dispute of the homeowner saying “you don’t own my mortgage”. This results in us having to show them that we are in fact the note holder, we will then supply them documents that prove our ownership.

Once that is handled, we now have to settle the dispute of…

– Do you want to stay and pay?

– Do you have enough income?

– Do you have the ability to make the payment after you make your car payment, groceries, gas and all living expenses?

 

Now pretend the homeowner is on disability and receiving medicare/medicaid but their funds have been stalled for the past six months. They inform you that their medicare has been switched back on and they are now able to make their monthly payment on time each month. A little bit of ethical decision-making comes into play that causes us to be a human and look at them not as a file number but as a real person. It makes us think of how we would want to be treated in this situation and say yeah, maybe this doesn’t follow the guidelines of what I wanted to do initially but I also want to do right by Mrs. Smith who has been in the house since 1974.

 

As with all investments, there may be oversights when purchasing a file. Should an issue arise, ask yourself “what was my original strategy?”. How long did you want to be in the file for? Do you event want to mess around with these scenarios or would you rather sell the note for a higher price than what you bought it for? These are some of the decisions that we face as note investors. Some issues are exclusive to notes and are new-to-you if coming from traditional real estate. These speed-bumps are manageable and you have multiple exit strategies to pursue.

 

Ultimately, there are various routes to take in the note industry that cause us to look at everything in real time, make hard decisions, and have our servicer or loss mitigation team make a decision as it comes up. In an industry full of loan numbers, debt, and labels, sometimes it pays off simply be human. There is still profit to be made while showing compassion. Many times both sides win and that is the beauty of notes. Making money, while helping people.

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Why You Should Start Purchasing Bank Direct Assets

About Bank Direct Assets

At Revolve Capital Group, we receive questions regarding the benefits of purchasing bank direct assets. What exactly does it mean to have a bank direct asset? How can you, as an investor, benefit from purchasing a bank direct asset?

The further you are removed from the bank that originated the delinquent mortgage, essentially the higher the price point you will be paying for the note. The more it’s been circulated around the marketplace means there are more companies that have their arms wrapped around the files. Most likely, there are fees and costs dumped into the files. If these companies cannot get the result they were expecting in the time frame they were expecting they will eventually sell that deal. They will have to recoup some of the costs they put into it, which obviously would elevate the price point of the deal higher than the original person who bought it.

That charade will continue around and around until eventually a loan gets blown into under your books. At this point, the delinquent loan could either be severely discounted or severely inflated based on how far you are removed from the bank. Being able to get yourself closest to the bank selling loans, delinquent loans, or even re-performing loans will allow you to capture a wholesale price point or as close to a wholesale price point as possible.

Buying Bank Direct Assets Through Revolve Capital

One of the benefits that our clients have when choosing Revolve Capital is we purchase bank direct delinquent loans directly from Top Tier 1 banks and sell these same loans to our investors. By purchasing these delinquent loans from Revolve Capital, you have the opportunity to become the bank. This creates a passive income investment play with many more exit strategies available vs traditional real estate investing. For further information on this topic, we have laid out the benefits of converting your traditional property investments to delinquent mortgage loans here: Put a New Spin on the Way You Invest.

Revolve Capital Group is committed to providing a simplified purchasing experience to our investors. For more information, get signed up with us today by CLICKING HERE and learn how we can assist you in growing your investment portfolio.

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The IMN’s 3rd Annual NPL Notes & Default Servicing Forum, Florida – 2019

We are excited to announce we will be attending the upcoming IMN’s 3rd Annual NPL Notes & Default Servicing Forum in Florida this upcoming February 7th thru 8th, 2019.

“IMN is excited to return to Fort Lauderdale, Florida on February 7-8th, 2019, for our next NPL, Notes & Default Servicing Forum. In its third year on the East coast, we look forward to welcoming back large institutional buyers, mid-sized funds and smaller private note buyers to discuss market trends, with new sessions addressing RPL securitization and REO to rental property strategy.

“In addition, we welcome a new crop of servicers and default professionals to discuss topics surrounding foreclosures and default servicing. These fresh supplements to the program and delegation promise valuable opportunities for information sharing and networking.”

To purchase your tickets, please visit the IMN Registration Page by CLICKING HERE.