Note Deal Case Study

[Liz Brumer-Smith]

I see lots of people asking about notes and what happens in a note deal on this forum. It's a rather mysterious area of investing for a lot of real estate investors, and I wanted to shed some light into a deal our company, Seasoned Funding, LLC completed a while back. So here is the case study on the deal: I will be posting more of these over the next few months, (this was the first one I ever had made). Hope you find it helpful, and let me know if you have any questions!

This was completed with 2 joint venture partners, and worked out completely by us (Dennis Smith and Liz Brumer) 

We purchased the note from a fund and began the workout right away. What you don't see in the case summary is how challenging it was to find the borrower initially. She was living in Georgia but had "relatives" living in the property. Initially, they refused to give us the number, but then realized who we were and what we were trying to do and happily gave us the number to the home she was living in Georgia.

As you saw in the case study, the borrower had a judgement with a credit card company. This took quiet a while to resolve because it required an document signed by the borrower authorizing us to negotiate with the company. When we requested the letter from the borrower, she got scared and worried we were doing some sort of harm and went dark on us for an entire month. Finally, after numerous letters, calls, and pleas with her grandson - she refused to answer the phone, we helped he realize we were there to help and pay off the judgement, we just needed her consent.

It then took another month to receive the release of judgement from the credit card company and get it publicly filed so we had clear title to receive the DIL. This set us back about two and a half months into the work out. All in all it took about 6 months to successfully get the Deed In Lieu from the borrower and have it publicly recorded. From there we did repairs/minor renovations, and got the property on the market. While we got an offer on day 3 of being listed, it was FHA which required an appraisal that put the property $10,000 under what the buyer offered it for! We we're super bummed about having to lower the price, but still were happy with our ROI.

There were some issues with title when closing, apparently the legal description had been incorrectly recorded for multiple sales and no one had caught it until now. This took another month to rectify which pushed closing back! Talk about frustrating! This deal definitely took longer than expected at 10 months but that's exactly why you always over estimate timeline, costs, and potential issues that way you over deliver in both the time and results to your partners or lenders. All parties involved were very happy with the outcomes and results and are looking forward to doing more deals!

[Jay Hinrichs]

@Liz Brumer-Smith

chalk this one up to some pretty lucky circumstances IE getting the Deed I Lui  good job doing that.. if you had not, foreclosures in FLA take forever and can easily be contested and would have added quite a bit of cost to your all in price.

For these deals you need this kind of spread to make them worth while in my opinion you could buy 2 or 3 regular fix and flips and not go through that drama and make the same money in the same time frame..

but hopefully this gives you the experience were you can start to move up were you can make some big dollars.

although big return APR wise still small dollars for all the time invested and risk is how I would personally look at this... Unless you have 5 to 10 going at anyone time.. but to do it one off Phew that's a lot of work risk and brain drain :) glad it worked out.