EXAMPLES:
On a BANK-OWNED (REO) property, the private lender will buy back the note from the investor for approximately 80% of the note value, at a simultaneous close.
BANK-OWNED:
Investor agrees to buy a home from a bank for $400k (property worth $700k).
Investor agrees to sell to end buyer for $600k.
End buyer puts $60k as down payment (10%)
Private Lender creates a note for $540k (90% of purchase price)
At close, lender buys that note from investor for $432k (80% of note value)
Investor profits: $79,040
$432k (amount of note sale) + $60k (down payment) - $400k (purchase price) - $12,960 (3 points on $432k) = $79,040.
OTHERS:
Investor agrees to buy a home for $580k (property worth $700k).
Investor agrees to sell to end buyer for $630k.
End buyer puts $63k as down payment (10%)
Lender sets up approved buyer into a loan program for $567k (90% of purchase price)
Investor profits: $32,990
$630k (selling price) - $580k (purchase price) - $17,010 (3 points on $567k) = $32,990
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