You should technically tie the note up first with an option. Then approach the payor and find out his situation. What can he afford? Can he afford the extra monthly above his normal payment? Can he maybe pay you some extra cash now in exchange for extinguishing the balloon? What is his credit like, can he refinance all or part of it?
If he could do this, now or in the future, Would he consider doing this now or in the future?
Know your exit your exit before buying. Make sure the yield you buy at is what you want, pryor to restructuring.
Let us say that I have found a note. It is for $10,000 at 9% with payments of 75 a month and a balloon after 60 months. There are 58 payments remaining. The seller and I have agreed to buy/sell for $5,731.85. I wish to keep this note for my own portfolio.
If I understand correctly I will need to get an appraisal, title insurance and/or abstract and to have the paperwork handled by an escrow company. Is there anything else I will need?
After I have purchased the note I approach the payor and he agrees to rewrite the note as $10,000 at 8% with payments of $148.12 monthly. This should increase my yield to 26.7% and eliminate the balloon payment. What paperwork needs to be done to complete this change? Thanks for the info.
I just finished reading “How to start a Profitable Discount Note Business” by Jonathan Richards. I was disappointed. It didn’t teach me anything I didn’t already know or couldn’t have figured out with a good 5-10 seconds thought. I need something more advanced. Any suggestions?