Buying Second Deeds of Trust / Notes

[Craig]

Doubt there is really that much available out there these days, but when the housing market cools, there may be more carrybacks out there.

Anyone experienced in buying second DOT notes? Example ... former owner of a piece of real estate is holding a 15 year, 7% note, fully amortizing ... original principal, say $15K, and paid down to $12K. Buy the note for $XXK, and be ready to take the property if things go south.

I know some folks do this for a living ... anyone here experienced? What did you like, dislike, what were your processes to minimize risk, etc.? Thanks.

 

[P.S.]

Over the years, my parents have tried to do this many times with commercial properties, but when they investigated , and more investigated would find something to preclude buying, like liens, etc. They still look though.

 

[uncledrz]

A second deed of trust or mortgage is subject to the first. Thus, if there is a default on the first, you may have to step in and bring it current, or make other arrangements, all at a time when you don't have possession of the property. Makes it a risky proposition, so the returns need to be high enough for undertaking this risk.

I've done some tax lien/certificates investing which while it doens't give the same return potential (never got a property--but did the research and only bid on good properties) is not as risky if you do your homework and don't bid on junk properties.

Uncledrz

 

[brewer12345]

uncle, could you talk a bit about the tax lien thing? I have read a couple of books on the subject and it seems like it isn't that hard, but that you actually have to be there to do the research, buy the lien, etc. What kinds of returns did you get? Where did you buy the liens?

 

[uncledrz]

uncle, could you talk a bit about the tax lien thing?  I have read a couple of books on the subject and it seems like it isn't that hard, but that you actually have to be there to do the research, buy the lien, etc.  What kinds of returns did you get?  Where did you buy the liens?

Brewer
I wrote a long explanation of the tax liens and then promptly lost it, so I'll try again, but maybe shorter.

Michigan did some in the 90's. Law has since changed. Was 1% return a month, then after 12 months (I think) went to a straight 50% gross return. Three years later you could foreclose and get either paid, or the property.

Florida late 90's early 2000's, bid against interest rate. So at auction if you bid 9% , 6% or 4.5% and are low, you get that rate. Same idea that after 3 (?) years can sue and foreclose, thus either get paid or property.

Never did in Illinois/Wisconsin so can't comment there.

Made 10-30% on Michigan properties, 5% in Florida, all cash on cash, not taking into account expenses.

Research of law and procedure is an absolute must. Also must spend time to know the area. Key is to not bid on junk property.

Just a short outline with a few points.

Good luck
Uncledrz