How It Worked for Performing Note Investors
This re-performing second mortgage was purchased for $20,900 by a retired couple who’s LLC is building a small portfolio of cash flowing notes by utilizing the equity in their house to invest (HELOC).
The Fair Market Value (FMV) is $75,900 with a current senior lien of $44,342. The second lien payoff is $35,470 with a payment, including principal and interest, of $346.95 and 176 remaining payments. They love the 19.06%, twelve month IRR (Internal rate of return) as well as the potential “kicker”, which is the difference between the payoff and the purchase price that this note adds to their portfolio.
All this along with having a servicer in place to collect payments, a replacement warranty if the loan defaults, and just an overall feeling of control make this investment much easier to handle than when they had rental properties to manage.