The best thing about performing notes: they’re passive. You are not responsible for the maintenance of the property.
Notes still have to be properly managed, and if you are investing within your IRA or if you are not properly licensed, you must hire a servicing company.
So, what do note servicers do? It depends on the company, but for the most part, they are a point of contact between you and the person paying the note.
While some note investors are properly licensed to manage their own portfolios, many do not have the certifications and licenses necessary to do so. Trying to “do it yourself” without the right credentials can lead to serious legal and financial consequences.
For investors who don’t want to take the time to become licensed, it is best to hire a professional. I recently met a note servicer in the DFW area, Amy Sayre, owner of August REI out of Garland, TX. Her company only manages loans based in Texas, but she highly recommends that you hire a servicer that is registered, bonded and insured in each state.
Amy started her own servicing company because she was unhappy with the services she received from another company. There were far too many hidden fees that were not discussed up front, particularly when it came to collections. She loves to work with clients and teach them about the note process from escrow, to trading/selling notes to other investors.
I visited with Amy and asked a few questions about how investors can make the most out of their relationship
Amy says that he best thing about what she does is teaching people about the process regarding notes. When looking for a servicing company, make certain that they are licensed and bonded and have experience working with investors. It is an added bonus if they have lenders selling paper in their portfolio. In order to make the most of your relationship with your servicer, make them a part of your team. “Communication is key”. Make sure you complete the paperwork they ask for, cooperate and be accessible when needed in order to help them get things done in a timely manner.
Amy Sayre knows what she’s doing, she invests in notes herself, loves helping people and answering their questions. If you ever buy a note in Texas, consider using her services.