Kent 's Real Estate
They say they will take $80K right off the bat for the mortgage note. Makes me wonder what the value is if they will take such a discount right up front.
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WHY WOULD A NOTE SELLER ACCEPT SUCH A LARGE DISCOUNT???
Me too but I figure they're just very motivated sellers for whatever reason. And as you've read in the Notes101 course material, I don't pursue the reason a note seller is selling the note.
If I do, the buying decision can get emotional and I always seem to lose on emotional decisions. My quotes are based on market value of the note. I stick to the type of collateral, the amount equity behind my note purchase and, if I really want to own that property type should the payor default.
Here in Springs, if that townhome went to foreclosure sale at the public trustee office at $.50 on the dollar (80k) and my research showed I could sell it for 110 K wholesale, I would buy the townhome if the collateral and terms into my comfort level.
Then, flip it to a wholesaler for a $5,000 to $15,000 profit. All the while trying to sell it to a retail buyer for a much larger profit.
ADD FORECLOSURE AND HOLDING COST OF INVESTMENT CAPITAL
Knowing that this is a mortgage note purchase and not a foreclosure sale purchase, you need to add the cost of foreclosure and holding cost of your investment capital should the note go upside down.
Let's say I calculate cost of foreclosure at 5K and more importantly, the time to get the public trustee deed after trustee sale is a 100 day redemption period. I still might by that note assuming I could cover the extra expense and time of foreclosure (approximately $10,000) selling a property wholesale at a profit of 15 to 20,000 or keep it as a rental, assuming there's positive cash flow.
Keeping it as a rental I would not want to keep $90,000 cash in the property as it would tie up so much of my funds for future deals. Here I would try to bring in a private real estate IRA investor at let's say, 6% to the IRA as a lender in first position to recover my 70k to 90k.
Real estate IRA investor would do much better than current CD rate of return and it would leave the real estate IRA at about a 70% loan to value ratio (safety for them) and loan payments for positive cash on a rental basis.
NOTES ARE A GREAT TOOL TO EXPAND YOUR PORTFOLIO
This is a good example how buying discounted notes can lead to owning real estate giving you the opportunity to expand your portfolio and man, the scenarios could go on and on from there the reason I love this business.
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Posted in Home Improvement Post Date 04/20/2018