Earl Green joined CFRI about two years ago. He knew he was interested in investing in notes, did some reading on the subject, then attended a CFRI class on Notes taught by Liz Brumer-Smith. Earl partnered with fellow CFRI member Shawn Lee for this non-performing note deal he presented at the February CFRI General Meeting.
In early 2016 Earl paid $14,000 for a note that had an unpaid balance of $60,000. The note was being sold by a hedge fund which had bought non-performing notes in bulk from banks.
The borrower had not made any mortgage payments for about three years. The property that was collateral for the note was a 3 bedroom 1 bath mobile home built in 1999 in Greer, SC on a very nice 3/4 acre lot. A real estate agent in SC did a BPO and determined the mobile home might be worth $45,000 as-is.
Earl and Shawn never visited the property. It was occupied by the son of the borrower on the note. His father had passed away. Their goal was to work out a deal so the son could keep living in the home. They were able to contact the son since he had a sign in the yard promoting his computer business. They contacted him, but the son wouldn’t cooperate. He thought the house was still stuck in probate even though Earl and Shawn knew it was not.
The original lender on the note had already begun the foreclosure process which led Earl and Shawn to believe they could continue with the existing foreclosure and be able to sell the property quickly at the foreclosure sale
After paying some legal fees, and having some delays due to a judge, the property went to the foreclosure sale. No one bid over the $35,000 minimum Earl and Shawn had set for it. They now owned the house as an REO and proceeded to find a buyer with the help of the local agent that did the BPO.
A friend of the occupant agreed to buy the house for cash and allow him to keep living there. They sold the home for $45,000, and had net sales proceeds of $41,600.
Earl and Shawn had paid about $4,000 in legal fees and workout costs above the original $14,000 purchase, thus making a gross profit of $23,600 without even visiting the property or doing any repairs. A 131% return in 9 months!
Some lessons they learned:
1. Some things just take time. (You can try to rush an attorney, but you can’t rush a judge!)
2. Part of a good deal is better than no deal.
3. Good real estate agents are GOLD!
Reprinted Courtesy of Central Florida Realty Investors. Visit www.CFRI.net From the May 2017 issue of the CFRI Newsletter.
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