advice on possible note purchase - Posted by Natalie-VA
Posted by Natalie-VA on June 28, 2007 at 06:54:35:
I’m very experienced in real estate investing and have zero experience in notes. The opportunity for passive income intrigues me.
Here’s the deal. I have someone who wants to sell me a note. I think it’s actually a mechanic’s lien that’s already been enforced. I would have an attorney review it and do an escrow for me if I decide to buy. The attorney I’m thinking of specializes in real estate, collections and foreclosure.
The note is for $27,000. The rate is 17% for eight years. The monthly payment is around $516. The note holder is not interested in selling at a discount. The collateral is local to me and worth around 175k. It should pull around 105k-115k at a foreclosure auction. The payments are current and started around 5 months ago. I’m being told that it is in first position in front of a reverse mortgage and that I can foreclose if she doesn’t pay. My attorney will verify that for me.
This sounds like a good deal to me, even without the discount. Does anyone agree?
I feel that I’m protected by the collateral, but if she defaults and I foreclose, I am out the $900 finder’s fee I’m paying, plus around $500-1000 in attorney’s fees.
Is there another way to minimize my risk and still give the note holder what they want – maybe buying some of his payment stream? How would this work?
Thanks for any thoughts on this.