Flip advice needed please. - Posted by KevinMiami

Posted by Steve H. on March 06, 1999 at 13:14:38:

I would talk to someone who purchases 2nd mortgage notes at a discount. You probably won’t get very much. Especially on a 2nd mortgage note. You may not be able to make anywhere near what you think. Check it out first. There are alot of buyers out there. Don’t take the first deal you think will work.


Steve H.

Flip advice needed please. - Posted by KevinMiami

Posted by KevinMiami on March 06, 1999 at 01:35:33:

I’m sure that this topic has been well discussed in this newsgroup before, but I would appreciate some feed back, so here goes. I’ve spoken to a pre-foreclosure seller who wants $85,000 (owes $75,000) for a SFH with a FMV of $115,000.I have a buyer who says he’s pre-approved up to $95,000 as long as he’s got 20% down, but he doesn’t. He’s willing to pay FMV if he can get a second mortgage. I told him that I might be able to get that for him, even though I haven’t told him that I would be the one writing the note. He’s willing to pay

  • 10% on a note of $19,550 for 10 years ($3450/3% down).
  • 12% on a note of $23,000 for 10 years (nothing down).

for the second mortgage and get $92,000 from his first mortgage. The way I figure it I can probably sell the note and walk away with about $35,000 CASH after all expenses. Am I doing anything wrong/risky/illegal/dumb here. Any advice would be appreciated.

Re: Flip advice needed please. - Posted by r.porter

Posted by r.porter on March 06, 1999 at 19:29:10:

FMV of $115k x 80% LTV loan = $92K - $85K to seller =$7K. After +/- $2K of closing costs, you’ll end up with about $5k cash at closing(assuming that the buyer needs the $3450 for his own closing costs, pre-paids, etc and you write the entire $23K as a second) and an unseasoned second mortgage on the property that has little or no value to a notebuyer.
However, if you hold on the the mortgage and get the buyer to refinance in a couple of years when he can qualify for a higher LTV loan, you can get paid off on your second and make some more money.
On the whole, this looks like a marginal deal.