First non-performing note closed out at month seven. $41k in, $58k out.

I bought one note last year to find out whether I could do this at all. UPB $88,400, arrears $14k, paid $41k. Small three bedroom in an older inner-ring suburb, occupied by the original borrower, value came back $132k as-is on a full appraisal I paid for myself before bidding. That appraisal was the best $550 I spent.

How it went. I hired a licensed special servicer before closing, which cost a setup fee plus a monthly minimum and was the only way I was willing to touch a consumer loan. They made contact in week five. The borrower had been trying to sell for four months with a listing that had expired and a payoff quote from the prior servicer that was wrong by about $6,000. Once he had a real number, he refinanced with a local credit union and paid me off. Discounted payoff of $58,000 at month seven, which was less than the full balance and more than I needed.

What nearly broke it: the servicing transfer took six weeks instead of the two I was told, and during those six weeks nobody was talking to the borrower and I had no idea if he'd walked. Also $4,100 of unpaid taxes I did know about and a $900 code violation for a fence I did not. Total advances $5,000, servicing about $1,400, so all in $47,400 against $58,000 in seven months.

What I'd keep: paying for the real appraisal, and getting a firm answer in writing on servicing transfer timing before closing rather than after. What I'd change: I had no plan for what to do if he'd said nothing. I'd have been ordering foreclosure counsel in month three with no idea what the inside of the house looked like. That was luck, not process, and the next one gets a plan for silence.