How to create a note to buy REO's? - Posted by Jim IL

Posted by Jim IL on March 14, 1999 at 24:39:39:

John and/or anyone with knowledge of “note Creation”,

First, Thanks John!, for the GREAT presentation at the convention. I was frankly lost much of the time, but my wife followed you along rather well, and your presentation is what “hooked” her and brought her on board our REI business.(she works at a bank and understands your language) She is now a participatory partner, not just my somewhat supportive spouse.
We returned ready to fire up our business and make some deals!

Now, onto my question:
I have read J.P.'s article on creating notes to buy properties and would like to do this.
I understand that my purchase price needs to be low,(ie: $60k or less for a $100k home)
I would like to buy the homes with No money of my own into them and use the proceeds of the note sale (which will happen at close?) to buy them.
I also understand that the note will probably be purchased at a discount.
How exactly does this break down? ( a ballpark example would help.)

I have an idea in my head, but am not sure if it is accurate?

Does this work like this:
Home value: $100k
My purchase price $60k
Note for: $75k? (what kind of numbers work best here)
Sell the $75k note at discount giving me enough cash to close on the home, and maybe some cash out of it.
(and of course, include a high enough interest rate, and some “prepaid” payments ((which can come from the proceeds of selling the note?)) on the note for “seasoning”)

And lastly, where do I find the forms for my state to actually create the note? ( I am in Illinois)

Can the “payee” on the note be me? (until we sell the home and someone else assumes the note payments) and how does my credit rating effect it? (it is not good, so I’d like the LTV to be the MAJOR factor)

I currently have several properties sighted that will work for this, IF I can figure out “how” to do it. (The actual mechanics of “Note Creation” and “selling the note at close”.)

And of course, after we have the properties, we can then re-sell them “owner financed”. We currently have several pending offers on REO’s that are ideal candidates for this, and more being submitted.

Any guidance would be most appreciated,
Jim IL.