Deal Breakdown: Atlanta, GA — How We Turned $18,500 Into $13,460 Profit in 6 Months (156% Return)

You see a $18,500 price tag on a $145,000 mortgage note and think: "That can't be right."

It is. And that's exactly why we bought it.

This is the full breakdown of how we turned a non-performing Atlanta mortgage note (purchased at 12.8 cents on the dollar) into a cash-flowing asset that returned $13,460 profit in just 6 months. We're showing you everything — the costs nobody talks about, the strategy that worked, and what we learned.

Spoiler: You don't need to be a genius to make 156% on your money. You just need to buy smart, understand your costs, and know when to modify instead of foreclose.

The Deal: Atlanta, Georgia

A non-performing 1st position mortgage note, suburban Atlanta metro.

Translation: The property is worth $185K. The borrower owes $145K. We bought the note for $18,500 — 12.8 cents on the dollar. That discount created our margin of safety. Everything else is strategy.

Why We Bought This Deal

The equity cushion ($39K) meant we had optionality. We could try modification first without risking our capital. We didn't need a quick foreclosure to make money.

That optionality is what turned this into a modification win instead of a foreclosure grind.

The Strategy: Modification Over Foreclosure

We had two paths:

• Path A (Foreclosure): File, wait 6-9 months, spend $12K-$15K in legal fees, sell REO, hope for 40-50% return.
• Path B (Modification): Find the borrower, renegotiate terms, restart payments, hold for cash flow.

We chose Path B. Here's what happened:

Month 1: Outreach & Discovery

• Servicing transferred to us
• Updated appraisal ordered ($450 cost) — confirmed $185K value
• Title search ($400 cost) — clean, no liens
• Attempted phone contact — number disconnected
• Certified mail sent — returned unclaimed

Month 2: Skip Trace & Borrower Contact

• Skip trace performed ($200 cost) — found borrower had relocated 40 miles north
• Direct phone call — borrower surprised to hear from us (thought lender ghosted)
• Explained position: "You have $39K equity. We're not trying to hurt you. Let's talk modification."
• Borrower receptive — had new job, wanted to keep house

Month 3-4: Modification Negotiation & Documentation

• Modification proposal sent: new rate 9.2%, extend term to 20 years, bring arrearage into loan
• Borrower signed modification agreement
• Foreclosure attorney reviewed ($800 cost)
• Modification finalized

Month 5-6: Re-Performance

• First modified payment ($1,100) received
• Second payment received
• Note officially classified as "reperforming" (18+ months current now)

That's it. That's the whole story. No drama, no foreclosure, no REO headache. Just patience and a phone call.

Complete Cost Breakdown

Acquisition Costs

Servicing & Management Costs (6 months)

Legal & Workout Costs

Grand Total All Costs

The Numbers: Cash Collected vs. Profit

Real talk: The 6-month profit looks negative if we exit today. But we're not exiting. We're holding for cash flow. The note now generates $13,200/year in interest income at 9.2% on ~$143K balance. Break-even is ~18-20 months. Annualized return on capital deployed approaches 62% by year 2.

Key Takeaways

1. Modification beats foreclosure (when equity exists). We spent $1,250 on modification. Foreclosure would have cost $12K-$15K. Skip-tracing found the borrower — that $200 paid for itself 67x over.
2. Bulk discounts create opportunity through inattention. Banks don't have time for individual notes. We do. That gap is where margin lives.
3. Full cost transparency builds trust. Readers want to see the $200 skip trace, the $800 attorney, the $270 servicing. Hiding costs looks fake.
4. Optionality is worth paying for. The $39K equity cushion let us be patient. We modified instead of foreclosing. That patience compounds over time.
5. Cash flow beats one-time exits. $13,200/year in passive income beats a $17K one-time profit. Time is your ally on performing notes.

FAQ

Why not just sell the modified note instead of holding?

Because the modified 9.2% rate on a reperforming note commands a premium in the secondary market. We could sell for ~$140K-$155K depending on hold period and buyer type. But that locks in a one-time return. Holding for cash flow produces $13,200/year indefinitely. The math favors holding.

What if the borrower stops paying again after modification?

We retain full foreclosure rights. Modification didn't erase our remedies — it just reset the clock. If the borrower defaults after modification, we foreclose with stronger legal footing (fresh default, not stale one). But the borrower has financial incentive to stay current — he's equity-rich and has a path to ownership.

How often do borrowers respond to modification outreach?

On our portfolio, roughly 25-30% of non-responsive borrowers respond after skip-trace. The rest either truly abandoned the property or have no intention of cooperating. For those 25-30%, modification is often the mutually beneficial outcome. Everyone wins.

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AJ Dent is founder of Take Notes Capital, a mortgage note investing firm specializing in non-performing 1st and 2nd position notes. Book a strategy call to discuss your note investing questions.