Is it realistic to purchase a note with $5,000?

Question

I would like to purchase a note. Not sure if it realistic on a $5000.00 budget.

I would love some feedback.

Jason Hirko · Answer

@Trevon Peracca Second lien, non-performing. But you need a lot of those in your portfolio to make it work. Otherwise it's like buying a very expensive lottery ticket. And probably not a good place to start, even if you were buying several

Patrick Desjardins · Answer

No, it's not realistic. While there are some mortgages you can buy for that price, they are either very risky and/or you won't have the reserves to pay for legal fees, servicing, and other expenses. Keep saving.

Mark Holencik · Answer

Sure it is possible. You need to be careful. Just like anything. There are no sure things.

I  buy my homes cash. Any mortgage I get leaves that much in my pocket to  buy and get ready for rent on another home. I get mortgages from people  usually in the the $10,000 - 20,000 range, but $5,000 is good to.

I  give them between 6%-8% for a 10 year mortgage. You get a monthly  check. You are in first position. It is not a second mortgage.

$5,000  would be a 5 year mortgage at 8%. Monthly payment of $101.38. 60  payments for a total of $6,082.92. This is a total of $1,082.92 in  interest.

I am not soliciting you. This is just an example to show  you they are out there. My next closing is on September 30. I am buying  the home for $10,000. I will have about $16,000 in it till I have it  ready for rent. It is a 3 bedroom row home. It will rent for $550.  Water,sewer and garbage are included.

The one thing I put in the  mortgage is if I am in default. You just need to get a judgement against  me and take the property. This eliminates you having to go through the  foreclosure process. I would make sure this is in any one you do.

Bob Malecki · Answer

Uhhhhh, nope. Not realistic. JV/partner with someone who has some funds and take down a higher value asset. At $5K you will get a junk note and holding costs/legal fees would erode any profit, if any.

Michael Henry · Answer

Trevon,

The short answer is no, as It would be extremely difficult to get something that you want on the note side with that level of budget (unless someone was basically doing you a favor). You may want to do additional research and consider the tax lien route it could possibly be more bang for your buck perhaps given your budget (check the laws of the state/municipality you may have interest in). Good Luck!!!

Thanks,

MH

Nehemias Ponce · Answer

Great post @Trevon Peracca! I was close to posting a very similar question! I'd be interested in learning a bit more of what you mean by a partial @Kevin Moen. I'll message you...

Kevin Moen · Answer

@Trevon Peracca I agree with most all of the comments above. Not enough/any quality product at that price point. However, you could buy a partial note from a note holder. Might be tough to do with $5000 but I know a company that might be interested in selling a partial at that price range.

FYI a partial is a portion of the note being sold by a primary note holder to a new investor. Its not fractionalized, both investors are not getting a split of the monthly payment, instead you would get X number of payments in exchange for your $5000, say at an 8% yield, and the primary note holder would resume collecting payments after you are paid in full.

Message me if you want to talk in greater detail.

Kevin

Bob E. · Answer

You could buy an entitlement for 1-2 years worth of payments on a note but processing costs are expensive so you would want to be in a position to renew for a longer term.   If you have Money in an IRA you can move that over to a self directed IRA and that might allow you to buy a larger balance.

Mark Holencik · Answer

111

Joe Mclain · Answer

@Trevon Peracca - Start with this link for tax lien research.  There are tax deed states and tax lien states.   Tax lien states are what you are looking for.   Tax deed states is where you are more interested in attaining the property while tax lien states provide a good interest rate return on your money.  - http://taxlienlady.com/StateGuide.pdf

Joe

Is it realistic to purchase a note with $5,000?

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