Note Buying - You Can Own These Non-performing Notes
Start Your Note Buying Business Now
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.
A Note Buying Opportunity
The Note Rate: 11.13%
Non Performing note balance: $62,957 payoff amount $66,885
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
One way to view this is: Buy a non-performing note for worth $63K 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.
The return on your note buying investment would be 21%. That isn’t even annualized.
Note Buying - Exit Strategy 2
Another route would be to bring the non performing loan current and reinstate the loan. (hint: sometimes a foreclosure action may get your borrower’s to do something with their loan)
If they are able to bring their defaulted mortgage current, you would get the reinstatement amount of $4,000 and on top of that a recurring monthly payment of $574. That is a total of $11,000 in your pocket within the 1st year. A 19% return!
Assuming the borrower refinanced within 3 years, I’d amortize that return over 3 years and get a 14.6% return on my note buying investment.
And even if they do nothing and you end up taking over the property, there is still about 50% equity that you have available.
Many ways to skin the note buying cat…