small notes - Posted by Bryan (NC)

Posted by pwelborn on August 24, 2004 at 20:39:02:

Hello, where are you in N.C. as that is where I am originally from also. At this time and considering the relative youth of the note I would say 40% or $10,000.00 After all that is what makes them discounted notes is the I don’t know how the note fits your scheme of things there is a time value of money meaning it is worth more today than it will be tomorrow.

small notes - Posted by Bryan (NC)

Posted by Bryan (NC) on August 24, 2004 at 17:01:08:

What is a typical minimum note amount that a note buyer will purchase. For instance, is $28,000 to little to find a buyer? (for the sake of arguement say 14% and 120 months) What about after 2 years of seasoning when the principle has been paid down to about $25k? If I could easily find a buyer for such a note, how much is reasonable to get for it (after 2 years of on time payments)?

I’m trying to talk the owner of a little house into owner financing to me. If I manage to do this, I’ll owner finance to a third party. I’m trying to get an idea of my chances of cashing out of this deal in a couple years.

Re: small notes - Posted by Tom Henderson

Posted by Tom Henderson on September 05, 2004 at 19:06:54:

Hello Bryan,

Although it is sometimes hard to get institutional buyers to purchase small notes, if this is a 1st lien, and the equity is there, this note should not be hard to sell to private investors. I specialize in small notes, because this is an excellent way of achieving above average yields.

For example in your example, discounting the note only $5k after 24 months will give you a yield of 21%. It does not take much of a discount on small notes or short terms to achieve astronomical yields. I love them.

However, I am not sure you would enjoy the same circumstances in two years as the present seller if you owner financed, because you would be in a 2nd position. Seconds demand a much higher discount than firsts. You might try developing some private note buyers. We can wheel and deal, where the larger instituitions will not.

Good luck.

Tom Henderson
H&P Capital Investmemts LLC