Posted by daveh on April 27, 1999 at 06:44:02:
Except remember that the note buyer is only doing 92% of the 90% first = 83% LTV. The other 10% is cash down from the retail buyer.
My experience is you need both a very motivated seller and very motivated buyer to make these type deals work. I’ve tried many with limited success.
Note flipping with high dollar houses - Posted by breeves
Posted by breeves on April 25, 1999 at 21:45:03:
Is the example below feasible? I working with “No Banks Required” in Atlanta in trying to get a note flip deal done and would appreciate any feedback on the example below.
My Purchase Price from seller 324,000
Owner/Occupant Purch Price 360,000
My offer is 90% of FMV to seller
Seller creates 90% Note 324,000
Seller sells note at closing(92%) 298,080
Buyer down payment of 10% 36,000
Cash on table 334,080
Seller’s Payoff on agreed price 324,000
My profit 9,080
Re: Note flipping with high dollar houses - Posted by James-IN
Posted by James-IN on April 28, 1999 at 11:12:33:
Breeves,
The structure of the deal looks good, but the numbers don’t. There are very few note buyers out there that will purchase such a large note. If they do, I really can’t see them paying 92%, which you may have a couple points in there for yourself :-). I have been wrong before.
You may want to try to target homes in the $120K to $265K range. Several reasons why:
More note buyers in this range that will buy a 90% LTV first position note between 90-100% ITV. Buyer needs to be a good credit risk…no flakes.
In this range, buyers have fewer mortgage options. FHA, down-payment assist,MieMia, and other “low or no down” conforming programs are not available.
Properties tend to have more equity and are located in nicer neighborhoods.
Buyers in this price range expect to put down 5-20% and have the ability to do so. Better jobs, income, 401ks, relatives, etc.
Homes in this range (in my area) stay on the market longer. “Seller Financing” just may be the trick to sell these homes.
Low volume. Yes, there are fewer homes and buyers, but the payoff on these deals are hugh. I really like going after spec homes. After a couple years, the builder brings out a new model, making their other spec homes “obsolete.” Perfect for a flip.
These are just a few reason why I like to stay in the higher end (not the hightest) of the market.
So, I would say you are on the right track. I would, however, suggest focusing your marketing for the buyer rather than the property. There are a lot of buyers in need of a “stated income, no doc” loan. Strippers, business men, commission sales, drug dealers, etc. have the cash but don’t want to tell you how they acquire it.
Simultaneous closings and creative notes are one of the best ways to help these customers. Worst thing that can happen is that you do a “seller assist” instead of a flip. Go after the buyers.
James-IN
PS Atlanta is a different market, so my suggestions may not work
Re: Note flipping with high dollar houses - Posted by Bud Branstetter
Posted by Bud Branstetter on April 27, 1999 at 09:14:33:
If you can find a buyer for the house that has a FICO of at least 681 you can do 95% LTV at 9.65%, no prepay, no ratios, no verifying income. But if they have that score they could get a standard mortgage near 7%. What is your buyer’s FICO.
Except that most… - Posted by David Alexander
Posted by David Alexander on April 27, 1999 at 24:15:58:
Note Buyers will only go into a at 80%, not 90%.
If these people do your dealing with do, then email me details. I’d like to use em’ quick before they quit doing it.
David Alexander
Re: Note flipping with high dollar houses - Posted by Lynn (AL)
Posted by Lynn (AL) on April 26, 1999 at 19:47:51:
I think it’s Bruce, right?
Based on the information given, your numbers look good.
Have you been approved for a 90% note thru them? They will buy a note somewhere between 80-90% LTV, depending on your credit.
Let us know how it turns out.
Lynn (AL)
Re: Note flipping with high dollar houses - Posted by James-IN
Posted by James-IN on April 28, 1999 at 10:22:39:
Bud,
What conforming lender will do a 95% LTV “Stated Income, No Doc” Loan at 7%?
I use to work for a large conforming lender and their “Stated Income/No Doc” program was 75% LTV at 9%. FICO/Beacon 680+.
In addition, there are few note buyers in the $300K+ range on residential properties. I have heard that these large notes take a very hefty discount.
Respectively,
James-IN