I get asked this all the time so I thought I would post this right on the site to make it easy. I just sent this email out and thought you know I bet if I post this on reiclub then I wont get these emails.
Lets say 200k house for easy numbers.
First $160,000
Second $40,000
You buy the second for $1,000 and the first for $120,000
Here is how it looks after closing. End buyer gets the property for $200,000.00
They get a first for $160,000 that puts $39,000 minus closing costs into your pocket. You carry a second for $40,000 at 10.99% they pay you $351 a month for 30 years (360 months) So you take $351.00 Subtract $15.00 (The cost to have someone else service the note for you) So now take 336.00 a month times 360 months (30 Years) $120,960 that you get paid on that note over the course of 30 years. Or lets say the REFI there house after 24 months (2 Years) After two years they have paid you.
$8,987.54 $271.87 $39,259.19
So you have made almost another $8k and they still owe you $39,259.19.
Here is a RECAP!
You made $39,000 at closing and another $8,987.54 in Interest that they have paid and you still make $39,259.19 if they REFI in two years. Here is something else really cool to think about. After 10 years at $3,500 per year you made $35,000 off Interest and they still owe you ARE YOU READY??? $31,665 So by doing it this way you make 3 times the money! And you create a INCOME that pays you if you work or if you don’t!
Can you go into the actual process of carrying a note? This is something I havent spent any time studying. What is required, what sort of process is there to financing the second note?
Thanks for the write up man
What is the beginning process of purchasing notes?
ie/
What department of the bank do I call?
What do I say when I call up? Hi my name is Ryan from and I purchase notes in default???
Do I need any sort of license to do this? I was told once that if you purchase (I believe) 6 notes you need some sort of license.
When you purchase the first for $120k, do you need to come up with the funds? If so, are you using hard money?
No Ryan you asked great questions I will try and answer them later in order to do that it will take a couple of hours… I will get back to this later if I get time today.
Doubtful. These are his favorite exit strategies when questioned…“will get back to it later”, “it’s late, i shouldn’t be writing anymore”, “i got to make this short, it’s dinner time”.
I’ve googled all over the web and can’t seem to find an answer to this one…
Do I need a license to buy the note? I’m in PA. I emailed my attorney this morning about structuring my deals this way and this was his response:
the problem that can arise when purchasing residential notes is
that you must be a licensed mortgage servicer if you intend to collect
from the homeowner (which may or may not include the act of
foreclosing). As a practical matter, if you are getting a deed anyway,
there is no need to structure it as a note purchase. Take the deed at
that time you pay the short sale payoff, and you have the same result.
Comments from anyone? Also, has anyone had success buying a note from Wells? Their liquidation dept said they did not think I could buy the note and that I’d have to contact their legal dept. Hmmm
Here is the problem u are going to run into based on the original posting. No first lien lender is going to allow 100% CLTV. So you can forget about that second lien for 40k. If you are going to get into the REI business it would probably be a good idea to spend some time learning what types of funding are available for your end buyers otherwise you could easily end up with customers that will not be able to qualify.
it is almost the same process as contacting the lender on the first lien of the short sale. All that the original poster is doing is quoting from some book or website that he found. In fact as I said in my previous posting the scenario he/she is describing is not even possible anymore because NO ONE allows 80/20’s anymore. The max CLTV allowed is 95%.
buying notes is something i’ve been looking into. i’m actually going to a conference in vegas to learn more. i’ll share some feedback if this is covered.
perhaps. it’s the notebuyingprofits with dean engle. you can find more info on their web site. let me know if you attend. if not, but you would like to meet up for some networking shoot me a PM.
