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Hey Folks!
Martha and I will be doing a webinar in the next couple of weeks where we explain the partial agreement and flowchart.
If you have questions about the partial please enter them below and we will try to cover as many as we can!
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What documents do you send to a potential partial investor? Should we send the BPO for instance or only the Executive Summary?
Dawn Glass
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When it comes to investors, the less the better. Executive Summaries should be thorough enough for a purchase.
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In Martha’s experience- do clients transition from smaller partials to larger partials or to whole notes?
We’re trying to decide what kind of notes to buy to maximize our partials offerings from clients out of our portfolio.
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Fred,
I can’t address Martha’s experience.
You may want to consider the purchase of high dollar, long remaining term PN. These aren’t the typical Note School niche. Have your Passive investors lined up (funds already with the escrow agent). Double close where you buy the whole note (preferably in a ROTH) and immediately have the partial buyer fund most of the deal. Then hope for or encourage the homeowner to refinance. Or they may sell before the term expiration. Then repeat with your recaptured funds.
Bob B
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I am interested in selling partials. I find many terms in the partial agreement confusing, and I have read about possible scenarios where partials border on being security that is not secured completely by the Real Estate. Can you explain ?
e.g
1. — Section F mentions that this agreement is not a security. Is that sufficient to not require filing with SEC ? What happens if borrower defaults during partial term — who steps in and which clauses in the agreement covers that ? That control of transaction which could make partial an unsecured/partly-secured security ?.
2. Can you also explain what clauses are special in the partial purchase agreement – that are missing in partial sell agreement — I understand handling of default and full payoff are covered.
3. Is the security recorded for a partial sale ?
4. The agreement makes no mention of yield receivable by purchaser but only how purchaser gets N installments of amount X. Is this on purpose ? Is same caution needed when we approach an investor and describe their interest in partial purchase from us ?
thanks a lot!
Abhay
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Does a partial note purchaser need to invest via an entity and sign an NDA to get access to any note details ?
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Question: Why wouldn’t I want to purchase a PN with highest possible rate if I am intending to sell a partial?
* Material: PN training modules, module #3 (Nov 12, 2015). The module discusses pricing of performing notes when we are interesting in selling a partial. The trainer said to purchase notes with interest rates <8%. The logic used was that the buyer of the note would expect to make at least the yield on the note.
* I contrived three examples below. The best investment from a $ perspective is the one
with the highest interest rate (intuitively obvious)
* Ex1: 30yr note for 100k at 10%, 330 pmts of $877.57 remaining
Partial could be sold for $74.5k, giving investor 120pmts yielding 7.33%.
* Ex2: 30yr note for 100k at 8%, 330 pmts of $733.76 remaining
Partial could be sold for $62.5k, giving investor 120pmts yielding 7.25%.
* Ex3: 30yr note for 100k at 3%, 330 pmts of $421.60 remaining
Partial could be sold for $36k, giving investor 120pmts yielding 7.19%.
* What am I missing?$100k loan, 360mo, 330 mo remaining 10% 8% 3%
Payment $877.57 $733.76 $421.60
Partial term 120 120 120
Partial price $74.5k $62.5k $36k
Investor return 7.33% 7.25% 7.19%Follow-up: A second reason was given (November 12, 2015, 50min, 29seconds) for buying a note with an interest rate less than that offered to the investor.
* Czarina: “The reason why I also want to have an interest rate that is higher than what the note is written at is because if it pays off early, my investor still makes a little bit of money. If I sell it to them on a coupon clipper and it pays off early, then they don’t really make anything because all of their investment was in the fact that the person was going to continuously pay.”
* I don’t understand this either. If the note pays off early, the investor would get payed
off early, ultimately receiving a higher yield -
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Following up on this thread. Were these great questions answered? If so, where?
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