All Forum Posts by: Loc R.

No.

Contributions to any 401(k) must be made by the company on behalf of the employee.

Chris,

Note buyers in today's market are becoming more picky. Whereas a year ago they were buying entire notes, most are now only offering partial purchases.

Off the top of my head, here is how you get 75-80% of face on a note in today's market:

1. Equity!!! 20% down for owner-occupied.
2. Credit. 620 minimum.
3. Debt to Income ratio.
4. Full amortization, 10 years max. Impounded taxes & escrow. 3rd party note servicing. ACH payments.
5. Verified income of payor.
6. Verified value of property.

Seasoning: More is always better. But if you're looking to churn through your seller-financed flips, 3-6 months of seasoning is usually the requirement.

If you have a relationship and a track record, some note buyers will buy your notes "green."

Kevin,

Thanks for the reply. As to the 3 risks...

1. I am not worried about the ex, as a 19-year pay history has demonstrated his ability & willingness to pay, just not anything more than he has to.

2. The seller herself IS a legitimate concern. Her credit checks out and she is a reputable member of her community. Still trying to figure out ways to better secure the deal.

3. This is not for the child support, but the penalties & interest.

So I've got an interesting cash-flow and would like the help of BP to brainstorm this one.

I had a lady contact me about a cash-flow stream she has been receiving and would possibly like to sell to me.

The background on this cash-flow is that she won a court case against her ex-husband for child support. The "principle" amount was $20,000 (which he paid immediately), and the penalties and interest were $18,000. He has been paying the court-ordered minimum of $200 twice a month, and has been doing so for the last 19 years (yes, there is a 19-year payment history). He has been doing this, I suppose, to be a jerk and string her along for the money owed to her.

Here's the interesting part: because he does not pay off the penalties & interest amount in full, every year the state re-penalizes him. So, in essence, that amount stays around $18,000 and has done so for the last 19 years.

In addition, the court order reads that in the event of (the ex-husband's) death, his estate would be responsible for the payments. I think that only then will the executor of the estate pay off the "balloon" of $18,000.

So, my questions/issues are:

How would I structure the purchase of this cash flow? Technically, I'm not buying a promissory note.

The court order does not mention anything about the assignability of the payments (or for that matter, the non-assignability of it). In addition, we are talking about the penalties & interest associated with it, not the actual "principle" itself.

The other issue would be securing it. At this time the "best" solution I have come up with is to open a joint account with the ex-wife, and have the state (which collects the payments electronically then deposits into her account) re-direct payment to our joint account, and eventually have her "drop off" from the account.

Any thoughts would be appreciated.

1. Develop relationships with the investors who are creating them.
2. Develop relationships with legitimate brokers.

It shouldn't be too hard to find Michigan LCs for sale.

The most important thing I learned when I started lending money was the concept of collateral.

Collateral essentially is what guarantees that you'll get your money back, and in a nutshell, that's the key to the lending game is: ensuring that you'll get the principal back.

All it takes is for one unsecured loan to go bad, and you'll never do it again.

You can make 10% with the insurance of taking back a house, OR you can make 10% with no insurance, and just the borrower's word of mouth. I'll take being insured 100 out of 100 times.

If credit is good, 10% is the minimum I would require.

If credit is poor, 25% is the minimum I would require.

In either case, I'd charge 8-10%, fully amortize it, and schedule it over 10 years max.

If it's NOO (i.e., to an investor), I'd require 20% down, and play with the numbers so that the monthly payment leaves some room for the investor to cash flow.

Haven't done it myself, but the Norris Group, as a whole, is a very reputable group. I'm sure this is a good program for someone who wants to pay to learn that particular business.

If it does have the cashflow, and you can actually get the loans, and it fits your business model, then you should do it.

Most of us here on BP are not big fans of buying condos as rental properties, due to the HOAs and their fees.

The advantages of using leverage is that you get to control multiple properties vs just a single property in your example. As to whether or not the multiple mortgages and their being deductible being an advantage is debatable. Some people like being free-and-clear.

If you are going to use leverage on that many properties, be sure that they cash flow. Otherwise, you'll find yourself in a spot where you're going to need cash (from a job, or your savings) to cover the PITI.