FBF #623: How to Successfully Invest in Defaulted Second Mortgages and Junior Liens — with Jim Maffuccio

Today’s Flash Back Friday Episode is from Episode #242, which originally aired on August 13, 2019.

In this episode of the Real Estate Investing for Cash Flow podcast, Kevin talks to real estate and note investment expert, Jim Maffuccio. Jim is co-founder and CIO of Aspen funds, an investment fund that provides returns without the volatility of traditional investment options. He is a 30 year old real estate veteran and deeply networked in the secondary mortgage industry.

In the podcast, Jim covers how he bounced from the recession and got into the note business. He talks about secondary mortgages and the profit strategies he and his team employ when capitalizing on note investments. He explains the process of restructuring distressed debt to benefit investors. Kevin and Jim also discuss the dynamics of working remotely and having a headquarters for business.


“Aspen Funds was started in 2012, really kind of born out of the adversity and the lessons that I learned in what debt can do to you if you’re a small developer, a small fish in a big pond. So that’s what launched me into the mortgage space.”

“If you’re gonna buy one offs, you can be picky about what you buy in terms of the equity profile of the deal that you’re buying. At our scale, we have to be ready to pretty much buy everything..”

‘We’re at about 65% of the time, we are able to modify the loan, keep the loan, get it re-performing and sell it to an income fund or another cash flow buyer. Another 10 or 15% of the time we actually get a settlement..”

“We’ve seen the quantity of deal flow has definitely diminished in the residential mortgage space in general. Most of that is first leads where most of the players have been, and margins have shrunk as price points have increased for mortgages in general.”

“If 10% of our loans, at any given time, stop paying, all the metrics of our fund are set up such that the fund investors don’t miss a blip and our management don’t miss a blip. We have that built into our pricing model.”


8:13 Jim’s background and how he co-founded Aspen Funds

14:11 Buying and selling real estate notes

18:41 Different investor profiles

21:10 What would be an ideal loan acquisition?

27:44 How the landscape changed since the crash

34:25 Business and management structure at Aspen

Recommended Resources:

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  • Looking for the ultimate guide to passive investing? Grab a copy of my latest book, The Cash Flow Investor at KevinBupp.com.
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