Re: Note flipping with high dollar houses - Posted by James-IN
Posted by James-IN on April 28, 1999 at 11:12:33:
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.
PS Atlanta is a different market, so my suggestions may not work