Buying my first Mortgage note

[Paolo Ruggieri]

All

I am about to buy my first mortgage note.

I would appreciate bigger pockets community inputs and comments on the deal (FYI I am an experienced investor in normal rentals and fix and flips).

Background:

House is 90% rehabbed- (I inspected the house) seller is a flipper that took a hard money loan from one of the big brand websites  that do hard money lending online. He obviously has something wrong going on with rehabs and cut corners with cheap rehabs... not at par with the rest of the neighborhood (800’s neighborhood in Georgia with top school district - east Cobb)

Property listed for sale now for 800k (will never get it because rehabs are sub par)

Mortgage note value 700k

House value can firesell immediately 450k (I have an offer from an friend seasoned investor already)

If I decide to flip it instead of foresell it Works to be done 20k (last 10% of works) to get a 600k+ price (alternatively I would need to undo all works done and redo up to par of the 800k houses- not worth it... for 600k house will sell to someone that would like the square feet and the neighborhood and the schools , but can only afford 600k-630k)

Probably I could resell property as is for 500k on mls to someone that wants to do some type of house hacking 

Deal:

I would buy the 700k note for only 270k.

I would the offer seller net price 10k (purchase price = all liens + 10k).  Seller is a flipper and does not live in the house. 

My offer allows him not to have to be subject to foreclose/bankruptcy and would get him to pocket 10k

Property would sell as a short sale (I will approve it myself as I am the lender ) and will sell the home for 450k to my investor friend, with proceeds slip as following:

10k for the seller

2k for lawyers that are helping me with both note and resell transactions 

438k for me as lender (if I paid 270k for the note I am making 168k).... could be less if there are other liens to pay.

If seller refuses to  sell (he will get no money and will get foreclosure and bankruptcy on his record) I will need to foreclose on him = 10k of legal expenses and 6-9 months depending if he fights it. However there is no gain for the seller to fight it as it ruins their credit and gets them no money and they need to pay a lawyer 

This deal looks too good to be true. Once I go under contract to buy the mortgage not I have 7 days due diligence to run title and confirm if there are other liens ... I do not expect to find any except maybe past due taxes as house has been purchased and financed 9 months ago (I assume on a clean title).

What am I missing? I never saw numbers this good in any deal on good school districts - anyone with mortgage note 1st lien buying experience out there?