Online Investing Daily

Get Your Note Buying Business Started

So you’re eager to get started in the note buying business and you’re wondering what kind of non-performing notes are out there to buy. Here is an example to feed your appetite.

An Opportunity In Note Buying

Note Rate: 11.13%

Balance on the non-performing note: actually $62,957 - with a $66,885 payoff

Estimated property value: approximately $112-114,000 (rough guess based on bank’s BPO and Zillow’s low range value - a cheap AVM to refer to) LTV (loan-to-value): 50%

The Note Buying Exit Strategy

So the way I look at this: I could buy a $63K non-performing note at a 50% LTV for $56K.

Thru a refinance of the borrower’s defaulted mortgage, you can pay off the loan at full amount ($66,885) in at time span of about 60 days.

Making almost $12,000 on $56,000 wouldn’t be bad in 2 months.

My return on my note buying investment would be 21% cash-on-cash, without even annualizing!

A Second Note Buying Exit Strategy

Alternatively, I could encourage the borrower to bring their non-performing loan current (a foreclosure notice might work here) and see if they reinstate my loan at the last minute.

Assuming they do bring their defaulted mortgage current, that would mean a reinstatement payment of over $4,000 plus a monthly payment of $574 - for a total of almost $11,000 in income year 1 - or a 19% return.

If the borrower refinanced within 3 years you would get a 14.6% return on your note buying investment. (to calculate, you would amortize the return over 3 years)

And finally, since you have a 50% LTV, even if you end up taking the property, you swould still have a good amount of equity.

Many ways to skin the note buying cat…

This article will provide some tips to help you find the right foreclosed home for you. One of the best ways to begin searching for foreclosure home deals is via one of the many virtual real estate listing sites online. Start your search by looking for concentrations of distressed homes in one area, since these are the homes that the bank or other lender is interested in getting rid of quickly and will be more inclined then, to sell the homes at a lower price.

Purchasing foreclosed homes via auction may be a less expensive option initially in some cases, but it can end up costing you a great deal more in the long run. Sometimes, there isn’t even an opportunity to see and walk through a home being offered at auction, and even if there is, there is rarely any time to order a home inspection to find out whether the home is in need of costly repairs. A better option is to purchase an REO or real estate owned foreclosed home, since this allows you to go through all of the same steps that you would in a traditional home purchase, including a home inspection to make sure that the home you are thinking of purchasing is in good condition, or at least, that you are aware of any repairs or problems in advance.

Keep in mind though, that just because a home is REO and being offered for sale by a bank, this doesn’t necessarily mean that it is a good deal. Since 2006, when overall home prices peaked, they have continued to fall dramatically, and many homeowners who are in the process of foreclosure owe more on their mortgage than the actual value of the property. Make sure, in other words, that you aren’t assuming a loan that is overpriced. You can always see if the bank will allow a short sale, i.e accept less for the home than the amount that is owed on the mortgage. This type of sale is sometimes in the best interest of the bank, so it never hurts to ask.

Purchasing a home is the biggest financial decision that most people make. If you can find a great deal on a foreclosed home, then you can congratulate yourself on saving a significant amount of money, compared to most homeowners. Make sure that the purchasing decision you are making is a sound one by following the tips in this article, and you will be well on your way to finding the right home for you.

You’ve probably heard some of the jokes about how bad the economy is. It’s great fodder for comics. One guy joked that the economy is so bad that “The economy is so bad that Angelina Jolie is now adopting an American kid.” Another guy quipped that “The economy is so bad that a woman got an exorcism. But when she couldn’t afford to pay for it they had to “re-possess” her. And Jay Leno remarked that “Times are so bad that six of OctoMom’s 14 kids are already working for Nike.”Unfortunately, there is a lot of negative spin rolling around and some folks really do believe in the Rush Dumbbells of the world that any rescue plan is doomed to fail. However, when I meet someone who starts to whine about how bad the economy is, I do a little Jedi-Mind trick and tell them that the economy is gonna go bananas in June 2009. How do I know this?

