Best way to structure the deal - Posted by Ken

Posted by David Alexander on March 14, 2000 at 10:27:20:

First step is to ask her. You need to be asking enough questions to find out what she really wants, and what she really needs.

Get her talking and you’ll be surprised at the things you learn. And ask some questions like below.

What are your plans to do with the money?

If I could make you a loan against the note how much would you need?

If the payor is paying perfectly why do you want to sell?

David Alexander

Best way to structure the deal - Posted by Ken

Posted by Ken on March 14, 2000 at 09:16:25:

I have a lady that called on my recent ad, “I buy houses and mortgages”.

Collateral: Mixed use property (gift shop for 20 years)
Value: $250,000
Note: 1st $165,000 (only financing on the property)
Interest: 7.5%
Term: 20 Years (no balloon)
Month Pymt: $1,329.22
First Pymt: 4/1/93
Next pymt due: 4/1/00 (never been late, AA Credit)
Remaining pymts: 162
Remaining Balance: $135,165

Sellers Situation: 66 years old, took back the note when she sold the business. Does not need the money, but is tired of collecting payments. She wants to know what I’ll offer her for the note cash today.

I would like to yeild a min 24%. In order to do that I would have to offer her $63,773 for her $135,165 note. I understand time value of money, but that sure sounds like a steep discount.

Any recommendations on a better way to approach the seller or perhaps a better way to structure this deal?

Thanks in advance for any help!!!

There is NO best way… - Posted by Michael Morrongiello

Posted by Michael Morrongiello on March 14, 2000 at 23:28:57:

You are correct offering her $63K of her $135K balance is like hittng her over the head with a lead pipe.

You need to counsel with her to find out whether or not she is in sufficient “PAIN” to move away from the status quo; which is the future collection of her payments to a discounted cash amount. If you are able to focus on her REAL cash NEEDS not wants then the possiblity of a creative note purchase transaction opens up.

There are at least 23 different ways to purchase an income stream. She very well may be able to get a lump sum of CASH now and STILL continue to collect some monthly income (a program I am all to willing to make happen).

Keep Probing,Picking, and Peeling back layers of the onion to find out her true needs here.

Michael Morrongiello

Another way you can present it to her is… - Posted by DanM(OR)

Posted by DanM(OR) on March 14, 2000 at 11:40:07:

to offer to buy a partial. Say you’ll buy half the note for a value equal to your 24% yield. Tell her you’ll buy the other half at that time also, if she wants to sell that half to.

You can sometimes take the edge off the discount by offering say $XXX for half & you get to keep $XXX at which time I’ll pay $XXX for that half to.

How about getting an option for $10 to buy at $xxx and then going to the payors to see if they would be interested in Sean’s offer. How about a trip to Hawaii?

David’s right to, it sounds like you need to listen a little more the next time you speak with her.

Best of luck to you.

Dan Matejsek

What’s the problem? - Posted by Sean

Posted by Sean on March 14, 2000 at 11:32:24:

Why not offer her say $115,000 for the note and immediately turn to the payor and tell him if he’ll refinance you’ll cut $10,000 off of what he owes.

She’s happy. You make $10,000. The payor makes $10,000.