Note Queen: Owner Financing Strategies

One of my takeaways from the DME (Diversified Mortgage Expo) conference in Nashville was that I need to pay a lot more attention to the risk of flooding when I'm evaluating a note for purchase.

Beth Boisseau-Coots representing JB Lloyd & Associates specifically called out flooding as one of the top going concerns for insurers.

I was having a private zoom session with Melody Wright, whose work I respect and closely follow, and she asked me how much seller carry back 'paper' I thought was originated each year.

I popped off the number often quoted in the industry: $35 billion or so.

Then Melody said, 'Yes, I've talk to Fred and Tracy, but they confirm that is just for seller financing transactions reported on the MLS.'

Welp... none of the owner financing I've ever participated in (whether I was the real estate buyer getting terms from the seller, or I was the one offering seller financing to a buyer) was reported in the MLS.

So... if that's true just in my little corner of the world, then my guess is that the number is AT LEAST double that... $70 billion... maybe even snuggling up to a Trillion$$.

There are enough sellers that think owner financing is an acceptable exit strategy to the point that there is probably about $70 Billion in private paper (notes/loans) out there.

Which means that if you're a note buyer / investor, there is plenty of opportunity for you ...you just have to be a 'hunter gatherer'... you're never going to find seller financed notes all in one place waiting for you to dump into your shopping cart.

The closest thing you'll get to that is checking out PaperStac (an 'MLS' for notes) or to buy institutionally originated bank paper from a larger hedge fund or other group.

I, myself, stick to Mom 'n Pop owner carry notes and buy them with the help of my intimate group of Mom 'n Pop investing partners.