Posted by Michael Morrongiello on August 24, 2008 at 21:07:57:
In Reply to: Carrying Notes on Midwest Properties posted by Lance on August 24, 2008 at 16:13:17:
Lance:
I've heard and have been exposed to the same pitch...These deals are not for the new investor.They are really for more experienced investors who have substantial capital to play with - and where a loss or two will not upset their lifestyle.
Inner city properties sold with a VERY LOW down payment and seller financing offered at EXTREMELY HIGH LTV's- loan to values is creating "paper" which is fraught with a ton of risk. The defaults that will happen with this paper will be substantial.
Fair Issac and Company - the developer of credit scoring and their "FICO" credit score model has factual emperical evidence that states;
Borrowers with credit scores of 550 or less< have a 51% probability (said another way - more than a 2 in 1 chance) of defaulting on their obligations within the next 24 months.
Prudent lending practices (which many lenders got away from over the last several years) like to insist that a buyer / borrower have put forth into the property a substantial saved down payment funds at risk.
There are plenty of opportunities to take advantage of without going out of your area, to other inner city areas, and without investing in HIGH RISK paper liket this.
Best to your success;
Michael Morrongiello