By Isaac Newkirk III
Notes provide multiple benefits for investors, the key is you can buy non-performing notes for pennies on the dollar. In addition, Tony Martinez, president of Asset Ventures LLC, says notes offer many more options to create a positive return.
“We want to make sure our investors are protected,” says the founder and president who has over 18 years in the industry.
He adds: “We have multiple avenues for a successful investment. That’s one of the advantages of investing in notes as opposed to investing in properties. When you invest in properties, you’re limited to the options of the marketplace. With notes, you have exit strategies.”
Martinez entered the industry as a builder back in 1989. During his early years in the profession (dealing with a lot of REOs and short sales) he became particularly aware of the banking industry’s desire to rid itself of delinquent properties through the short sales arena. As he became more knowledgeable of the process, principally by acquiring short sales notes (non-performing or delinquent notes) directly from banks, he also came to realize how he could help people retain their properties, at the same time.
Asset Ventures are negotiating about 400 notes and have an additional 700 notes in the pipeline. Their goal is to acquire about 100 notes a month and Martinez says they’re on pace to meet or exceed that goal for the current year.
Based in Redondo Beach, Calif., Asset Ventures has three primary responsibilities: resolution (helping owners stay in their house); acquisitions (helping investors make a positive cash flow return on their investments); and teaching and mentoring in the industry.
The notes that Asset Ventures selects go through rigourous research. “What we do in the research phase is we have contact with the banks and lenders and they’ll give us a pool of notes that’s limited to address, the amount of the loan, the fair market value, and just a limited amount of information,” Martinez explains. “Then we have to do our due diligence, our data mining. Every note is then researched against a one hundred point checklist to see if we want to purchase it and move on to the next level.”
Each pool of notes obtained by Asset Ventures from their network of banks involves anywhere from 50 to 500 notes. The pool would be packaged with very similar types of notes and an initial assessment would be done on a small sample (say, 25 to 50 out of 500) to get a feel for that particular pool. Asset Ventures has specialized researchers who perform this task. Tony says that “Researchers don’t do any analyzing, they just gather the information pursuant to the checklist. Then it goes to the next level where management analyzes the data. They go through about 500 files in a week.”
We asked Martinez to show us the inside mechanics of one of his recent deals. Our case study involves the Arrezo Deal. Begun in February of this year, the Arrezo Deal was completed in mid-August. Martinez says “Once we completed the research phase of the deal, we began the acquisition process. We looked at the numbers on the Arrezo Deal; we bought it for 19 cents on the dollar. It was a non-performing second mortgage. The biggest positive, when we bought this was – combined with the first [mortgage] – we had equity in it. The Arrezo Deal had a second lien with an unpaid balance of $86,000. We paid $9,600 for it. When the owner stops paying on the loan, the bank has delinquent debt. They benefit from selling it off. As a non-performing or toxic debt, the bank would package it up and sell it to someone like myself for pennies on the dollar because it doesn’t have face value to them anymore.”
Of utmost importance, Martinez believes that it must be understood that “In the acquisition phase, we don’t buy the property, we buy the paper. So we’re the bank now. What we do is, we’re buying the collateral paper, which is a bank note. So, if it was owned by Chase or GMAC or Wells Fargo for example, it’s now owned by us and we’re the bank. We don’t necessarily need to take ownership of the property but we’re still going to make money because they’re obligated to pay us. So we’ll go to the borrower and create options for them to get back on their feet. This is how we help people while creating positive returns for our investors. Where they may have paid $500 a month before, they may now pay us $200 a month. In the Arrezo Deal we actually settled the note for the homeowner at $22,000. So they paid us $22,500 and we wiped away $80,000 worth of debt. The investor just made $13,000 profit, which equates to 235 percent return on their money. Everybody wins.”
And that is the main goal for Asset Ventures — that the investor and also the homeowner are successful.
For information, visit Asset Ventures
online at: www.assetventuresllc.com