Hello @Wayne Brooks Thanks for your comment. If an investor forecloses on a note and gets the property back then they are able to sell it for the full fair market value. The BPO on this is at $76,000 which means there is the possibility to invest 27K (plus foreclosure costs/time) and own a property worth $76K. They could sell this to a buyer for cash or with financing. The upside potential on this strategy is the ability to collect the 76k.
This is a strategy some rehabbers or wholesalers use to find properties, especially when the REO market is so competitive. They are basically buying the deal before it goes to REO.
Another possibility is an investor can work with the borrower to restructure the note and get them paying again. In that case they collect the monthly payments and earn the interest on the note plus discounted yield.
For example investing $27,306 to receive 476.29 per month for 96 months (the remaining term) would potentially yield an investor 14.125% per annum based on time value of money PV/FV calculations. In this situation that is probably the more likely scenario as it would be unusual for the borrower to walk away from that much equity.
When starting out with note investing we suggest investors first get some experience with performing notes and then consider whether non-performing notes are right for them. The performing notes can make good passive investment options for self-directed retirement accounts.
