From your figures the monthly cash flow is 557.72 a month. To net $32,000 you would have to sell about 84 payments to yield 11.5% to an institutional buyer. There would be additional cost(pmts) because of title policy etc. A note broker will add 2k+(4-5 pmts) if you do not go directly. Because you are selling a portion most will use a contract that they get theirs first in the case of early payoff or default. They will service the note(collect payments) until their cost is satisfied then return the payments to you. If they have very good credit the return the buyer requires could be less.
I am selling a house for 56,900 with 5000 down and owner financing for the remaining 51,900 @ 10% for 15 years. I would like to sell part of the payments in order to pull 32,000 cash out to cover what I have in the purchase and rehab. Is this a possible deal for a note buyer? Where would I find someone to buy this small part of the note? What kind of a yield would the note buyer be looking for on this size deal? Since I am only selling part of the note, who does my buyer make his payment to? As you can see, I am new at this but the concept intrigues me. If this, or some form of it, can be done, I see great potential for the future.
Bob:
What you would like to do is VERY feasible. We will want some info on the property, who is to be responsible to repay note, and finally the paperwork to be used. We are principals and can close this type of file FAST.
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Investor buys 1st lien for ~$32,000 @ 11.5% yield (subtracting processing costs of $1K).
Seller holds 2nd lien.
With this arrangement note buyer can purchase the full 1st lien note. With a single note the note buyer would have to create a contract, as Bud suggested, to clearly state who gets what pmts from the pmt stream. By creating 2 notes from the beginning there’s no need to complicate the situation with an extra contract.