Capstone recently purchased several low balance Contract for Deeds and sold 3 small partials which were tagged “Partials For Beginners”. They were sold before all of the COVID-19 mess. This is a situation that evolved truly by accident. The variables were such a new investor could make that big decision to “jump in” and buy their first note without any real risk. Even with the uncertainities of COVID, the investors funds are relatively safe.
One may ask, “Why minimal Risk?”
They all had great basic analytics. Meaning, low Investment to Value(ITV)< 35% & low Loan to Value(LTV) <50%. All the loans had a great pay history–greater than 5 years with real negatives. The payors insurance was in place. They were professionally serviced. They all had a low investment entry point of less of than $11,500 and a partial amortization schedule of <46 months.
Normally a partial is only viable with a larger # of payments remaining –typically over a 100. In this case, the partials were viable due to the superior buying power of Capstone resulting in a winning combination for the partial buyer and Capstone.
I asked each investor why they chose to buy. To the person, it was the set up.
- Low dollar entry point
- Great deal analytics
- That I, a seasoned note investor would be protecting their interest as the “tail owner”
- This would be a learning opportunity for them to see 1st hand just how a professional note broker structures a partial transaction for free and still make money and get all the paperwork. No mentoring fees were asked for or required.
- Bottom line it was the 3 famous words in any sales transaction–the know, like and trust factor. Therefore, not just the deal but the deal maker.
Check out this short utube detailing the deal points and similiarities of each transaction.
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