Performing vs. Non-performing
There are many types of notes, but one easy way to categorize them is to label them as either performing or non-performing. A performing note is being paid on time every month. A non-performing note is typically defined as one where the borrower is behind on their payments by at least 90 days. From an investor’s standpoint, non-performing notes typically involve more risk and work but potentially more reward. Although pricing has increased in the last few years, a note investor can often buy a performing note for 70% to 90% of the unpaid principal balance of the existing loan. A non-performing note can be purchased for less, possibly 40% to 70% of the unpaid principal balance. The unpaid principal balance is the amount still owed on the note not including interest, late fees, and other charges that may also be owed.
RE & Mortgage Note Investor | Mentor | Asset Manager
1 年Thank you for shedding light on the intriguing world of performing vs. non-performing mortgage notes. This distinction is crucial for investors to understand, as it significantly impacts investment strategy and potential returns.? Performing notes, being the smoother path, offers a consistent income stream, akin to navigating calm waters. On the flip side, non-performing notes, while presenting a higher risk, also open the door to potentially higher rewards for those willing to navigate the stormier seas, offering the chance to acquire assets at a fraction of their value. Your insights underscore the importance of thorough due diligence and risk assessment in choosing the right path. For investors willing to explore the complexities of non-performing notes, the opportunities for significant returns, coupled with the chance to help borrowers retain their homes, can be especially rewarding. This nuanced understanding encourages a more strategic approach to portfolio diversification. Appreciate the deep dive into this topic, offering valuable perspective for both seasoned and aspiring investors. Which do you prefer June, performing or non-performing notes?