All Forum Posts by: Daniel M.

A property that is underwater is bought for a steeper discount from the hedge fund. If it sells in an auction, the proceeds would go back to the lender since the owner is underwater. If it doesn't then you may take it back at auction and sell it retail since you bought it cheap.

But I think if the property is that much underwater, the borrower is more willing to do a DIL / cash for keys scenario.

At least that is my understanding.

Thank you Jay. 

So essentially the only way to profit in a equity NPL would be to find an agreement with the borrow for an DIL and some kind of cash for keys offer.

After reading several books about note investing and attending some local REO networking events, I'm still not clear about the exit strategy when purchasing non-performing notes.

Let’s say there is an offer by a hedge fund for the following property:

Principle Balance: $34,255
Payoff: $46,035
Property value: $208,650
LTV: 16.42%

The hedge fund asks for 70% of the payoff.

My general question in NPL with equity would be; how would I maximize profit. I assume, if the owner doesn’t catch up with the payment, in case of foreclosure, I would probably get back the amount I have invested but every excess amount would go to the owner.

I could do a deed in lieu but why would the owner do that if he could wait for the foreclosure and profit there? 

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