Case Study: Partial Note Purchase on a Mobile Home in Dayton, Texas
One of the questions I get asked most often is about partial purchases. Most note sellers call in asking for an offer to buy their whole note, and are unaware that selling the note for cash now and payments later is even an option. Here’s an example showing how a note buyer can buy just part of a note ("partial purchase").
Jane sold her 1999 Double Wide Mobile Home on 1.47 acres in Dayton, Texas, for $87,000. Dayton is a small town in Liberty County, just outside of Houston. The buyer had rented for a little while and did some repairs, so Jane agreed to seller-finance the full amount at 7.00 % for 15 years. She collected $719.06 per month for nearly four years ($28,000+), but then life happened and she realized those monthly checks weren’t going to fill her savings account as fast as she was going to need a lump sum of cash for another property. Small payments every month tend to get spent on groceries!
Jane filled out a Quote Request form on our website and we had a nice conversation the same day about her needs and how we could help. Jane really didn’t want to sell the note, but she needed cash, so she decided a partial purchase option would be the best fit for her situation and give her the cash she needed.
We paid Jane $40,000 up front and worked out an agreement to assign the note back to her when the remaining balance reaches $27,000. Here’s how much Jane received from the sale of her mobile home:
$28,000 (payments collected)
$40,000 cash from Texas Note Buyer
$27,000 principal balance when note is reassigned to her
$95,000 total (so far!) from the sale of her $87,000 mobile home
Jane got the cash she needed and is looking forward to payments again in a few years. Knowing Jane, she’ll probably want to sell another stream of payments for cash when the time comes, and that’s OK. Selling just part of your note gives you options!
How did that work out for us? We invest in notes for our own portfolio as well as for other private investors. Buying a note on a mobile home may look pretty risky to some, but what made this deal attractive to us was that Jane only needed $40,000 right now. The mobile home appraised for less than the sales price at just $72,000, but investing $40,000 into this note gave us a 56% ITV (investment-to-value) and an above-market rate of return.
The fact that this note was secured by an older mobile home in a rural part of Texas, the buyer put nothing down, and that the seller probably over-sold it (she did as evidenced by our appraisal!), made it an instant decline for other note buyers. We've been very happy with our purchase :-)
SCOTT WINN buys real estate notes in Texas and everywhere else. What started as a part-time job working for a note buyer while attending Texas A&M in the late 80's, quickly turned into a passion for real estate investing. Scott's experience in buying, selling, and managing real estate note investments, residential and commercial loan originations, servicing, collections, foreclosures, and the rehab and resale of real estate assets, has given him some great stories to share about lessons learned the hard way. Call him at 940-268-5850 for help with your note investments.