Notes?

[Terry Royce]

I figured I would place this here instead of a more specific topic, since its more of an overview question.

I came across a seller who has a note for $37k he picked up for $0. He wants $5k for it and is liquidating his inventory. House probably needs 35k.

Can I put an option on a note and wholesale it/ assign it?

What is the best way I can go about making some money from this. Comps are in the 75k to 95k range.

I have no experience with notes, and and all experience is helpful

[Michael Dorgan]

Not nearly enough information. Notes are a little different than real estate. The Payor is a large factor in the note's value.

Anyways, we also need to know:
* What's the interest rate on the note
* How many payments have been made and if they have been on time.
* How many payments remain (seasoning)
* Is it currently deliquent and how much.
* Are there any other senior encumberences against the property (is this a 1st or 2nd position note and are there taxes due.)
* How much value is in the collateral which you've stated is around 40-50k after repairs.
* What is the general credit worthiness of the payor?

All of the above can make the note worth anywhere from 0 to above par (37k).

For instance, if the payor has good credit, has paid for a year on time and currently is up to date, and if the note yield were in the 10-12% range or so with a loan to value of under say 65%, then you'd probably get close to par if not more for the note.

If, on the other hand, the note is delinquent, has almost no equity to back it (which it sounds like this note has), and has any other senior liens ahead of it, then it is worth just about 0.

Anyways, without the rest of the info, we can only guess. And yes, you can reassign notes to other people. Banks due it all the time when they sell mortgages.