Re: Selling my note - how does it work? - Posted by Tim (Atlanta)
Posted by Tim (Atlanta) on May 25, 2000 at 13:10:34:
I can only speak for myself, other investors or companies will do things differently.
For #1, I don’t care what interest you charge. I used the 12.75% in the example because it is the Lonnie standard. I believe that Lonnie mentions the zero interest idea in his book. It seems to get peoples attention. You understand that with no interest, a whole note buyer will give you much less, since the payments are lower. I would also pay less for the partial, since the payments would be lower. In our example of financing $16500 over 5 years, the payment would be $275.00 per month instead of $373.32. If you halve the 275, you get $137.50 for 60 months, and using the 35%, I would pay $3874.30 for that. Makes a pretty big difference doesn’t it?
For #2, I normally don’t buy partials for the whole term of the note for any note over 5 years. That doesn’t mean that I won’t buy a partial on the note, I would just want to front-load the payments. That is, I would take the first X number of payments entirely, instead of splitting the payments over the whole term.
For #3, the risk is the main reason I charge 35%. I am counting on the integrity of the MH investor, not entirely on the MH buyer. I have been burnt once or twice, but that doesn’t happen often. The risk is the main reason that larger finance companies won’t do these type of deals.
For #4, your credit and the buyers credit are both looked at, but I don’t worry too much about credit.
For #5, new notes are practically all I buy. If your note is seasoned for 6 months or a year, I would recommend that you sell it to a finance company. They would pay you much more for a seasoned note.
For #6, you will be collecting payments from the MH buyer just like always. You and I would have an agreement called an Assignment of Partial Interest. This agreement looks just like Lonnie’s note. It specifies how much per month you are to pay. You make the payments to me. I normally place a lien on the MH to protect my interest.