Is there a general rule of thumb regarding what note buyers want & offer?
In other words if I am going to set up an OWC with the intention of selling the note… I know they prefer seasoned notes & 10-20% down but
what interest rate do they want? is 1 % over the local or nat av appropriate or too low?
prefer interest only?
what is the general or avarage% they pay
example: if I just sold a prop with 20% down 20 yr ammorit. balloon in 5 yrs what percent of the principle bal. would they generally give?
This question may be to ‘general’ & I have tried contacting note buyers & searched online but no luck with an answer so far.
The reason you aren’t having luck looking for a stock answer is because there is not one. Each note purchase is its own creature. Why? Well the risk involved in the purchase will determine the discount one the note.
The greater the risk, the steeper the discount.
So, what creates risk?
[]A new note with no seasoning.
[]Bad Payer, or bad credit payer
[]Jumbo sized note (even conventional lenders don’t like jumbos or high CLTVs)
[]Little equity in property
Remember that note buyers are in business as well. So if they are looking for a certain return on their investment to be returned over time. Meaning they will give you a lump of their cash that they can not use during the time the loan is out there. So getting their money back to them faster to turn and do more deals helps them
Obviously this would mean creating a shorter term, a nicer balloon, oh and a nicer rate of return IE interest rate. Set it at 5% interest and expect a heavy discount.
As you can see there are a ton of factors that go into the underwriting decision necessary to price a note sale. I know that when I got into buying notes it used to take me days to determine what returns I would like. Then I got burned by bad choices as I didn’t take everything into account. So now I have learned.
Sorry that I couldn’t provide a set answer, but hope this gave you some insight!