Sales of Mortgage Notes

I have some interest in possibly doing a few hard money deals. However, I want to find out what options I have in regards to exit strategies for this type of business.

Thanks in advance.

Edited: 06/26/2010 at 04:42AM

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Craig Cooper

Real Estate Investor · Cottage Grove, Minnesota

10 posts
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Icon_minipost May 28 '08, 09:06 AM

Just wondering if you got your hard money mortgage notes complete if not feel free to message me here on BP with details.

Mutual Success
Craig C.
Diverse Capital

Edited: 06/26/2010 at 05:15AM

JC Smith

Real Estate Investor

2 posts

Icon_minipost Jun 02 '08, 07:00 PM

When I started learning about notes years ago it seemed daunting. Now I love them.

[EDITED BY ADMIN - Please keep your Deal solicitations to the appropriate threads]

JC Smith

Edited: 06/26/2010 at 05:17AM

Joshua Dorkin

BiggerPockets Founder · Denver, Colorado

10630 posts
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Icon_minipost Jun 02 '08, 09:22 PM

Originally posted by "lb703"

However, I want to find out what options I have in regards to exit strategies for this type of business.

Can anyone help the poster with this end of his request?

Edited: 06/26/2010 at 05:17AM

Joshua Dorkin, BiggerPockets, Inc.
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JC Smith

Real Estate Investor

2 posts

Icon_minipost Jun 02 '08, 09:41 PM

Performing Notes -

The greatest stratgies for this if it is a performing note and they pay on time is to hold it and collect compound interest.

Otherwise there are numerous companies looking to buy seasoned notes of two years or more that have an excellent payment history and good credit.

Non-Performing Notes
Which are my favorite. Have numerous exit stratgies.
Here are just a few

Vacant or Occupied -

The investor can talk to the owner of the property once you own the note to see if they want to do a forbearance agreement. (put payments at the end and start making payments)

They can also ask for the deed to the property in lieu of foreclosing.

If all else fails they can start foreclosure and acquire the property to be a rental, lease purchase or resale.

JC Smith

Edited: 06/26/2010 at 05:17AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
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Icon_minipost Jun 02 '08, 10:20 PM

It sounds like you want to originate hard money notes. Hard money notes are typically only for six months. I'm not sure that's enough time to season them sufficiently resell them without taking a significant hit. So, if you made a note at 15% interest for $100K and pocketed 2 points up front, I think you'd have to sell it for less than $100K (i.e., at a interest rate higher than 15%.)

As EIGco mentioned, if the borrower doesn't pay or doesn't pay off the note at the expected time, you take the property. Hopefully, they borrower plays nice and just hands it over in a deed in lieu. If not, you would have to go through the foreclosure process. As long as you're careful about your valuations and stay at a low LTV, you should be able to turn around and sell the property at a discount, cover your costs, and still make a nice profit.

Edited: 06/26/2010 at 05:17AM

Jon Holdman, Flying Phoenix LLC