Before diving into the world of debt portfolio investing, it's essential to ask yourself a few key questions. What is the risk profile of the underlying assets? How does it compare to other investments? And, do you fully understand how these investments work? By answering these questions, you can make an informed decision and invest with confidence.

For the typical investor, purchasing a debt portfolio may seem daunting and uncertain. However, for those who have the resources, patience, and time to invest in this asset class, there are three crucial questions to consider before making the investment:

1. What is the risk profile of the underlying assets?
2. How does it compare to other investment options?
3. Do I comprehend how these investments operate?

A good way to start is by asking for their due diligence requirements. The seller should have a list of things they want the buyer to do before acquisition, and if not, ask them now. 

Due diligence is an important step in the process of purchasing a debt portfolio. There are many questions that need to be answered before one can begin buying and collecting on receivables from companies or individuals who owe money. 

A couple questions to ask for example, when was this portfolio acquired? How long has it been shelved ? If it hasn't been shelved, then there may not have been any updates since purchase which could severely affect your collection efforts. 

Due Diligence:

Obtaining a Debt Portfolio from a Potential Debt SellerInquiries to make:

1. Type of debt
2. Agency level
3. Length of time the file has been inactive
4. Chain of title (request review after signing a NDA and presenting a LOI for purchase)
5. Previous collection methods used
6. Copies of the signed agreement or check and billing statement

The process of receiving debt portfolios from potential sellers can be a tedious one. However, it is crucial to have the key metrics in order before signing on with them. Account numbers are essential so that they can be cross-referenced for accuracy and authenticity; original loan balances will also determine how much money you stand to gain after the sale is complete! There's no point trying if there isn't any profit at stake - these two measurements should give an indication as to whether or not taking this portfolio would produce results worth your time investing into the portfolio. 

Step 2: Due Diligence

To determine the quality of a portfolio, the following key metrics should be considered:

1. Original account numbers
2. Original loan amount
3. Overall average account balance
4. Original loan date
5. Last payment date
6. Charge off date
7. Debtor States
8. Zip codes

Once you review the unmasked file, your team checks a few key metrics to determine if there is any missing data or inconsistencies in the unmasked debt portfolio. We are looking for social security numbers and date of birth among other things to validate the portfolio. 

Step 3: Due Diligence

Once all metrics have been supplied and met, we'll proceed to examine the revealed file to assess performance. The following metrics play a crucial role in evaluating a portfolio's performance:

1. Social Security Numbers
2. Date of Birth
3. Phone Number
4. Address
5. Reference Name
6. Reference Number
7. Reference Address
8. Employer

Above is some key metrics that we'll be looking for: social security numbers, date of birth, phone number and address; reference name and reference number; employer details, Media (copies of the signed contract, check, or billing statement) Bills of Sale make up a complete chain of title. 

How much money do you have?   All this is to say that, before investing in a debt portfolio, the most important question investors should ask themselves is how much time and cash they are willing to invest. If you don’t have enough of either one of these resources then buying into a debt portfolio will likely be an unpleasant experience for both your wallet and your psyche. But if you are patient with yourself, understand that there will always be risk involved when it comes to investing (especially in today's market), and can afford some upfront capital investment while waiting on interest payments from investments like loans or bonds, then congratulations! You just may become part of the small but growing group of people who make their living off  of other peoples' debts. 

Check out our blog for valuable tips and insights on how to succeed in the credit and collections industry. Visit https://www.jefferyhartman.com/#blog and take the first step towards success today!