Posted by doug,KY on April 11, 2000 at 15:11:04:
Thank you for responding. I’ll talk to him about using this method and let you know how it works.
Thanks
Doug,KY
Assigning payments on a note - Posted by Doug,KY
Posted by Doug,KY on April 11, 2000 at 13:04:48:
An investor sold a home for $160,000. The first was assumable and the investor took a second for $55,000 with 10% down. The payments are $482.66 per month.
Now, the investor now wants $10,000 in cash and is willing to assign the payments to me for 3 years. I calculated the ROI to be around 40%. I’m going to keep this one, but my question is what happens if the homeowner refinaces during this 3 years?
Doug,KY
The Compensating Note technique - Posted by John Behle
Posted by John Behle on April 11, 2000 at 14:16:24:
The way I would do it is to use the “Compensating Note” technique. I would buy the whole note and give the note seller his 10k cash and then a note that mirrors the portion that I don’t buy.
Ideally secure that note with another property or note and if the note you buy pays off early, you get the windfall profit and do not have to pay off the note you created early. You then put the money to work - including the “windfall discount” that you received.
This is also an easier scenario than explaining some complicated contract and deals with the potentiality of a default also. It’s better all the way around. The “contractual partial” just doesn’t have the advantages, but is what almost everyone out there uses - because they don’t know an alternative. There’s some more info in an article here about partials. It’s at: