Creating Notes With Flips
I would like to know if you can put a property under contract, find a buyer, offer owner financing, get a note investor to buy the note and at closing everyone gets what they are suppose to get. I have several properties and I would like to use this approach. Can this be done? How and where can I find the note investors? Oh, is this legal?
Thanks for your help
Kecia 
Yes this can be done but you must understand that your note will be discounted based on buyers credit worthiness, seasoning on note, down payment, the ability to pay note back.....
One acid test question is why should the borrower do owner financing through you? Are they bankable? With the rates so low today why not get a conventional mortgage.
With that all said and done. You can arrange for a simultaneous close with note buyer but be prepared for discount. Make sure you spend time doing your own due diligence on borrower. I have access to note buyers if you need assistance be glad to help.
Mark
Thanks Mark
I would like to be able to flip the property quickly and by offering owner financing I could get a lot of potential buyers. Yes I do understand that the note would be discounted. I would like to be able to get in and out of deals as quick as possible. I figure this would be a great approach to accomplish that task.
Thanks again
Kecia
This is a well-known device to bring the money to the table, by first selling the RE on a note, then, either simultneously or shortly after, selling the note to an investor.
I've done many deals like this with investors who like them, profit from them and want more.
The investor gets a good paying note, without having to buy the RE or risk the holding time until the buyer is found.
And the investor is getting a better yield by far than he could if he merely made a loan.
E.g., I've had deals where the investor got 15% or better actual ROI and ann. yield, whereas, in my state of WA, our effective usury rate on RE loans is 12%...the total yield (and the investor's yield) is higher than the usury rate because the seller first takes the note, then discounts that note to the investor.
Caution: When doing one of these deals on sale of residential RE, just be VERY sure that it's the Seller, NOT THE BUYER who's "taking the hit" on the discount.
E.g. a WA State Supreme Court Decision voided a note in a deal like this, where the home BUYER was actually made to pay a higher interest rate, because the deal was structured for the buyer to borrow $100,000*, but he only received $85,000 credit.
Buyer had to sign a promissory note to pay interest on the whole $100,000, @ 12%, but he only got credit for $85,000, which made his net interest rate a LOT higher than 12%.
So when a deal like this is contemplated, on residential RE, it MUST be structured so the Seller takes the hit & receives less money, or else the note is a risky one that might later be attacked for being usurious....and the end lender and note broker might all end up getting sued and hurt financially.
An example of one of these that I recently completed: the Seller of a DWMH in a MHP, with good credit and income, and already credit-suitable to the mgr. of the MHP, made her own deal to sell her DWMH to Buyer for $45,000.
Purchase terms: $5,000 cash down payment, and note for $40,000, 5 years at 15% (loan on MH, being personalty, in WA, has NO usury rate).
Investor agreed to buy that note for gross $38,000 ( all closing costs to P&S, no costs to note buyer), at closing of P&S deal, which he did, so Seller walked away with less cash than face of the note she took, and Buyer is paying 15% interest on a loan she couldn't otherwise find.
The discount was taken by the Seller, not the buyer, although under WA law, there being no usury on seller carry-back loan on ANY personalty, it could have been either way...my preference was to have the Seller take the hit so that's how I structured it.
End ROI/yield to investor is much better than if he'd made a straight loan, and he didn't have to find the buyer, pay MHP rent, etc.
*all numbers herein are fictitious, for ilustrative purposes only, not accurate or real numbers.
There is a program available for $200.
They buy back the paper at 95%. Send me a note if you want more info.
Kevin