February 2014, my partner and I purchased 5 second deeds of trust having a balance of $1,300,000 for a total purchase price of $107,000. Two were in CA and three in AZ.
Thirty days later, we sold the two in CA for $125,000 and paid a broker $25,000 for bringing the buyer. Two of the AZ notes were too costly to cure the first. We let one go and the other one agreed to list the home with a "Short Sale Broker" who eventially sold and closed the property giving us $8,000 to step out of the way and release our DOT and now we have a $1,000 profit.
Our last home was occupied and the first was current. We tried working with the borrowers but they would not budge. We ended up foreclosing on the property - no one bid at the foreclosure sale, cost of sale $1,800 to foreclose, $4,000 to cure the first $7,000 to clean out and haul off debris. Sold and closed within 90 days. Total net profit after all expenses and hold costs - $140,000 in 10 months.
Second mortgages are not for the weak at heart, but they are a great way a large return or a way to buy properties.
Nest time I will post "Area 51".
Congratulations @Duke Marquiss . It takes a lot of guts to jump out there and do things like this. I am glad it worked out for you. Did you buy them at an auction or some other forum? I would be interested in buying some in Wyoming, but would be worried about buying in another state. I would imagine it would take a lot of due diligence to be safe with this type of business. Best of luck on your next one.
Jerry, when I first started buying notes, I had the same feeling as you. I wanted to buy a discounted note in Fort Collins or at least along the front range of Colorado. I wanted it to be secured by a 3 bedroom 2 bath 2 car attached garage in a nice neighborhood.
I found out that that note did not exist. In the last three years we have purchased over 400 notes in 18 different states - all non performing. We can have a brokers price opinion and title in our hands within 4 business days. Are they always spot on? No. but we buy at low enough that we can loose on 20% and have various degrees of success on the balance. Some are home runs and some aren't. You mainly have "blight, taxes and title" to worry about. I am originally from Gillette so I know your turf. Thanks for the comment.
The image is quite misleading there Duke, I was trying to figure out what the heck happened in 5 seconds, and it took a minute to realize they were 5 junior or 2nd liens. You got me there, good play on words!
Great job, though did you gross $247,000, with last one profiting you $140,000?
Good stuff!!! Congratulations on transactions looking forward to hearing more from you!