Mortgage in a country area - a good deal? - Posted by Durand

Posted by Ed Copp (OH) on May 01, 2000 at 08:48:31:

Something here is not coming together, in my mind. First you mention a value of 200K and a purchase price of 138K. I think that the 200K “value” probably is not real, rather the opinion of the seller. Now I reserve the right to be incorrect, since I have no idea about the market you are in. I do not know where you are.
It is my opinion that if there is over 60K in equity going in that you should not be asked to put another 60K into the deal. I mean the seller will come out fine, cash heavy, and no more management problems, but what is in it for you?
As a footnote, there are places in this country where a population of 6,000 is considered to be a “big town”, and over 50 (age) is just considered mature. Anyway if it were my deal I would look long and hard before I put 60K into it. If you like the deal there should be some way to refinance, and not put so much cash into it…ED

Mortgage in a country area - a good deal? - Posted by Durand

Posted by Durand on May 01, 2000 at 07:56:25:

An opportunity has presented itself to me to buy a 5 houses worth $200,000 in total for $138,000. Or rather, I wouldn’t be buying the houses themselves in four cases, just the mortgages on the houses. (4 are owner occupied, and one is a renter). The guy is desperate to sell because one of his investors has got sick and needs the money for operations etc. I’d put up $60,000 in cash, borrow the rest, and get $25,000 per year if all the payments were made on time. (The existing loans are linked to the normal borrowing rates to be 4% higher than what I could borrow for).

However, the properties are in the country, about 3 hours drive from where I live. Three of them are in a small country town of 6,000 people with an ageing population (average age around 50), and two of them are in towns of 1,500 people, so I figure that if anyone can’t pay for whatever reason, I don’t know if I’d be able to sell it to anyone else. (At least not for a long time).

I have no idea what to do to assess if the properties are worth the risk. I read about this thing when the owner of the mortgages put an ad in the paper. I think I was the only one to respond. I really don’t want to have on my tombstone “He who hesitates is lunch”, but I don’t want to lose all my money either, and I haven’t done this before. Help!

Re: purchase mortgages via an assignment - Posted by NJDave

Posted by NJDave on May 01, 2000 at 09:37:51:

You are not buying real estate, just mortgages that secure loans. You should determine the creditworthiness of the mortgagor(s), and the value of the real estate. Ask to see the origination appraisals, and if more than 6 months old, call the appraiser and ask to have the appraisals updated.

A hard money lender I know requires at least one appraisal, sometime two PLUS a comprehensive field inspection before he makes loans at 65% LTV. He gets up front points, and has his attorney’s fees paid by the Borrower(s). He makes certain that the premises’ plumbing, electrical etc. are in marketable condition. If not, he passes.

If the numbers are as you say, your LTV will be 70%.

My advice? Do your homework. Be suspect.