Marketing 2nd Lien - Posted by Bob-Tx

Real Estate Investing
1

Posted by daveh on March 29, 1999 at 09:44:20:

I agree with David. That second will have little value. Hang on to it for a year then offer a small discount to the buyer to cash you out or refi the entire property and cash you out.

2

Marketing 2nd Lien - Posted by Bob-Tx

Posted by Bob-Tx on March 28, 1999 at 20:47:03:

We are in the process of selling one of our rehabs wherein
buyer will get 80% financing from third party lender, put up 5% as down pmt. and we will carry a 15% second in amount of $7050. My intent is to create a note at 11% with a term of 5 yrs. I will want to sell this note as soon as it makes economical sense.
Questions:

  1. what return can I expect selling this note with 3 months seasoning?
  2. how much does that return improve with 1 yr. seasoning?
  3. is a 5 yr. term as attractive to note buyers as a 10 or 15 yr. term?

Thanks for your help.
Bob

3

Re: Marketing 2nd Lien - Posted by Bud Branstetter

Posted by Bud Branstetter on March 29, 1999 at 12:10:24:

Bob,

Not sure what your objective is but here is another thought. Create a second and a third. There are buyers out there that will go up to 90% of appraised value. With 3 mo seasoning much less value. much better with atleast 9 mo. Broker directly to the buyers and the return will be much less than 22%. Some of the guidelines call for 1% premium on seconds. While the 5Yr balloon numerically adds some value, it can cause more problems on the second than it is worth. A graduated payment or interest would be just as effective. I would also bet that you can find someone that you can trade it into equity before you get it aged.

4

Re: Marketing 2nd Lien - Posted by Jeffrey G. Branyan

Posted by Jeffrey G. Branyan on March 29, 1999 at 10:07:46:

With A+ Credit, 5% down, and 6 mos. seasoning we require about 22% return. This equates to about .65-.70 cents/$. If interested, give me a call at 972-985-8928 or fax me at 972-985-7829.

5

Re: Marketing 2nd Lien - Posted by David Alexander

Posted by David Alexander on March 29, 1999 at 24:14:40:

Seconds, about .30-50 on the dollar, above that 80% mark, when selling to experienced investors. Why not keep it, so you have a hook in the property. Or you could look for private money to borrow against it.

David Alexander