Area 51 - Ever heard of it?

[Duke Marquiss]

A little over 3 years ago, a friend of mine that new that I purchased mortgages, came to me and said that he had purchased a second mortgage with a face amount of $1,150,000 secured by 51 Town Homes in a nearby town.  We purchased for $720,000. The original first mortgages were held by 51 separate mortgages that were in default and foreclosure was started.  Original borrower was a nonprofit entity that had built the units in 1995.  They had made it past the required time period to keep the units  for low to moderate income tenants.  They had not made a payment since 2002.  A quick calculation showed that more than $2,000,000 was owed on the second mortgage.  The sale on the first mortgage was a total $1,800,000.  We redeemed the first after the sale and started renovations - any Section 8 tenants would remain, we could not evict without cause for a period of 3 years from the sale.  Our average cost on the units was $55,000.  Our rehab cost per unit is around $15,000.  Sales average $130,000 and rents average $850/month.  We will hold 25 units for long term rentals.

Buying defaulted first or second mortgages is a great way to acquire properties for flip or hold at a price that you can't get any other way.  I like Area 51!!!!

"If you aren't scared, then you aren't doing anything BIG."