Well performing note/deed

2 Replies

I was scanning craigslist for some deals, and made a few phone calls to see if I could arrange a seller financing deal on a 4 plex.... and it had already sold (darn) 

However, the seller offered a wonderful deal that I wanted to see if it is as good as it sounds. 

Price: 117k Cash price 

4 properties all set up as owner financing

Located in the mid-west 

All notes all well seasoned (6+ years of payments) and are yielding 12% in pocket. 

I suppose I just wanted to see what everyone's thoughts were on this type of deal. Is it common/uncommon, is it a great deal or just along the mid-level line? If you'd like more information on it please pm me. 

There is not really enough information to decide if that asking price is a good one or not.  The yield is within an acceptable range and the history sounds good from a high level but it is not understood what that means in terms of the rest of the details.  

The security is not understood.  "Seller Finance" can mean a couple of different types of instruments - i.e. - contract for deed/land contract or mortgage/deed of trust 

In addition to understanding to some degree 'what' you would actually be purchasing, the value of the property versus the amount owed on the lien is relative.  Also, is it safe to assume all four assets are separate borrowers or have they been crossed in one security instrument and to one borrower who is renting them.  

Once we understand what the asset is in general, features of note will also be relative.  Do the instruments have balloon features or interest only features, etc?

Saying the assets have a 6 year history is not the same as saying the assets have paid on time, every time for the entire six years.  For that idea, you can look to the more recent span of time over the last 12 to 24 months.  A gross yield of 12% IF they make all there payments is not what you would go by if they have only made 7 of the last 12 payments on time.

To some extent, it is not clear if you are trying to figure these out for yourself or thinking about trying to offer these for sale.  I might be reading too far into the PM idea.  If you want answers and opinions, the public forums is usually the best place to collect some in mass.

@Dion DePaoli  

I honestly gathered a small amount of information, and told the seller I was not originally interested in that type of deal, but that I had someone that might be. So i jumped on here to see if it was a good deal from the information that I had gathered. 

All four properties have on time payments for 6 years. 

I offered to PM as I was going to give sellers information for a prospective buyer, in hopes that I could learn from this deal (in the background). I would like to see how it would unfold between a potential buyer and the seller. I was going to offer sellers information for a trade of being taught how this would actually work, and possibly a small finders fee, if anything at all.