Considering getting a prospective buyer into my home, and then selling the note. Not sure if I really want to worry about foreclosing and things of that nature. Think its a go, or should I wait a little and sell? Any and all suggestions are welcome! Also, would take suggestions on who normally buys at a good rate.
In years past, I have used institutions to quote an offer on a deal that I was structuring so that I could cash out…in fact I’ve done many double closings this way…contract to buy, contract to sell, contract to sell note, double closing, walk away with cash.
Often times, I would sell year 2 through 15 of the 30 year mortgage I gave to the buyer so that I could keep the down payment, the first 12 payments, and then keep my back 15 years of the 30 year note, which grows in value each year that passes, not to mention if there is a default, the mortgage buyer would be required to offer me FIRST right of refusal on buying them out of the default…which has happened and offers additional opportunities for a new profit in the transaction.
It is likely that most of those resources are difficult to find these days due to many issues related to the markets being manipulated back around 2008. If you find one, the underwriting guidelines might be a bit more strict and would likely reduce your profit margins in the deal.
What I have found to work the best is to find private money…more specifically through qualified retirement plans such as self directed IRA’s and the like. There are some 7 Trillion Dollars sitting in plans and if you have a decent offer of yield along with security of a mortgage (or in a mobile home transaction, security with the title), then it is likely you can get your funding.
Do the math, however, and think about only selling a partial…when you calculate your discount to sell all 30 years of a note vs. 15 years and keeping the back…you might find the difference is only a few thousand dollars. I’d rather have the back payments growing up for later years plus a first right of refusal in the event of a default giving you additional opportunities for profit.
In fact, my most recent experience on this was a mobile home and land package which I sold with owner financing and presold years 2 through 15 to a note buyer who was a national company investing pension funds for insurance companies. They purchased those years of the note for more than my costs, I got the down payment, the first 12 payments, and then the note payments were kept by the note buyer company.
About 8 years later, I got a call from the mortgage company that the buyers defaulted and offered me the property back for the balance due, as I had an equity interest by still owning years 16 through 30. They offered it to me for $20k. After inspecting the property, I said yes and offered to close within 30 days.
I put an ad in the paper as a handy man special at $29900 and put the address in the ad…the day the ad came out, I had a family call me and offer me a $5000 deposit to hold the house for them. WE closed within the 30 days and I received the balance of my $9900 and the $20k went to the note buyer. I paid for the closing costs and the deal was finally done with my interests.
You can do the same with private money…use your calculator and see what works best and then find the money by offering a good secured yield to someone with a self directed IRA…you will be surprised how many people will write a check quickly out of their IRA yet they will not with personal funds.
Hope this helps.
Rob, Pretty interesting info you posted. Thanks. It’s always a pleasure to see creative financing at work.
Young in Ca. Personally, I feel it is best to sell properties using notes. I am a note broker who is direct to the note buyer(s). The people who I use will require 2-3 months seasoning before they buy. Purchase prices based on buyers credit scores. I also found a transactional funder who is willing to come in a deal as long as the end note buyer sees the contract for the purchase of the note and a POF.