Quote:
Originally Posted by littlelee30236
Andy
Way to hold your ground and come up with a good resolution for both of you guys. Read your post from the previous email about you buying debt. Have you changed your mind now that you have a feel. Also do you really need a resell strategy if your liquidating at 5-7 with 3 months. I think you would increase/double your monthly profits buying directly from a sellers. You also can use your debt buyers files as kind of a base line for getting start or learn how to evaluate a portfolio. Any thoughts on this?
As we've been doing better and making money in the past few months, I can't help but jump ahead of myself and look down the road to see how we are going to make more money.
Our liquidation numbers have fluctuated depending on age and quality of the package from a low of 5% to a high of 9.0 percent. The type of dept we are working costs about 3cents on the dollar for our client to purchase, and normally we get 45% of that and the debt buyer gets 55%.
On the face it seems like a no brainer to start buying debt. The problem is, that 5-9 percent is liquidated over 6 months or so. We WORK the debt for 3 months, but that doesn't mean it is all collected in three. There are other problems too. For example, we work about 1mm in debt per month give or take. at 3c on the dollar that costs me 30k per month. I don't have that. I would also need to come up with that month after month in order to keep the debt coming in while I start liquidating. I could keep one of my clients and supplement that with debt of my own, but we're still looking at a liquid amount of 30k minimum to buy debt for 3 months. And at 7 percent liquidation, we're looking at 38.5k on an investment of 30k over 6-8 months. That is a great return, but it is also very time intensive to manage that debt. That time would be better spent right now increasing my liquidation rate and improving the collection aspect of my company.
The other thing that I'd like to do before I venture into debt buying is open another collection agency. Debt is kind of like a car as far as value is concerned; the more OWNERS it has, the more it decreases in value. If my debt buying company can place with my first collection agency, then have the debt unworked for a few months and then place it with my 2nd agency and THEN sell it, I get more liquidation out of it, and the resale value does not go down signicantly more than if just one agency worked it. Even though it has been with two agencies it has only had one additional owner; my debt buying company.
I have been spending time trying to learn how to evaluate portfolios, but honestly, it is probably 2 years down the line before I start buying debt.