Investor defaulted on a $300 per month mortgage!

7 Replies

Morning BP Fam,

I recently had an investor default on a $300.00 per month note! What's interesting about this is the investor placed a $2,000 down payment and was spot on for 4 months with the payments then everything stopped. I tried several times to work it out with the investor as I really don't like taking properties back but 90 days with no payment it's time!

Here is what is interesting about this, when I sold him the property he requested that we do not file the land contract as he was going through a divorce so this was done on a handshake! 90 days later that decision may of saved me some extra legal headaches.

I've had notes go bad in the past but in 7 years this scenario is a first for me!

Bummer @Mike Alder . So this was to an investor, not OO?

$2k down, $300/mo?  A trailer or something?  Oh - I see you're in OH.  What was the PP?

Not sure if not recording the land contract will help or not.  Doesn't go into the buyer's name anyway.  Handshake deals can be he said she said.  

Hope it works out for you!

Thanks @Steve Vaughan !

This was an investor planning on a fix & flip strategy for this one and yes houses sell for the price of mobile homes in Cleveland lol!

Yep, I realize we can get dragged into court over he said she said circumstances but with his lack of effort and response to resolve this I'm currently not too worried. If this deal takes a big U-turn I'll be sure to update this post so others in this situation will know

@Mike Alder - gotcha.  Hopefully you'll get it back in an improved condition!  Have you been lending long?

Thanks @Steve Vaughan ! that would be cool to take it back in better condition but we both know that almost never happens lol! I've been structuring seller financing deals since 08 as there is a huge demand for financing (even on these cheap ones) in my market. 

In recent years I've dabbled in lending hard money for investors but that's only when I have extra money sitting. Eventually I'd like majority of my portfolio consist of notes. That has been the most passive income I've experienced in this biz!

Nice @Mike Alder !  I like to restructure debt (I call it rehabbing the paper, not the house) as well.

I've had an interest in notes (performing at first) but am afraid of the tax hit.  The IRS treats you like you're evil if you earn more than $600/yr in interest income.  I have 2 kids and will lose my tax credit of $1k each if I earn more than $599.99.  Have you found that to be a burden as well?

 @Steve Vaughan  

Yep, I have 4 kids so my accountant likes to show me the difference before and after but that's the cost of doing business :)

Keep me in the loop with your business! I'd like to hear more of what you have going on in Washington

Thought as much.  I just heard an older @Joe Fairless podcast ("Best Ever" - it's great) and his guest was talking about SDIRAs. I didn't know you could invest in notes with an IRA. I think I'll convert mine and invest in notes with my ROTH. Tax problem solved!

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