Every investor has questions—whether it’s about non-performing notes, seller financing, foreclosure risks, or choosing the right markets. In this Q&A episode, we tackle five key questions from real investors on everything from force-placed insurance to the best (and worst) states to invest in. We break down strategies for managing distressed assets, securing your investments, and navigating complex real estate deals. If you’ve ever wondered how to mitigate risk, maximize returns, or handle tricky situations in note investing, this episode delivers practical insights you can apply right now.

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What Investors Want To Know: 5 Key Questions Answered

I want to spend some time doing a little Q&A. Over the past few weeks, we have had a bunch of questions come in. Maybe I will start doing a live show with people, come in and ask questions. I do that with my membership group, where every other week we have a call where it’s asked to help me answer the questions of people on what they have going on in their portfolio at this moment or questions they have.

We answer them whether it’s a question about attorneys, what they should do, what their bid on, and a tape that came out, my opinions on it. We love to provide answering questions as we look to provide more information and education for those who deal with anything with paper, whether note investing, seller financing, or private lending.

Question 1: What Should You Do If A Borrower Stops Paying Insurance?

The first question that came in was of borrower who is not in escrow and stopped paying insurance. He said, “The servicer suggests that we put force place insurance on the property. What are your thoughts?” First, let me dive into saying what force place insurance is. On a property, say it’s a $200,000 property. You have your principal and interest payment, then the servicer who’s the person who collects the payments will have an escrow, which is meant to collect for taxes and insurance.

In this instance, the loan docs, probably a seller financing deal and not institutional paper. Institutional meaning from banks. They almost always require escrow. For seller financing, some people do, and some people don’t. It depends. If a loan was non-performing in a period of time and it went back to reperforming, there may or may not be an escrow. There’s many different reasons why. Let’s boil it down.

Let’s say you are owed $150,000 on a $200,000 property. That property burned down. The borrower would still owe you the money, but they probably don’t own anything that you could recover from. You always want to make sure your property is insured. Your service is correct. You would want to get what’s called a forced placed insurance, which is your forcing insurance on the property. It also goes by name, lender placed insurance as well, and you can get that up to the amount of the loan.

You always want to make sure your property is insured. Share on X

You don’t have to do the entire home price. You could do the amount of the loan. If the property would be destroyed and get paid off. You release the lien and that borrower owns the piece of property. Let’s use an unfortunate incident that happened in California with wildfires. Let’s say you had a $200,000 house. No such thing in California and you owed $150,000. Wildfire comes through and burns a house down.

If the borrower had insurance. They would collect on that and pay you. If you add insurance through lender place or force placed, you would get paid whatever you insured it for, which I always recommend being at least the loan balance, and if there’s no insurance, you get nothing. You can see why it’s important to have insurance. Now, how do you get insurance?

Most servicing companies work with insurance companies. They will place it for you. They will charge you a small monthly fee to manage it, but you can get it through your servicer. We use Madison Management Services, so you can get it through Madison Management or typical other servicers. If you have a big portfolio, I recommend reaching out to an insurance company directly. Avoid the middleman and add loans as you buy them or sell them on and off the books. That is question number one.

Question 2: Can You Successfully Buy Non-Performing Notes From Lenders?

Question number two is, “Has anyone had any great success with buying non-performing notes directly from lenders? Doing a short sale is not an option. The owners are deceased. Ideally, I want control of the asset. My plan would be to buy the note at a reduced rate, if possible, become the bank and foreclose or take control of the asset. I figured if anyone would be knowledgeable, it would be this group. Thank you.”

Great question. With what we do, as you know, we like to buy non-performing loans and try to work something out with the seller and get them on a repayment plan. Unfortunately, that does occur for everybody, and how do you deal with that or mitigate it? With mitigation, unfortunately, you are probably going to have to foreclose but before you do, possibly see if there’s family members or if there’s a probate file with an estate that there’s an executor or an administrator who might be able to also work to sell that property.

I will use that example previously, a $200,000 home. They owed $150,000. In this instance, the question is, will you get the property back? They said it was a short sale, so we are going to flip the numbers of a $200,000 loan on $150,000 property, but you are in control. You probably buy that note for $100,000. Rough numbers. You owned it at $200,000 but it’s only worth $150,000.

