Pasadena Success Story: Note Exit via Settlement

[Gabe K.]

Our extensive research process resulted in a significant pay off this week. In September, 2015, we purchased a non-performing 2nd mortgage on a property in a desirable area of Pasadena, CA. The homeowner had not made a payment on it since 2008 and the current balance was approximately $53,000.

During the due research process, we discovered the homeowner was current on his 1st mortgage, which means he would likely want to keep the property and settle the debt. Further, we believed the note seller was unaware of the rapid appreciation in the property's neighborhood. Armed with this information, we were able to negotiate an amazingly low purchase price of $4,500 for the 2nd mortgage.

After loan servicing was transferred and collateral documents were received, we quickly made contact with the borrower to get a better understanding of his financial situation. We ended up accepting an offer from the homeowner to settle the balance of the loan for $40,000, after a discussion with our investor.

The return on this investment was $35,500 or over 750% in about 7 months.This is an exceptional outcome for any note investment. We believe this success is attributable to our extensive research process, detailed due diligence, and proactive borrower outreach.

Part of this investment was funded by a ROTH IRA, which means the gains were earned tax free.