Posted by John Behle on October 26, 1998 at 14:40:39:
I had to read your post a couple times, so I may need more details, but if I understand what your questions are, here’s the answer.
Investor A wants the property. If he can get it at 70% FMV, he can create a note and sell it. If he needs the full 70%, he might need to create a note in the 80% LTV range.
So, “A” is looking at a 100k property for 70K. He makes the seller an offer for 80K with nothing down and the following terms. 30 year amortization, 9% interest with a 5 year call (balloon). The monthly payment would be $643.70.
A note buyer buying this note for 70k would get a 12.43% return.
Many note buyers do not do these types of deals. Many will. If it were in Utah, I’d write you a check tomorrow. Your first step in doing these type of deals would be to find an existing note buyer or create one.
See the posting on “Equity Arbitrage” or in your videos that should be there in a couple days. It is discussed in detail in the section on “Financing Paper”.
So, Investor A gets the property. The seller gets his cash. Investor B gets the note and a decent yield, which funds might come from his borrowing against equities as low as 7-8% interest.