Tagged: seller financing
Joe SchmittParticipantNovember 5, 2018 at 11:44 amPost count: 74
I think there are a fair number of sellers out there who would gladly sell their property for a low price or just GIVE the property to you for a promise of future cash flow. Some of them lack the sophistication or time to set up a terms deal. For whatever reason, it would just be easier for them to let someone else do it.
Does anyone ever work with sellers to sell or re-sell their property on terms, service the debt, and split the proceeds with the seller? If so, what did the contract look like? What kind of split did you do? Who held the deed?Modern Asset ManagementParticipantNovember 5, 2018 at 9:58 pmPost count: 11
Joe – We’re new to the group. But we are here to help with exactly this. Our primary business is buying notes and originating loans. We have an application portal that we hope land investor/sellers can use to qualify their borrowers. Typically we buy part of loans. For example if you have a 120 month loan, we’ll buy 1/3 (40 payments) for 1/3 of the loan principal. That way you, the seller, gets to retain the remaining 80 payments for future income. Typically the net invested is around 1/3, so you get to roll your cash over into another deal. There’s many ways to do these kinds of transactions. We’ve done more than 30 mortgage, land contract and seller finance deals in the past 2 years. Ramping up to serve this niche better.
Steve HodgdonJason CochardParticipantNovember 7, 2018 at 10:05 amPost count: 53
Steve, when you say you buy a part of the loan, do you mean you give the investor the cash upfront and the investor pays you back out of the payments collected from the buyer, like a heloc?
I guess the real question is, who would be on the hook for payments to you in the event the buyer defaults during the payment period that you purchased? Does the investor carry the risk because he’s borrowed money from you, or are you sharing in the risk of default? ThanksModern Asset ManagementParticipantNovember 7, 2018 at 11:59 amPost count: 11
This is not a loan to you. You don’t have responsibility for payment.
Let me lay out a little clearer. Example is $50,000 sale, $5,000 down and 180 month note @ 9% principal balance $45,000 payment $456.42
I buy 1/3 of the payments (60) for 1/3 of the balance ($15,000)
If the buyer defaults I foreclose or take property through repossession per state and local rules. But likely you would want to buy me out for 1/3 of whatever principal is remaining and sell the property again. This happens more often with low value assets than higher.
1- you write legal, assignable land contract. Collect down payment, which you keep.
2 – You sell part of the land contract to note investor (me). The loan is assigned and recorded against the collateral. There’s a contract and can be placed in escrow for # of payments sold if $$ high enough.
3 – At end of the the term, the note is returned to you with a new Assignment and release of lien filed with County.
When the note is returned to you, payments 61 to 180 are yours. The principal balance at that time is $36,000.
So, in this example you get:
$15000 sale of 60 payments
$36000 remaining principal
$18740 interest remaining for payments 61-180
$74,740 Total if all payments made on time
If your purchase price was $20,000 or less this seems like a home run. Make sense?LaneyParticipantDecember 19, 2018 at 12:43 pmPost count: 2
I am new to this forum, but searched “note buying” and found this discussion. Any advice would be greatly appreciated!
I recently had the opportunity to buy a note on a Southern California office space. I am not currently in the note buying business.
It is a 75K note with an interest rate of 2.75%. It is a “Note Secured by Deed of Trust”.
-8.5 years left on the loan and I would like to make at least 15%/year on this investment.
-The difference between 2.75% and 15% amortized is about $48,953.50
-So, I would need to buy the loan at $26,046.50 to make 15%/year on this.
Do you agree with my calculation of buying the note for $26,046.50 to make 15%/year for 8.5 years?
Or, am I way off?MarcusParticipantDecember 29, 2018 at 2:15 pmPost count: 68
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