You could try and sell it at a short sale for $130,000 or $120,000 and make a quick $20,000, or you could go through the foreclosure process, but then you would control the house if you foreclose because most likely you would take it back, then you could do what you want with it. Hold it as a rental, renovate it, or sell it. Options galore. There’s plenty of options there, but let’s understand foreclosing is not for the faint of heart. It’s a lengthy and a costly process.

If it’s vacant, you may have to worry about squatters. You are going to have to secure the property. You are going to spend a significant amount of money foreclosing on a property. Depending also on the state, whether it is judicial or non-judicial, which we’ll talk about a little bit with follow up questions. I hope that answered.

Question 3: Are Small, Short-Term Mortgages Under $50K Worth It?

Next question, “I’m trying to understand how to properly paper first or second mortgages at short-term high yield, low dollar amounts that are less than $50,000. I’m finding the transactional costs, proper paper, and legal title make this “not worth doing.” On the other hand, I have encountered a fair number of people who do this over the course of my education. It’s all about the legal fee. Any thoughts out there?”

Great question. If you look at banks and institutional companies, they will not originate anything under $75,000, and the reason being is the underwriting costs and fees. If you are independent and working for yourself, that’s your own time. You may spend $500 to $1,000 to have the documents created by the attorney and title appraisal. The cost to underwrite a $50,000 loan is the same cost to underwrite a $500,000 loan. The appraisal costs is pretty much the same, for the most part and everything else. That’s where it does make it very challenging for a lot of people who don’t want to get into that rat race.

 

The other component to it is, let’s say you are doing a private money loan to somebody $30,000 and it’s 10% interest. That’s $3,000 a year. If that’s all the money you have that you can invest, that’s a good return, but if you have $200,000, all these smaller deals can look like it’s a lot of work. That’s something to consider. Especially on seconds, which also have a potentially higher rate of default. Possibly some people in seconds would say no. The money you make versus the risk, is the risk worth the reward. Those are some of the things that you have to consider.

The other is first position loans that are low on properties in very bad areas or the person owns a property looking for cash, but what are they going to be doing with it? They are probably paying off something else. That’s where it makes it a little more challenging is the simple fact that it’s not as much paper and the cost to do it, but what is it secured by? Is the borrower okay with paying $5,000 in closing costs no matter what? That’s a big percentage. I will say do not do this on owner occupied properties. In seller financing, I’d also say be very careful. Private lending is good to go.

Question 4: What Are The Best Companies For Tracking Loans And Real Estate Taxes?

Next question, “Does anyone know a company that monitors taxes loans and real estate nationwide? We need help. Thank you.” Yes, we do. There are several companies out there. We are using DocSolution, which is under ProTitles. It’s affiliated with ProTitleUSA, where we got our title reports. They monitor taxes and we can have them check them annually, bi-annually, or quarterly, or however you want.

That is something we do within our portfolio, at least every quarter, I believe it is. We check the taxes on all the properties and make sure none have gone to a tax sale. It’s very affordable. It’s under $20 per loan, I believe. Don’t quote me on that. It also depends on the size of your portfolio. There are other companies that we have used in the past.

Honestly, I can’t think of their name, but there are other companies out there that will do this specifically for you. I highly recommend you do that. When I was affiliated with a servicing company, we provided this as part of the servicing as well, which I thought, any services out there reading this add to your portfolio. If you reach out to Alex Goldovsky, he can connect you with the people in his firm who can go there.

Question 5: Which States Are Good Or Bad For Investing?

Another question, “What states are a no-no and what states are good to invest?” I love this question. For anyone that’s ever heard me in the past, I always joke about Ohio. Only headaches in Ohio. That is my kryptonite. I still invest there. I’m licensed to investor in Ohio, but I’m very careful where we invest in Ohio and I’m not actively seeking loans in Ohio. If I were to run down the list of states, which I’m going to do, to tell you what I have invested in and which ones I enjoyed or which ones I haven’t been in.

Let me spend 3 to 5 minutes and talk about that. I love Alabama. I realized that in Alabama there’s redemption rights by a borrower fee for close. Enjoy Alabama. In Alaska, I never invested. In Arizona, it’s very limited, but I thought it was an okay state. In Arkansas, it’s been a while since I have seen anything. From what I recall, it wasn’t too bad. In California, it depends on what side of the bed you slept on. It’s easier. It’s a non-judicial state so you can foreclose, but evicting is another whole other challenge in California.

