How would this work if I created the Note ? - Posted by Robert (NC)

Posted by Michael Morrongiello on January 25, 2002 at 24:08:00:

It looks like you may have a potential deal here. Where you need to “tweak” your thinking and deal structure is as follows:

  1. The prospective payor credit on the seller financed Note does not have to be sterling,BUT should not be very sub-standard. Look for several active open trade accounts paid as agreed, also look for credit scores around that 600 range or better…

  2. The low interest rate of 8% is TOO low on a seller financed Note to be amortized for 360 months (30 years). Don’t get me wrong, you can finance buyers are ANY rate you wish to, even ZERO interest, etc. - BUT if you goal is to convert this “paper” into a lump sum cash payout at some future point in time, then you need to boost that Note interest rate into the 10% + range…

  3. Sell your prospective buyers on the fact that there are NO points, NO application fee, NO lender junk fees, NO PMI premiums to be paid, and NO prepayment penality. - They can decide whether to stay with the seller financing your’re offering them or attempt to refinance after 12 months + to the VERY lowest interest rate they may be able to qualify for…

  4. With the right deal structure, buyer, down payment, and other important variables, there is NO reason the seller financed paper you take back cannot be sold at the SAME time your property is being sold.

To your success,
Michael Morrongiello

How would this work if I created the Note ? - Posted by Robert (NC)

Posted by Robert (NC) on January 24, 2002 at 07:43:19:

I’m new/just getting started, however I think I might have found a possible deal, but would like to know a little about how creating a note then being able to sell the note would work.

Found serious don’t wanter, the estate of a woman who recently passed away.

Sale price of home : 35k (including closing cost)
Paid from unsecured personal line of credit, so NO liens or mortgages…
Home appraises for 60K, tax value 50K

Offer to sell with owner financing to someone with ok, but not AAA credit…
10% down, 8% for 30 years

Sell price 55K: 5500 down, note for 49,500 @ 8% for 360 months. 363.21 PI payment per month

Question: How long would I need to season the note before being able to sell it ? The idea (and I know this isn’t a new idea) is to sell it as quickly as possible to pay off Line of Credit (so I can do this again) and take my profit. I’d like to make about 30K total on this deal, but don’t understand the discounting when trying to sell the note. The note would be in a first position.
What is the discount rate,rule of thumb ? Could I sell this note in the first year ? I understand that it may have to be seasoned before I can resell.

thanks for helping a newbie…