Posted by Marc Faulkner on September 22, 2011 at 07:25:01:
You are smart to look at buying a note and buying the property as two completely different things. Notes are priced with several factors in mind.
What is the current balance of the note?
How much equity does the borrower have?
How much seasoning?
Credit of the borrower/payer?
Area of the country the security is located in and current market conditions there.
Yield potential based on the way the note is structured.
These are just a few of the considerations. These types of notes are always discounted in the secondary market. You will want to consider the above factors, look at the real property value and determine how much you invest. Based on the bad credit and the fact they have been late, I would not want to spend any more than 60% of what the property will appraise for, when buying the note. I would then look at the yield using these numbers and make sure that is acceptable for risk involved.
Posted by Dee-Texas on September 19, 2011 at 21:48:25:
I’ve been an investor for about 9 years I have rentals, done rehabs and
flipped and rehabbed and held…but I’ve never bought a note.
I had a women offer two properties. One is now a rental with a years
lease the other is sold on a contract for deed which has been recorded (
sold one year ago) Both of these properties have underlying mortgages.
Seller is moving from the area and wants to sell. Properties would make
good additions to my rental portfolio.
Title company says rental is no problem but the contract for deed property
sell will be selling the note only.
How much do you offer on a note. They are asking 40k for the “property-
note”…that price is close to retail for the property, which i wouldnt pay that
if it were a regular property deal.
The one year owner doesn’t have good credit and has only paid payments
for one year and was late once. Can someone give me an idea of what I
need to ask, offer or any words of wisdom.
Thanks so much for your time.