For the last few weeks when I’ve had conversations with asset managers, I’ve asked them what they see happening in the 4th quarter. One asset manager told me that he does about 50% of his yearly business in the 4th quarter. I asked him why there is so much activity at the end of the year. He said that there are some traders who haven’t made their bonus yet, so they kick things into gear to make their year. Other traders who have had a good year want to sell off their losing assets so their books are in good shape to start off the next year. What this means for note investors is that there should be more inventory available than usual, and possibly at better prices.
While it is great that these opportunities will be available, you want to go into the 4th quarter with a solid plan. Don’t just start buying stuff sporadically and expending a lot of energy looking at assets that may not be right for you. Make sure you have thought about things like:
- How much capital can you realistically deploy before the end of the year?
- What do you want your portfolio to look like?
- Do you want to stick to the states or areas you are currently active in, or are you willing to take on new states?
- What are your holiday and family plans? Can you do deals in the last week of the year or do you need to have things wrapped up before that?
For me, I’ll get the 4th quarter started by closing on 4 assets this week. Of the 7 that I had bids accepted on, 2 turned out to be vacant and 1 was sold at a tax sale recently and the seller didn’t actually own it anymore. I’m disappointed I couldn’t close on all 7, but this should get me off to a solid start. I plan to buy ~10 more notes in addition to these before the end of the year.
This week I’ll traveling to Ohio and Indiana to look at assets. I’ve been asking asset managers for lists of what they have in those states, and I should have a pretty busy trip. There are some smaller cities where I have seen assets come up in the past that I want to become familiar with, as well as particular neighborhoods in some of the larger cities. I want to see for myself which areas are on the rise, which ones are doing ok, and which ones are shitholes that I should just avoid. Talking to realtors and investors, and studying crime maps and population statistics is great. But now that my business is scaling I need to have more direct knowledge of what is happening on the ground in the areas where I am going to be active. I also have an asset going to foreclosure auction in Indiana which I am going to attend (assuming the borrower doesn’t file bankruptcy at the last minute). I don’t need to be there in person, but I want to observe the process. I will also likely have an eviction and cancellation of land contract coming up this fall in Ohio, so I want to talk to realtors and property managers face to face, and make sure I have a good team in place ahead of time. This is a trip I have been intending to take for a while, and I’d rather do it now than wait until we get into the winter.
As this quarter gets underway I urge you to review your goals that you made at the beginning of the year, and come up with a plan to utilize the time we have left in 2018. There should be lots of opportunities that present themselves. Make sure you can take advantage of them, but in a thoughtful way.