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…
