We wanted to share another one from the pipeline.
464 performing residential mortgage notes sitting on a defined subdivision in the Rio Grande Valley. Owner-occupied, first lien, 1st position on every single loan. Aggregate UPB just under $14.9M. Nothing broken here, every note is paying.
We negotiated the portfolio down to 92% of UPB an 8% discount to par before we even underwrite the real estate underneath it. That’s over $1.1MM of built-in equity on day one, plus the seller’s tax and insurance reserves transferred to us at closing, so we walked in with extra liquidity and lower carry from the start.
Here’s the twist that makes this “boring” asset class interesting: the portfolio carries a 10.22% weighted average coupon. We’re financing it with a $10MM note-on-note facility at roughly 67% of UPB, priced at SOFR + 2.5%. That spread between what the notes throw off and what the financing costs is the whole trade a wide, durable margin sitting on top of a concentrated, easy-to-monitor collateral pool we can drive by in an afternoon.
Small check size per note ($32K average), big first-loss cushion, and a lender-friendly structure with a conservative advance rate. Add moderate leverage and the numbers pencil to a strong double-digit cash-on-cash return for our investors, sourced from something most allocators never look at twice: seasoned residential paper.
This is the same playbook: boots on the ground, off-market sourcing, structures most institutions are too big or too slow to bother with.