Buying notes

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Posted by Mark Knight on October 13, 2002 at 21:45:38:

I have recently come into contact with a local CPA here in Birmingham, Alabama. His client is in need of cash now instead of receiving the remaining 12 payments. I ran a credit check on the payor which turned out to be very attractive. (Beacon score of 805) I have been in contact with R&P Capital who gave me a 93.5% quote of the outstanding balance. The noteholder has accepted that quote and is waiting on me to follow through with the deal. I have never purchased a note for my own portfolio, I have just brokered them. After viewing the terms of the note and the payor's (almost perfect) credit score, I realize that it would be much more profitable to purchase the note instead of brokering it. I am very familiar with the condominium that is securing the note because I have stayed at the complex at least 4 or 5 times. I am 100% sure that the appraisal will be no less than $250,000 to $260,000 and probably closer to the $300,000 price range. I feel that if I purchase this note, there is no way that I can go wrong. In the unlikely event that the "A+ Credit" payor defaults, then I will own a luxury condominium on the beach that I will be able to sell for no less than $250,000 (sale price on 7-23-00). I am not trying to purchase the property. I just need close to $136,000 to purchase the note. I am seeking the lowest interest rate possible and have someone to co-sign for me that has an outstanding credit history. The person who will co-sign owns 2 childcare centers and has been in business for over 25 years. I would rather not have to collateralize either business and hopefully find someone who will use the condominium note as collateral. The only problem is getting someone to take a close look at the deal to see just how risk-free the opportunity actually is. I will appreciate any feedback.

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