September 15, 2021
Best Ever CRE Team

High-Performance Real Estate Investing With Nonperforming Notes

Great entrepreneurs often share a special talent: They can turn bad situations into good ones. They can earn profits from seemingly unprofitable properties and take opportunities that might scare many other businesspeople away.

Paige Panzarello epitomizes this ability to spin straw into gold. As a Simi Valley-based entrepreneur and investor, Paige is responsible for real estate transactions totaling more than $150 million.

What’s particularly fascinating is that much of Paige’s income now comes from nonperforming notes — in essence, loans that are going unpaid.

Paige’s story provides valuable lessons, especially in terms of the personal attributes that are crucial to professional success.

1. Boldness

About 20 years ago, Paige started out in real estate. She inherited a number of properties in California and Arizona when her grandmother passed away, and she decided to turn that bequest into a business. Paige began by overseeing 38 residential units in Arizona townhomes.

In itself, the decision to manage those properties rather than sell them was bold. A high percentage of their units were unoccupied. Taken together, the properties were $4 million in debt. On top of that, Paige knew nothing about the real estate industry at that time.

Paige was unrelenting, however. She gathered real estate experts around her, and she learned new things all the time. It helped that she was in the habit of asking questions constantly.

In time, Paige compiled her own real estate investment portfolio, which included a sewer treatment plant that her grandmother had left to her mother. She increased that plant’s output, so to speak, before selling it to the local government.

Moreover, Paige didn’t stop at real estate. She also created a construction company with 36 employees. And, when she founded this business, she didn’t know anything about construction. But she soon mastered that field as well.

Paige’s construction firm handled its own projects along with those of other companies. Most of them were located in Arizona, and some were in California.

2. Integrity

Integrity is vital to Paige. For example, after the economic crash of 2008, she sold many of her assets to stay afloat rather than declare bankruptcy. All told, she lost about $20 million in cash, but she managed to pay back everyone she owed. As a result, she now views that painful chapter in her life as a learning experience.

For a while after the crash, Paige avoided real estate investments altogether. Instead, she founded small businesses in other fields. One was a teeth-whitening business, a company she still owns.

However, those smaller companies never provided the personal fulfillment that real estate investing did. And they certainly didn’t provide the cash flow. Paige realized that she couldn’t stay away from her true calling, and she returned to the profession she loves.


3. Tenacity

Unfortunately, by this point, Paige had sold off every real estate asset she once owned. She had to start again from scratch.

Instead of looking back with regret, though, Paige focused entirely on the future. She rebuilt her real estate brand quickly and forcefully. She became active in wholesaling, tax liens, and tax deeds. She fixed up and flipped properties, too.

Most important of all, Paige started learning about real estate notes, which changed the course of her career.


4. Finding Positive Opportunities in Negative Situations

Earning money from a nonperforming note is a terrific example of turning a liability into an asset.

Basically, a note is a legal document through which a borrower promises to pay back a lender. Of course, for various reasons, borrowers sometimes fail to make those agreed-upon payments. In such a case, an investor might purchase the note from the lender.

As a result, the lending institution gets some or most of its money back and no longer has to worry about missed payments. And the buyer will try to make money from the note.

Investors can acquire nonperforming notes at steep discounts. At one time, Paige was able to buy them for 40 to 55 percent of their value. The price now tends to range from 55 to 62 percent, which is still a significant bargain.

Asset managers bring these notes to Paige’s attention. She and her team sometimes buy bundles of notes, which are called tapes. Other times, they’ll sift through tapes to find the most promising notes.

While there’s some competition in the note-purchasing space, buyers can be surprisingly collaborative. They’ll often bring each other leads, for instance, or find ways to divide up tapes among themselves.

Furthermore, note investors occasionally combine their money to purchase tapes together. They then split the monthly payments. This strategy can be ideal for closing deals whenever tapes are massive and expensive.

But how does Paige actually make money from nonperforming notes? Well, once purchased, such a note goes to her loss mitigation team.

Those professionals will rely on one of 23 methods to make money from the note, techniques they call exit strategies. In most cases, they’ll employ one of these four exit strategies:

  • Foreclosing, which is Paige’s least favorite option.
  • Arranging a short sale, which means selling the property for less money than is still owed.
  • Seizing the property’s deed as payment for the loan.
  • Collaborating with the borrower to help that person pay the mortgage once again. This choice happens to be Paige’s favorite.

Before Paige buys any nonperforming note, she and her colleagues will carefully study the situation to determine the optimal exit strategy.


Don’t Be Afraid to Fail

Summing up, Paige Panzarello believes two attributes are most responsible for her professional accomplishments: her due diligence and her unwillingness to fear failure. And, along the way, she’s been able to aid many borrowers in paying their mortgages. It’s a great example of a successful person helping others turn difficult situations around.

Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.

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