Thread by @financeguy725

how i made $4,000,000 in 60 days on a deal no one would touch 👇

I've said a few times that perhaps my edge isn't actually sourcing or anything tricky like that

maybe my edge is just a really weird collection of risk tolerances

i suppose this deal is case in point

I first saw this NPL in a widely marketed pool last summer

some NPLs are scarier than others

this one was a stillborn ground up multi-deal that had a pile of mechanics liens and tax defaults to go with the usual payment default

mid-stage construction NPLs are interesting

you're buying a lawsuit (as usual with NPLs)

if you win the suit your prize is taking over a fiasco construction project with a bunch of unpaid bills

it's the kind of thing that vest bros in midtown like to avoid

which is why it smelled like an opportunity to me

it didn't trade as part of the big marketed process

i was the second highest bid at just under 50, but first place was only a couple points ahead of me

but i had zero DD and 30 day close on my LOI

the original lender wasn't ready for bathtime just yet

i'd forgot about this one until a few months ago

@CleanTo2ndLien put it back on my radar

i went to see it again, this time the place was hopping

siding sub and all the trades where there

i even got some looks from the foreman before i walked over to chat him up

good signs, maybe i won't have to finish this thing

I tossed out a new LOI for 12mm or about 75 cents

closed late june

for those keeping score at home my (rounded) numbers were:

purchase price: 12mm

contract rate payoff: 16mm

Default rate payoff: 17.5mm

Collateral value: ???

Cost to complete: 10mm

Stabilized value: 35mm

I wasn't excited about the prospect of stepping into this mess and dropping the 10 million bucks needed to complete it

but i didn't think this outcome too likely

maybe 1 in 10 chance

and i was gonna make a lot of money in that outcome anyways, but it would take work

for a lot of credit guys, that 1 in 10 chance of a complete shitshow is enough to pass on the deal

I saw it differently

there was a 10% chance I would have to work a bit more to make a lot of money

and a 90% chance I would make a decent amount of money

me like

we did something the previous lender had refused to: we called a default and started foreclosing

this pushed the borrower to get off the couch and get a refinance

while I didn't expect it to play out as quickly as it did

a little over 60 days later it paid off

I gave a break on the default rate, but still made 4mm on a 12mm ticket in less than 3 months for a cool unlevered 33% return

and i didn't have to dust off my hard hat 😂

this is the latest NPL deal out of our fund

you can learn more about the fund at the link below or DM me

constlending.com/credit-fund