Because everything starts with a single thought. Isn’t that what Napoleon Hill wrote about in the capitalist’s Bible, Think and Go Rich? Whatever the mind of man believes, he can achieve!? That’s because thoughts are things, incredibly powerful things that trigger the mind into thinking ways and means of how something can be done. When you start to believe something can change, it creates a chain reaction for doing so. So imagine a big June 2009 with making lots of money!

Now if you disagree, if you don’t think this will work, or that the economy will come back this soon, I know how you feel. Many people have felt this same way; that the economy will take years to come back.Or that it’s gonna get worse before it gets better because we’re in too deep of a crisis. What I have found however, is that making a timeline for something to happen and believing in it usually helps. Call it a short-term goal. But by doing so, I know that I will work harder to find buyers and sellers to make my dream a reality. It’s kind of like the joke about the blonde on the airplane.

A beautiful young blonde woman boards a plane to New York with a ticket for the economy section. She looks at the seats in economy and then looks into the forward cabin at the first-class seats. Seeing that the first-class seats appear to be much larger and more comfortable, she moves forward to an empty seat in first class. The flight attendant checks her ticket and tells the woman to return to her original assigned seat. The blonde replies,”No. I’m going to sit here all the way, until we get to New York.” Flustered, the flight attendant goes to the cockpit and informs the Captain of the blonde problem. The captain says that he has a blonde girlfriend, and that he can take care of the problem. He approaches the girl and whispers something in the blonde’s ear. She immediately gets up, says “Thank you so much, now I understand”. She hugs him, and rushes back to her seat in the economy section. The flight attendant, who had been watching with rapt attention, asks the Captain what he had said to the woman. He replies, “I just told her that the first class section isn’t going to New York.” Like the Captain, tell everyone you meet the positive outcome that you expect to happen this June. Who knows? Like the Captain on the airplane, amazing things may just might come about for you!

There are many different types of loan modification, short sale and foreclosure-related scams, and new types of scams sprout up every day. There are probably as many scam categories as octuplet mother Nadya Suleman has babies, but today we’ll discuss just three of them. These activities can be loosely described as follows:

Phantom Helper:

In this type of action, the scam artist offers to negotiate with the lender or perform other lender-related services for the homeowner in exchange for a fee. However, in reality, the scammer performs little or no service at all and eventually absconds with the money. Whatever services the scam artist does provide, the homeowner could have probably done on his or her own. The homeowner ends up not only losing the money, but often loses valuable time to make other arrangements to save his or her home from foreclosure.

Bail-Out:

The homeowner is saved from his dilemma by the generous helper who offers to bail him out. Often the helper needs to take title to the property in order to modify the loan, and promises to lease the property back to the homeowner. Then when the owner is able to purchase, he will be able to purchase the property back again. Sounds good, right? Usually the scammer ends up not honoring the agreement, and simply kicks out the owner. Or the helper rents out the property until it is foreclosed upon and keeps all the rent receipts for himself.

Bait-and-Switch:

In this scenario, the homeowner is usually persuaded to do one thing but ends up doing another - like signing a deed and giving up his interest to the property. For example, the scammer might tell the homeowner that he needs to sign a power of attorney to negotiate with the lender to do a loan modification. Then after signing it, the helper uses the power of attorney to evict the owner from the property and rent it out.

In addition to these types of deals, there are many other kinds of scams, including identity-theft, loan fraud, and even elder abuse. How do owners meet these people? The helper can contact an owner by mail or telephone solicitation or sometimes an owner will contact a scammer via a We Buy Homes or Stop Foreclosure Now sign on a telephone pole.

Therefore, if a helper asks for money upfront before providing any service ” beware. If he asks for payment only in the form of cash, cashiers check, or wire transfer”beware. If he asks for a transfer of title or an interest in the property”beware. If he gives an unqualified promise to stop foreclosure or other assurances “beware. If he offers to buy a home for a price above its market value–beware.

Just as one would be wary of eating raw fish as a restaurant with a quality rating of D ” when it comes to foreclosures, short sales and loan modifications, you should be extra cautious with people offering their services to help you too!