Note Creation Question - need creative ideas - Posted by Yacht Sailor

Posted by JWood on September 28, 2004 at 17:32:21:

Yacht Sailor,
First let me tell you that in order to answer your question I had to make a few assumptions. #1- The $85k you are paying is cash from your pocket, #2- The property is owned out right, free and clear of encumbrances, #3- You will not be placing financing on the property other than the notes you will carry for your buyer.
Having said that, here is what you might be able to do. If you are carrying a loan of $90k at 8%, your payments will be approx $660 per month. At the end of 7 years (84 months,) your balloon will be roughly $83,229. Since you don’t have any debt service to pay, you have some room for maneuvering here. You may want to split your single loan into two loans, or even three loans and sell the second place loan to an investor to raise the cash you need.
Here’s how that would work. Instead of creating one loan for $90k, create three loans for $30k each, with your desired interest of 8%. That would give you a second place loan at a total of 60%ltv (for the second place position, 90% for the third which won’t sell,) with monthly payments of $220 per month, and a balloon of $27743 after 7 years. That gives you 84 payments of $220 that you could sell to somebody. You could offer those payments for $6000 at a yield greater than 40%. And, you would still collect $440 per month on the other two loans, plus you would still collect your balloon payment in full (because you didn’t sell the balloon, just the payments) at the end of seven years.
This is just my two cents, though.
Good luck and good investing,
JeWood in Cali.

Note Creation Question - need creative ideas - Posted by Yacht Sailor

Posted by Yacht Sailor on September 20, 2004 at 09:15:08:

Hello all,

I recently got the not bug as
some of you already know.

I have been working the numbers
to see if I can use the creation
of notes to facilitate some of
my deals.

The following is an actual deal
but I share it more for educational
purposes (mine) than anything else.

Here’s the deal:

Multi-Unit building valued at about

Seller wants 85k cash to exit.

I will flip it to a buyer by
creating a note in the amount
90% of the full appraised value.

The buyer will come in with either
5% down with me carrying 5%, or he will
come in with the full 10% down.

The buyer has a 620 score and the
note will have an 8% interest rate
amortized over 30 with a balloon
in 7. (these numbers could be
adjusted to make the note more
desirable. all suggestions are
appreciated here.)

Okay, is there a way to structure
this deal so that the closing costs
of around 4k come out of this deal?

I have run the numbers over and over
and can’t seem to find the 4k in the

Does anyone see some creative ways to
use notes to make this deal happen?

Trying to get it done within a few
weeks from today.

Thanks for all your wisdom. What I’m
looking to do here is learn some
different ways to use notes to facilitate
deals like this one.

Fair Winds and Following Seas

Yacht Sailor