In Colorado, only had one asset and sold it. in Connecticut, I never owned an asset. In Delaware, I had one asset that we ended up selling. We invest in Florida. People love Florida, but honestly, Florida is not my favorite state. They are very strict on making sure all the papers are in order. Be careful with Florida. In Georgia, I love Georgia. Fast foreclosure state, but I need to be licensed. In Hawaii, I never invested. In Idaho, I don’t think I have ever had one.

Illinois, I will not do. You couldn’t give me loans in Cook County. I have invested in other parts of Illinois. We are seeing a lot of products in other locations so it’s not my favorite. Indiana, I have done a lot in Indiana. More on the contract for the deed side. Foreclosure can take a little bit of time there. Not a bad state. Iowa, very limited assets there. It’s been a while but there were no issues. Kansas, I have some assets in Kansas that did take a long time to foreclose there and work some time with borrowers.

Kentucky, very limited loans there. Not that bad of a state. Louisiana, takes a very long time to foreclose. Maine, takes forever to foreclose. Not for the faint of heart, also look up the Greenleaf case. Maryland, I love Maryland because everyone hates it. It is a little more challenging, quasi-judicial. Now leisure might need to be licensed in Maryland, but we love Maryland but most people don’t. My home state, Massachusetts. I don’t have a loan in Massachusetts. Michigan, I like Michigan. You can’t recover legal fees, short redemption period, but very fast foreclosure.

 

Minnesota, it’s been a hot minute since I have had anything in Minnesota. I can’t remember anything bad about it. Mississippi and Missouri, a great state to be a lender. Montana, had one foreclosure from a woman who passed away there many moons ago and it went pretty smoothly. Nebraska, I don’t know if I have ever owned Nebraska. From what I heard, it’s not a fun state. Nevada, I had some loans in Nevada. Going average there. It doesn’t take forever, but the process doesn’t happen overnight.

In New Hampshire, I have had one asset in New Hampshire that we got deeded in lieu of. New Jersey, the same thing. Very limited in New Jersey. Those states don’t target New Jersey because of high taxes. New Mexico, again, 1 or 2 assets. I don’t see much. New York, we don’t touch New York. Down by the boroughs is very challenging getting outside of that area. Not as challenging, but from servicers and everyone, not a lot of people want to do business in New York. It’s one state that we see it come up on our list now we are like, “No.” That, Alaska, and Hawaii are all hard nos.

Not a lot of people want to do business in New York. It's one state that, when it comes up on our list now, we are like, “No.” Share on X

North Carolina took us a while to find a good attorney. Not that bad of a state. North Dakota, I don’t think I have ever seen a loan. Ohio, I already talked about. Only headaches in Ohio. We will not buy in Cuyahoga County in Ohio. Oklahoma, hard state to foreclose on. You got to have all your paperwork in order. They are strict compliance on paperwork. Get good paper and you are okay, but if not. In Oregon, I never done a deal working on potential participation with. Pennsylvania, I like the Western part of the state, but the Eastern part, not so much. The Philadelphia area takes forever.

Pittsburgh area still takes a while, but a lot of opportunity. I never had anything in Rhode Island. South Carolina, we like. Nothing in South Dakota. Tennessee and Texas, we like. Utah, haven’t seen anything. In Vermont, I had some assets. The whole Northeast can be pretty challenging for investors. Virginia, my home state. I like Virginia, non-judicial and fast.

Washington, again, we stay out of the Pacific Northwest as well, and then Wisconsin, then Wyoming. I have had an asset in Wyoming. Foreclosure is quick in Wyoming. District of Columbia, we have owned stuff, but it’s going to take a long time. I have not done the Puerto Rico, or US Virgin Islands. I haven’t done any of those. I hope that answered your question.

As part of our membership group, once a month we do a deep dive into every state where we go through all the foreclosure laws, timelines and state laws. All of that where it’s probably a good 90-minute plus presentation outlining everything and everything about the foreclosure/eviction processes within that state. I wanted to wrap up this episode and change up a little bit by doing some Q&As that we get asked. I hope you enjoyed this episode. As always, catch you on the next one. Lastly, hopefully, I will see you at the Paper Source Convention. Go to the PaperSourceConvention.com. Thank you.

 

Important Links

• 7e Investments
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