Posted by Ronald * Starr(in No CA) on July 24, 2003 at 22:11:27:
You ask: “If I buy out the 2nd’s position do I also have to pursue the 1st mortgage holder’s position?” No, you just have to pay on the first to prevent them from going ahead with their foreclosure. Similar when you own the property, should you buy on the second loan.
You might try to buy out the third’s position for a steep, steep discount, as that is a threatened junior. Threatened with getting nothing if the sale of the second takes place. If you get the third, then you could bring the other two current, demand repayment, and if not forthcoming, start your own foreclosure. Good things only can happen to you: The owner starts paying and you have a current loan to sell for closer to face value, you buy at the sale and end up with the property at a bargain price, somebody else buys at your auction and you get paid the face amount of the loan you bought at a discount.
However, I feel that this approach to investing is really much better for sophisticated investors, not beginners. And people who have lots of cash or immediate access to it via lines of credit. It is not to be done on a shoestring, in my opinion.
Good InvestingRon Starr***