BiggerPockets

Hello all... rookie on the forum here! Glad to see such a resource exists!

I've just closed on a short sale in Miami (finally!). Additionally, I am in the fortunate position to sell immediately to the long-term tenants who have occupied the house for nearly five years at $800/month and would like to own the property. The tenants have approximately $15,000 for a down payment. The realtor who executed the short sale is not experienced with creative financing and can do little to offer advice.

Anyhow... I've been crunching some numbers, and feel I could sell the house at a decent premium all the while keeping the buyers' payments at or below the current rent. I would like to structure this as a win-win situation for all. A scenario I've developed is as follows:

Sale price: $89,900
Down: $15,000 (16.68%)
Balance: $74,900
Interest: 9%
Monthly: $602.66

I am hoping to execute the sale of the property simultaneously with the sale of the note to an investor/buyer if this type of note is in demand. The credit of the buyer is fair (about 630 average score). The property is a 3/1 SFH with a 2009 tax assessed value of $116,779. (2008 value of $126,411) The house sold for $175,000 in 2006. My cost as a short sale was $28,000 (paid in cash). Comparable values in the area are difficult to assess because of the glut of REOs.

My questions are as follows:
1.) What is a conservative estimate of what I will likely receive
when selling this note to an investor/note broker?
2.) Are there any factors in the deal that should be changed to
make the note more valuable when selling? Mind you, the
tenants really don't care what the interest rate or selling price
is as long as the monthly payments are manageable.

Any and all advice, information, or perhaps even offers to buy this note :wink: are greatly appreciated. I look forward to hearing what all of you experts have to say!

Best Regards,

Dave

search topic CASH FOR YOUR REAL ESTATE NOTE, there were guys dealing with it, maybe they can help you.

Thanks for the lead, Mike. I've seen that gentleman post before and intend to give him a call tomorrow to see what he has to say.

The other major factor in getting more for your note is payor information. Any estimate given you by any investor will be changed if the information they recieve is not verifyable by their sources.

Be prepared (or at least let your payors know) to share the SSN of all payors involved as well as job information. The more you do for the investor the more he is willing to pay you.

Your credit score is low by investor statndards, but fair (or common) by the economic conditions we are in now. So job stability can be a big factor.

I have seen the discounts as great as 50% with the score given. And some simultaneous investors have required a seller guarantee for the first year or 6 months to reduce risk of walk-a-ways.

Even with the worst case scenario in place your note of 74.9K would get you 37,450 plus the 15k down for a total of 52,450 minus the purchase price of 28k leaves you a profit of 24,450 minus any and all closing costs that you have to pay for minus any other repairs, ect.

You may not net 10k for the selling of the note itself, but looking at the entire deal it does look pretty good.

There are several sites that deal with the selling of notes. If interested PM me and I will give them to you as well as a list of known investors who buy such notes (not all will do the simultaneous closes). Marc is on that list, by the way, so I would start with him.

Remember I tried to use a worst case scenario, so you look pretty good with what you have listed except that I do not see the length of the proposed note listed.

Nice work David. After the $15,000 down payment, you only have $13,000 into a $74,900 note!!! I also like the fact that you checked the credit.
With that said, I still think it would be next to impossible to find a buyer willing to do a simo closing on this note due to the values in the area being in question and the number of foreclosures. It is easy for anyone interested in buying your note to check and see what you actually paid for the property. What did you do to ad value to the property after you purchased it? If the property does not appraise for the sale price any real buyer for your note is going to bail out on the deal as credit and real equity (what do I end up with if I end up OWNING the property?) are two of the most important factors for note investors.
Don't let this get ya down. I would have done this same deal in a heartbeat and would NEVER think of selling such a note. At the terms of the note it is not going to take long for you to have all of your money back even if you have to use borrowed money! You have done one deal and are set-up to get a check (mail box money) for years to come!!! How many payments of $602.66 pr month do you need to live the life you want? In my opinion that is how many deals you need to do.
I agree with Jawsett. Don't worry about selling these types of notes for a few years. Keep them for cash flow. Sell the note only when you are confident that the appraisal will come in at no less than 20% more than the current principle balance. Again, nice job. Do 10 of these and you will have $6k pr month income-sitting on your can:) I am sure you might find someone to buy this from you at a real low price but, I personally would hate to see you sell yourself so short when there is so much more potential in this deal for you. Why would you want to sell this note anyhow?

I think the answer to your question regarding capital gains is that it depends on weather or not you sell the note in the same year you sell the property. I believe you should also be able to take a loss in the year you sell your note. I would check with a tax professional that understands real estate to be for sure though.

Marc,

I will definitely keep your offer in mind... and in fact may take you up on it in a few months.

Also, I'll check with an accountant regarding the capital gains issue and let the forum know.

Is there any way I can provide a better market value of the property other than having an appraisal done? Obviously Zillow, Cyberhomes, and Eppraisal are not authoritative sources..., but their estimates are as follows:

Zillow: $155,500
Cyberhomes: $59,252
Eppraisal: $37,242

I greatly appreciate everyone's input on this deal and look forward to contributing and absorbing good information in the future as well.

- Dave

I trust things work out for you with Marc.
Holding for 3 months isn't a long time.

On the chance they don't, I may, may be interested. Depending on the buyer, it might be able to restructure for an earlier sale.