Orlando, FL - Reperforming 2nd Mortgage Note Purchase - Collateral Assignment (Case Study)

I purchased this reperforming 2nd mortgage back in 2023 on a property in Orlando, FL. 8-months after I purchased the mortgage, I did a Collateral Assignment with one of my investors. Eventually selling the mortgage to the same investor.

Here are the Deal Numbers:

Property FMV: $475k
1st Mortgage Balance: $225K (Current)

Note Purchase Price: $28,425.91 (Purchase Yield 13.7%)
2nd Mortgage Loan Balance Purchased: $50,943.06
Borrower Payments Made: 4
Borrower Payments Purchased: 356
Monthly Loan Payment: $350.00
Current Interest Rate: 7.2901%

I collected 8-monthly payments of $350 (8 X $350 = $2,800 received), I then did a 2-Year Collateral Assignment with one of my investors.

A Collateral Assignment of Mortgage is a legal agreement where an investor gets a security interest in another investor's mortgage loan and its underlying collateral (like property) to secure a loan between the two investors, essentially pledging the mortgage as collateral for a loan.

2-Year Collateral Assignment Amount: $30,000 (Money lent to me, from my Investor)
Monthly Payments to my investor: 24
Monthly Interest-Only Payment to my investor: $250 (10% Yield to my Investor)

I used an existing Reperforming 2nd Mortgage as collateral to borrow $30k from my investor for a 2-Year period. The terms between my investor & I, were 24-monthly payments at 10% interest-only, which is $250 per month. After 24-months I owed my investor their full principal amount back, the $30k.

For 24-months I collected a $350 payment from the borrower of the mortgage loan and paid my investor $250 a month. So, I still received $100 a month, after I paid my investor their $250 (24 X $100 = $2,400 received).

I could have paid my investor back his full principal amount of $30k, when the Collateral Assignment was finished, but I decided to sell him the mortgage note instead.

Investor's Note Purchase Price: $36,908.72 (Purchase Yield 10%)
Since I owed my investor $30k, they only had to come to the closing with $6,908.72
2nd Mortgage Loan Balance Purchased: $49,516.68
Borrower Payments Made: 36
Borrower Payments Purchased: 324
Monthly Loan Payment: $350.00
Current Interest Rate: 7.2901%

The thought process was to buy a Reperforming 2nd Mortgage Note, borrow against it since I needed $28k for my son's college tuition and to make some money along the way. Instead of just coming directly out of pocket the $28k for my son's college tuition.

My Note Deal Numbers:

8-monthly payments collected from the borrower of $350 (8 X $350=): $2,800

Cashflow from the difference between the borrower's 24-monthly payments minus the 24 payments to my investor at $250 (24 X $100=): $2,400
Amount made from the difference of what I purchased the Note for and then selling it to my investor ($36,908.72 - $28,425.91=): $8,482.81
Total profit made over a 3-Year period minus the original note purchase price of $28,425.91 ($2,800 + $2,400 + $8,482.81=): $13,682.81

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