NPNs for a newbie
Hey there.. Since this is my first post let me introduce myself a little. I've been a RE investor for many many years. I started with a singe SFR and worked my way up to multiples and then into fix and flip and general real estate practices sales, appraisals, you name it really. Since it seems fix and flip is getting harder due to dummies buying homes that need $100k of work with $20k margins have almost run me out of business locally (if someone knows how to make money that way please let me know maybe I'm the dummy?!), I've been looking online at other ways to find properties and make money doing what I am good at at know. I stumbled across this forum and the idea of buying into non-performing notes. I've done a lot of reading here but one thing I can't find is the doom and gloom (other than the people posting you could lose all your money) I can't find any tangible downside. So maybe some of you smart people can work through a scenario with me?
I'm looking at a note online, non-performing for 12 months or greater, it's a first position note with no other notes or liens (that I've found) Note is 5 years old, note is 250k, UPB is like $255k sale price for the note is 50% so about $125k. Value of the home is about $375k. Now I'm going on the assumption that the home is run down on the inside (seller's website has a good looking recent picture of the outside, no damage, looks lived in still) So maybe they are having a hard time selling it for $250k or maybe they lost their job and just can't pay.. Whatever, doesn't matter. My options are shortsell for below market value maybe 200k and I walk with 75K; renegotiate loan, reduce principal, payments, etc and get them refinanced under government programs after 3 payments, walk with $75k or more; cash for keys they walk, maybe I dump $50-100k in remodel and sell the home for market value at $375k and walk with as much as $175k; foreclose, spend maybe $10-20k on legal fees, remodel as previous and walk with cash after maybe 6 months of work or more?
Ok so I found the plus side which honestly seems too good to be true.. Now tell me the bad? Where does this go terribly wrong? Tell me your worst story from NPNs.