Exchange of View Points on RE and Note investment

Hello ET
what is the figure that you are looking at because I have a very interested party that closes fast and I trust this person.
WHAT IS YOUR PRICE WANTED FOR  BOTH NOTES
I CAN DO THIS WITH THIS INVESTOR

Wed, March 24, 2010 7:34:24 PM


For tax consideration, I'll not give any discount on my note of $60,000 (It is definitely working on 15 year amortization schedule with 10% interest and due in February 2019.  I prefer to keep this note if possible---there is no such urgnet need for me to sell both notes; just one note sale is good enough for my conservative mind if I buy a home in AZ.)  If that's acceptable, I may accept $46,000 for my second note of $73,000 (It appears that the buyer may not get tax credit of $8,000 in time to exercise her option so that the note is going to be working on 30 year amortization with 11%, due in June 2019. But everything is possible since there are still 7 days for the buyer to pay and exercise her option.)  So the posssible price for me to sell both is $106,000. Hope this can of help.

ET    

Date: Fri, March 26, 2010 11:17 pm

Dear J. B.

It seems you understand my position.  Allow me make it very clear, the note of $60,000 is created from a property that I'd lived more than 2 years.  As you know, all the profitt is tax free per the current home sale law.  So, any discount I give out is 100% loss to me. 

The note of $73,000 is different. That's my investment property in which all the profit is subject to tax as capital gain.  That means my discount is NOT 100% loss to me in terms of net gain after taxation.  That's why I am willing to give 37% discount ($27,000) . You know what I expect for both notes ($ 106K); I am open to your reasonable "package" offer if you or your buyer agree to accept my above condition: full price for the $60,000 note. 

Thank you for your hard working,

ET

Hello ET,

I understand your position, but I do not understand your numbers the Killeen Note which you have recieved two years of payment already has a current balance of 58660 ( no investor is going to pay 60000 for that, besides the investor is paying for the risk of the future. Mobile home are at the bottom of the housing chain they do not appreciate ( no matter how attached you have become to them ) The other note with 2016 square feet is this the NOTE THAT YOU WANT 60000 DOLLARS FOR am I correct on my assessment if that being the case then you would be will to sell the othe note at 25 - 30 % off the current balance owe or is it the other way around ( do I have the notes switched around on my assessment ) let me know if I am correct so that I make the next move.

Dear J. B.

You are great in catching up my position, even there are some confusion and misunderstandings.

Let clear some facts:

1) The note A with original principal amount of $60,000 is created in January 2009. This one comes with 2180 sqft living space and it is the one I hate to give out any discount.

2) The other note B with original amount of $73,000 with 2016 sqft is created in April 2009. This is the one I am willing to give 37% discount to compensate your buyer if there is a package deal accepted.

3) Since they are created in 2009, it is impossible for one of them to have a record of two years payment. 

*****

Now, let talk about some myth, opinions or perceptions:

This is an area full of subjective idea.  Everyone has his or her bias, preference or viewpoints. The following is purely my opinion. 

It appears to me that you may have an excellent expertise in note or paper business; but you seems to me not really understand real estate investing.

To certain degree, I agree with you a mobile home is a depreciating asset as a note or car is. However, the same is true to a sticky home (site-built home.) Other things being equal, an older home has less value than a brand new one. If you check Los Angeles county assessor website, you can see much share, up to 85%, of the purchase price is allocated to the land value; while improvement hardly gets more than 30% of the value in the eyes of assessor. 

The point appears to me that the value of a piece of real estate is basically coming from the land (that's why people say "location, location, location.")

Now let's go back to see what happens to a mobile home. A mobile home is located in a mobile home park without land is depreciating by the times as you said, no matter how it is affixed.  But it is totally different if it has its own land. Why?

All the appreciating value goes to the land in which park owners get all the equity and appreciation in relation to its rent increase. The higher the lot rent, the lesser the mobile home value.  It appears that your perception is based on your observation in California where most of mobile home are in a park without land and pay a hefty lot rent of thousands of dollars a month.  If you can look farther at those beautiful mobile homes in AZ, NM or TX, you probably are going to have different view.  That's why I don't buy a mobile home without land. 

Last, all the numbers have to be making sense. I agree with you that the chance of selling my note A of $60,000 for more than $58,000 is slim if my note purchaser is a professional note investor who wants very high-yield return (in your proposal, it seems your investor is more greedier than other brokers' by roughly asking a rate higher than 45%).  But on the other hand, it is also very possible to make someone very happy if he or she is not so greedy.   Say, the ones who are putting their money in a bank saving or CD to earn 2% interest since they can have 5-7 times return in terms of interest.  So it depends whom we are dealing with, right? 

So, let's just say, my bottom line is: $106,000 for both notes no matter how you or your buyer want to allocate the fund to each one. At this moment, I am very firm on this and there is not much zone to negotiate unless I can't resist my girlfriend's demand of more cash reserve.

Both of us will be luckier if you can find a doctor, dentist or someone who is unable to do active investment, except a passive one. From the past few days communication, may I suggest you to cultivate your client base to find and explore the opportunity to serve average Joe.  Don't confine yourself to those professional investors who are so greedy to ask 20-40% yearly return rate.  An average Joe will be more content, very happy to buy my notes.  In particular, please dig out a self-direct IRA account holder who will jump on this profitable opprotunity to put my notes into his or her account once he or she knows its existence and quality of tax-free and fast growing of assets.  Not only you'd be more appreciated by them, but less stress and better performance can be expected in your business. 

ET