Real Estate Note Investing Mini Guide

[bukuu]

During the Virtual Real Estate MasterMind Group on Skype, a lot of people have been showing interest in the “note business” so I want to give you a better run down on how the business operates to acknowledge the multiple messages I've received.

For simplicity, we will use the term “real estate note” to reference a mortgage, deed of trust, or land contract.

When you own a note, you are acting like the bank. You will be receiving the payments. If something needs to be fixed, the owner has to do it. And like the bank, you also have the right to take the house back in the event of non-payment.

Note Investing Example

Let’s say a property sold for $120,000 with owner-financing and the buyer put down a $20,000 payment. The seller of the property carried back a note in the amount of $100,000.

Let’s assume they wrote the note at 10% interest for 30 years. If so, the note would look like this… 360 payments of $877.57.

Now, 5 years have passed and you have an opportunity to buy the note (it could be any number of years, just a example). That means there are 300 payments remaining.

The “Present Value” or current balance owed on the note would be $96,574.32.

If you wanted to earn 12% on your investment, you would pay $83,322.39 for the note.

How your risk is managed:

The value of the property is $120,000. That means your ITV (investment to value ratio) is 69% or that there is $36,677.61 of “equity” in the property.

The good news is...

You are earning 12% on a non-traditional investment backed by something traditional – real estate. IF the payer does not make payments, you have the same rights the bank has. You can foreclose and take the property back. You can then resell, create another note, or sell for cash.

In the case you had to take the property back, what is the likelihood that you can sell a property worth $120,000 for something more than $83,322.39? Pretty good!

Of course, this is a simple example and there are certainly some other variables, but you get the idea. With notes, you have the benefits and security backed by real estate – without the headaches!

And you have choices:

Want to lower your risk even further? You don’t have to buy the whole note!
You may just choose to invest $50,000, $20,000 or even $10,000 in the transaction – getting the benefit of event more “equity” in the property.

How to find notes…

Outsource It - It's easy: just contact me directly with your name, number, and email so we can discuss your game plan. You will be contacted with notes that fit your criteria and specific needs.


Or


When a mortgage or deed of trust is created, the original document will be recorded at the courthouse in the county where the property is located. Go to your local courthouse and search the real estate property records for mortgage or deeds of trust where an individual is the beneficiary.

Copy the name and address of the beneficiary into your records. Mail letters or postcards to them informing them of their options. I suggest 4 times a year.

Get the note holder's phone number and follow up with them regarding the letter you previously sent.


Or


Partner with real estate professionals – real estate agents, mortgage brokers, title companies, attorneys.
Why? Referrals! They come across or create notes and are unaware that they can be sold. This allows them to help their clients, who might have originally wanted to cash out their note.


I hope this quick guide helps. If you have any questions, feel free to ask them here, or inbox me with your contact info.

Looking for more information on how properties are sold and bought with owner-financing?
Check out this great book below to learn more.

Magic Button :

http://bestblackhatforum.com/Thread-GET-...-70-Faster

All the best,
Bukuu

PS
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PPS
Are you a Real Estate Investor (or inspiring to be)?
Join the Real Estate Investors MasterMind Group below:

Magic Button :

http://bestblackhatforum.com/Thread-JOIN...p-on-Skype

[RazorMAGNET]

Great tips man. Great tips. Reps Added.

[smileypeople]

so the seller of the property has a loan
how does one buy from him and sell the property to another
without paying off the original loan?

[bukuu]

The example above was on a property owned free and clear. However, if there was a underlying loan on the property, we can do whats called a wrap-around mortgage.

Here is an example using the same house above with a underlying loan:

Created Underlying Bank Loan 2005: $100,000.00
Term (months): 360
Interest Rate: 5%
Payment Amount: $536.82


Current Underlying Bank Loan Balance 2015: $81,342.06
Term Left: 240
Interest Rate: 5%
Payment Amount: $536.82

New Owner-Financed Loan: $100,000.00
Months Left: 360
Interest Rate: 8%
Payment Amount: $877.57

Now, as you may notice, the seller will receive $877.57 a month from the buyer and will then pay the underlying mortgage $536.82, leaving him a net profit of $340.75 ($877.57 - $536.82) every month.

So that is how you can sell with an underlying lien.

That is one of the many ways to skin a cat, in this game.

If you have any questions, feel free to ask them here.

All the best,
Bukuu

PS
Enjoy REI Material ? Show some love Heart hit the add reputation link and I will continue to give back.

PPS
Are you a Real Estate Investor (or inspiring to be)?
Join the Real Estate Investors MasterMind Group below:

Magic Button :

http://bestblackhatforum.com/Thread-JOIN...p-on-Skype

[fresh]

Replying to this thread so I can bookmark it.
Thanks for the post bukuu.


Cheers,
fresh

[gestroud]

Very good information. Thank you.