Notes noob with questions

[J Johnson]

I have a client that is interested in a note purchase that fell in my lap. I have never been involved in a note purchase, but I am learning. The client will have an attorney reviewing the deal.

I do not have the loan terms at this point...meeting with the bank rep next week. This is what I do know. A builder has a permanent loan on 15 townhomes that are move-in ready. The development has a total of 50 units. Two other banks are financing the remaining units. The remaining balance on the note for the 15 units is 2.8M. I do not know the original loan balance. The title search found no other liens on the units. The note is currently performing, but will likely become non-performing. The units were originally priced at 220K/unit, but have been reduced to 199K/unit.

The bank is willing to take a huge hit on the note. My client would like to purchase the note for around 1.5M. The units will become rentals if the builder defaults.

What are the upsides/downsides to this deal?