Note Buying – These Non-performing Notes Could be YOURS

January 14, 2008 by notebuyingprofits.com
Filed under Real-Life Case Studies

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 are a few to whet your appetite.

These are notes – non-performing – that are available to buy from a major national bank.

Quick analysis on the first one, just to show you how I look at one:

Note Rate: 11.13%

Balance on the note: actually $62,957 – with a $66,885 payoff

Arrearages: $4,037

Estimated property value: approx. $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%

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

If I could get the borrower refinanced – I could probably payoff my loan for the full $66,885 within 60 days. Making almost $12,000 on $56,000 wouldn’t be bad in 2 months. My return would be 21% cash-on-cash, without even annualizing!

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, 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. Assuming the borrower refinanced within 3 years, I’d amortize that return over 3 years and get a 14.6% return.

And finally, I might even end up controlling the property, in which case I’d have a good amount of equity that I could tap into.

Many ways to skin the note buying cat…

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