Fractional note sales

[Al Bunch]

Hopefully someone more experienced can help me wrap my head around this.

Unless it makes a difference, my widget in this example will be a stick-built SFR.

Purchase price $10000
Repairs $5000
ARV $25000
10% down $2500
Note $22500 @ 9% for 8 years (pmt: 329.63)
Actual rate of return 28.26%

This is where I start waving my hands around, making wild guesses and hope you just agree with my #'s.
I'd like to sell a portion of this note (let's say 50%) at a 25% discount, so the sale price would be $8437 (yes?).
This entitles the purchaser to $164.82/mo and I'm assuming a 50% portion of the underlying asset, but at what value ($15k (purchase + repairs), $12.5k($15k minus down pmt), or $22.5k (sales price less down pmt)? or does it matter?

I could obviously completely divest myself of the note, but I enjoy mailbox money and if the borrower defaults, I have no problem taking the property back and starting the process all over.

What happens if the borrower defaults? What is my obligation to the purchaser of the other half of the note.

I've got a ton of questions, but I'm hoping this will at least get some attention by the more experienced folks...

Thanks!

[Bill Gulley]

I understand.

I'll just cut the mustard real quick. 90% of those trying to deal in notes in such matters don't have no clue as to what they are doing, including the two week shake and bakes that got a mortgage brokers license and who have been impressed with themselves for ten years doing half baked lending deals.

My comment was not impllying you were out to screw anyone, however your "I'll foreclose take it back and do it again" tells me two things; 1. you are not aware of the legal aspects of lending and 2. that allowing your buyer to fail is not that much of a concern to you.

Thousands of your kind of deals have crossed my desk, I didn't say you can't do it or could not learn, what I said was get with someone who already knows how, work with them and learn with them as I can guarantee that anyone trying to do this on thier own in this environment doesn't have a snowballs chance, if this were 1973 I'd say go get'em, but this is 2013.

If someone is not sure what PAR value is, I have to assume they are brand new to notes. That is the reason I made my suggestions.

There was no offense intended. Yes, I do rain on parades, generally because everyone wants to dive in the deep end with the sharks when they should be in the shallows wearing a life vest. Wonder why I dislike gurus and those that skim over stuff and push systems and programs off on newbies?

The problem with my advice is that it requires more time, effort, investigation, understanding and thought, no one wants to do that, especially in something as simple as financing, securitizations, collateral evaluations, compliance, underwriting, partial distributions and servicing aspects that need to be addressed. Give me the easy way.....there is no easy way, if there were I'd love to give it to you and other 5000 folks who think finance is like making mud bricks.

I could write a 2000 page book and never touch on all the aspects or concerns, yet this topic is expected to be covered in a forum thread. Forgive me for taking the easy way out telling people to get professional help with an attorney who deals in finance, not RE.

BTW, dealing with an individual with SDIRA funds is going to be another touchy aspect on that side of the fence.....

I'm sure the guy that went to prison did not intend to screw anyone when he started out, he was just inept, got in a bind, could only keep going and got in over his head and then the house fell in on him. It happens when people get clever.

Now, forgive me, I need to finish my book on operating room proceedures as I will be in surgery in the morning performing a heart transplant, but I'm not charging the patient so everything should be fine. ( :-))