Basic Business Operations
For your note broker business, you will need a business website and customer relationship management (CRM) system such as GetResponse, AWeber, Infusionsoft, or Mailchimp. You should avoid using Constant Contact and iContact since they are generally not as welcoming to real estate investors.
You can upload your list of contacts to the CRM. Having a CRM gives a more professional look. Using this software daily by conducting webinars or marketing will increase traffic to your website.
Always be professional. It can also be helpful to send a survey out to your contacts to learn about what they are looking for (i.e., property type and location, performing or nonperforming note). You can also ask them if they are using their own money or acquiring money from another source.
Note Broker Do’s and Don’ts
With note brokering there as cardinal rules to follow. There are certain things you should never do. To start with, do not take lists of assets and send it to all your email contacts.
Also, never post assets and claim you have them under contract when others already do. This is one of the easiest ways to get blacklisted from online groups.
Do not misrepresent yourself by claiming you work for a note investing company which you do not actually work for. Asset managers can easily confirm this.
In addition, you should also never “double dip”. This occurs when a broker contacts both the buyer and seller and claim they both pay them a percentage of the transaction.
Just Say No to Daisy Chains
A joker broker is someone who will see notes for sale on the market, secretly take them from the internet, raise the price, and send them around to other brokers who have networks of buyers.
This is referred to as a daisy chain, because that one broker you are working with will give that note to another actual broker who has a list of buyers, thus creating a chain of two brokers.
Having more brokers between the note seller and the end buyer will increase the cost of the note since each broker will want to get paid thus preventing the note from selling.
Building a List as a Broker
If you are going to be a good broker, you will need to build a list of potential buyers. You can attend real estate clubs and networking events and take business cards to pass out to note investors. You can also join online note investing groups.
If you are short on business cards, you can scan one with your cell phone and text it out others. When you get home from any networking in which you obtain business cards, send a friendly follow up to those you met.
You will need to narrow down your lists, know your audience, and know what they are looking for. As a broker, you should always ask investors what they are looking for and then reach out to them when you come across a note/property that would interest them.
It is helpful to ask your buyers about what their top three states of interest are. You can also reach out to hedge funds to obtain larger lists of note investors and ask if you can market them.
Finding Note Deals
The best method to find active deals for brokering is to reach out to other investors and “dial for dollars” or send an email blast to asset managers.
Many investors are willing to pay brokers a fee for bringing a deal to them. Too many eager brokers are willing to jump on the first asset they see (which plenty of others have already seen themselves), and send out an email blast about this asset, which is generally a waste of time.
Preliminary Due Diligence
Even though you a brokering the note deal and not actually purchasing the note yourself, you will want to conduct some preliminary research.
You will want to gather specific information about the property and note such as: the property address, the terms, the interest rates, unpaid principal balance, any liens attached, payment status, etc.
When you find a note of interest, always review the area by looking at Google Maps or driving by if you live close. It would also be beneficial to know the rent rates and property values in the area.
Be sure to obtain a copy of the collateral file. In the event this is a commercial property, LoopNet is a great source to use to find out if the property was previously listed or if you would like to find comparable sales in the area.
In addition, you can use LoopNet to find out if deals have been dragging out for quite some time. You can also use LoopNet if it is a short sale or property in distress so you can reach out to the title company and determine who the current lender is so you can reach out to them if needed.
