Looking to Create Marketable Real Estate Notes? Read This!

1384589_brown_envelope_money_bribe_1If your’re looking to create marketable real estate notes then you’ve come to the right place. Take a look at this article and learn how to design your notes in order to make them more marketable to make even more monet.

From the article:

I am often asked how can I structure these types of deals to provide for two things:

A saleable note that can be easily converted into cash

A minimal note discount from the balance owed

The following circumstances surrounding a potential note deal will come into play when a note investor, including ourselves, is looking to purchase these newly created notes. Let’s briefly explore each of these variables.

Type of property
As far as the collateral securing repayment of the note is concerned, clearly a vacant land parcel that has no improvements attributed to it would be considered far riskier than a mortgage lien on a single-family dwelling, which is generally considered to be the easiest type of real estate to finance, sell, or dispose of.

Different types of collateral warrant different levels of exposure from a funder. Residential properties are far more acceptable than commercial properties or land. Within the residential sector, there are varying degrees of acceptance over the actual type of residential property.

A mortgage lien on a single-family detached home is far more desirable than one on a condominium, town home, or mobile home, etc. We will focus on the most desirable type of collateral for an investor in paper and that is the “bread and butter” single-family home.

If you are creating paper and want to maximize the amount of cash you can receive, then a properly structured first lien mortgage on a single-family, owner occupied, detached dwelling is by far the type most note funders can price aggressively–meaning, maximizing the funding exposure and minimizing the discount on the note sale.

Occupancy
Statistically speaking, a payor who lives in his home as their primary residence is going to keep up the condition of their property better and pay more timely on a note than an investor/owner who may be struggling to collect rents, keep up with repairs, or other bills, etc.

This translates to more conservative exposure levels that are going to have to be adhered to for a non-owner occupant/investor type payor. It is wiser to sell to prospective buyers who are going to live in the home, feel that they have some emotional attachment to the home, and are more willing to pay a full “retail” sales price for the home than an investor.

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SIDENOTE: Looking to only sell a portion of a note? Checkout this article and get answers to your questions that could be of interest to you.
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Read the entire article here: http://www.creonline.com/how-to-create-marketable-real-estate-notes.html#ixzz2RrRP0iFJ

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About Capital Connections

Christian Downward is a note investor serving the Washington, DC and Sterling, Virginia areas.

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