Purchasing Existing Notes

[Phil Shearcroft]

Hey Everyone,

I’ve been considering the purchase of a portfolio of notes on existing seller financed rental properties. They all have different timelines and applicable cap rates. Does anyone have experience with these types of investments?

Most of the properties have some sort of equity and since my company will hold the deed to it could I possibly pull that equity out until the term is complete then pay off he loan prior to the renter getting the deed clear title.

Example:

Original Note: $60,000

Note Face Value: $35,000

Rent payment: $1000/month

Term: 4 years remaining

Value of property: $110,000

Insurnace: $550/year

Taxes: $950/year

If I paid fave value for this note can I put another loan on the property?!

If anyone could comment their experience and suggest a good direction to start I would love to hear from you.

Thanks Everyone

Happy Investing!

[Roman M.]

It seems that you are referring to contract for deed and not an actual note purchase. 

You will need to ask the lender.  There might be language in the loan agreement that a contract for deed is considered a sale because it is a sale. If the property is sold then due on sale clause kicks in. 

Also I don't see how you can legally pledge the property that you don't own. Yes you have a deed but you already sold it to someone else. 

I doubt its doable.