What is a typical discount on notes?

General Real Estate Investing
1

I’m a builder looking into doing some owner financing of homes for my customers. I can afford to hold the notes for a while but I expect to eventually run out of capital. What kind of discount can I expect if I hold the notes 6 mos. to 1 year?

2

  1. this is hard to say as each is very differant >>>> it would set on basicly three things if you hold them a while

  2. downpayment 2) pay record 3) payers credit

3

I know that the answer is always, “it depends”. Can you give me a typical range?

If my customers can get refinanced would that always be better than my selling the note?

4

A refi would be better if you are getting paid in full. I know Countrywide buys notes, but I don’t know how or what. Talk with them.

Why do you want to hold notes anyway?

5

Thanks for the tips guys. I hold land notes now because of the income, but I’d only hold these notes on homes so that I could eventually have them discounted less when I do sell.

6
  1. you sell your notes when you want to >>>> there your notes they can be sold any time from the day they are made to when ever you want to sell
7

Theres a website called wannanetwork. I know a few people on there buy notes, maybe they would have some answers.

8

jharris,

While the same answers is “depends” here is a list of what you need to do in order to make a note worthwhile on the note market and what a note investor will want. Note investors look at these deals much like banks. They like nice credit scores, DP, low DTI’s, low LTV’s, etc. Anyways read below.

1.Sales Price
2.Appraised Value (current appraisal)
3.Description of property (square ft, updates, bedrooms, bathrooms,
acreage, area of town its in)
4.Loan Application 1003 (Must be filled out as detailed as possible)
5.What’s the downpayment? At least 5% required (10% would be great)
6.What discount will the noteholder take to get the deal done (Hopefully in the 85-95 cents range)
7.Payors Credit (At least 575 or higher would be nice)
8.Interest Rate agreed upon (At least 8% is required, anything over that is superb)

Again this is a general rule of thumb so if someone blasts me on this form you have my disclaimer :wink:

Nate-WI