A broker called me and said he had a listing of 42 mobile home park, 26 apartments, 2 commercial buildings, and a house on 4 acres for $1,000,000 dollars. I made an offer. He contacted me back and said that the loans were in default and the owner owed back payments. I cancelled the offer quickly.
A month later I decided to find out who held the loans that were in default. The title company gave me the information. There were two liens against the property and both loans were in default. I contacted the first lender who was a single lady who had held the note for several years and didn't want to foreclose and take over the property. She agreed to sell me her loan/note for $145,000. The balance on the first note was $260,000 plus back payments.
I didn't have the $145,000 to buy the first so I used the loan as collateral and borrowed the $145,000 from a private party lender to purchase the first loan. I paid the investor $1933.00 per month from the $9,000.00 a month income from the rentals. I knew the investor from having borrowed in the past. I found him from an ad that I placed selling a note that I had that I wanted to sell for cash.
I then contacted the 2nd position lien holder which was an investment group run by an accountant. I told them they would have to bring everything current or I would foreclose. Their note balance was $325,000. They didn't want to take back the property nor make up the back payments on the first loan. The accountant for the group called me and said their group was involved in other projects and they would assign their 2nd to me for the escrow and title fees. They agreed to sell me their 325,000 loan for the transfer costs or about $5,000 dollars.
Next step, I went to the owner told him I was the new “bank” and he told me he didn't want the property. He gave me the grant deed.
I had a nice monthly cash flow until I sold the property to another investor for $500,000.
I sold the property for $500,000 and made a whooping gross profit of $350,000. My monthly cash flow averaged $4,000 until I sold the property about one year later.
Think about it. I bought a $1,000,000 property in which I invested about $5k of my own money and used $145K from a private money lender. My sales price of $500K was a great deal for another investor and netted me 3X return on capital invested!
I could not have done it with out the use of private money!
Palm Springs ,CA