So let me preface this with the fact that I know nothing about notes or how to create one, so I could use some advice here...
Situation is this: My sister is moving to Pittsburg and realized its actually cheaper to purchase than to rent. They were driving a neighborhood, ran into a guy and started talking about what's for sale in the area. He is looking to sell and they're looking to buy, and the numbers they were throwing around were $150k. This would be an off market transaction, no local agents involved, but still full due diligence for inspections and appraisal. 10% down, 700 +/- credit scores, and good DTI.
What's the feasibility of me loaning her the balance of the loan after downpayment, creating a note, and then once it has a three or six month history of performance selling that note? What would be the expected gain on sale of the note, and how does that work? Anyone who has experience please respond or PM welcome. Thanks for the help, and look forward to hearing your thoughts.
You can create a note to your sister - if you wanted to sell it a few things to consider:
1. For best bang for your buck wait a year so it has a full year seasoning. Selling it less than a year from origination lowers the price.
2. You will take a steep discount on the note. Investors will want between 8-12% yield. So if you charged your sister 4-6% be prepared to take a steep discount on the note - most likely be a ten(s) of thousands.
@Chris Seveney Thanks for the response. I didn't realize there was that steep of a discount! Unfortunately I'm going to need the money before a year's time so probably not the best route for us to go right now. Appreciate your insight.