Do not make the mistake of not having enough exit strategies. New investor will often purchase a home without knowing what they will do with it. Then if the first exit idea they do not know what to do for plan B or C.
When you purchase a home make sure you consider plan B and C. If you do not it could hard to succeed at this business.
Do not make the mistake of purchasing a property without doing due diligence to evaluate the market the property is located in.
Great investments can go wrong with an unsuitable market and vise versa buying a property that does not look like a deal can be great because of the market.
What to take from this: Know your market. Know what is coming in what is going out. How is it doing?
We know the market has hit some difficulties. We also know the subprime market has basically crashed. What does this mean to you?
You have more houses to purchase and more people who can be willing, qualified tenants for you. Even if you do not have money or credit you can do lease options now.
Because of the number of people who could have gotten loans 10 months the number of lease optioners has gone way up. Consider having buyers / optioners now even before you had a property. Then think of the number of homes that you can tie up. This market is great.
If you follow the 6 other previous post I created you can sell your notes for a very good price.
You will want to keep in mind that all investors will offer differently on notes. Get to know the investors, their methods, what they look for, and how they deal. If you give them what they want you will get the best prices.
I will soon give some posts on actually selling the notes now that we know what to look for and what to add in a created note...
Allow a few payments called seasoning on the note before you attempt to sell.
Why?
Simply put this creates a track history. If a payor pays well it looks better.
Obviously a note that has paid for 20 years is worth more than a note that has paid for 3 months and the 20 year paid note will get a better offer.
Having 0 payments turns off most if not all note investors.
Keep the loan terms short. If you cannot keep the terms short because of the large payment attach a balloon to the loan.
Why?
The shorter the term the less an investor can discount the note to get a particular return.
Examples:
$100,000 note; 8% interest
Investor is looking for 20%
30 Year note would get a $43,911 offer.
20 Year note would get a $49,236 offer.
5 Year note would get a $76,532 offer.
True, the payment increase dramatically but the idea is still there.
Pull credit. Check income. Qualify a perspective buyer / payor. If you don't a new investor will and this is a huge way to keep yourself safe.
Why?
Keep in mind that most investors that will buy notes from you will act as a bank. They will want to know everything about the payor.
The more you know the less scared an investor will be.
You also want to make sure that you keep yourself safe just in case you keep the note.
People with high credit, low debt to income ratios, long term job history, and so on have a less likely chance to stop paying payments.
Get as much down payment as possible because the higher the amount of down payment to less risk to you and an investor that will purchase from you.
Why?
It has been statistically shown very well that those that have their skin in the game are less likely to default. Most investors that buy notes do not want to foreclose. Investors that buy foreclosure and deal in notes don't mind it if they default.
However, to get a better price for the note you may create or will work with you want down payment.
Interest: 2-4% above conventional interest rates unless a mobile home or land.
Why?
If an interest rate is low the investor will have to discount the note even greater to get the return the want.
For example 30 year; $100,000 note and the investor want a 20% return or yield:
6% interest originally on the note = $35,879 offer from an investor.
10% interest originally on the note = $52,517 offer from an investor.
14% interest originally on the note = $70,907 offer on from an investor.
I have had several private messages asking me how to sell mortgages. Because of this I will be adding a series of information about how you can create a note and sell a note you create.
One of the methods my partner and I use to escape properties is to create seller financed notes and we may sell them to investors.
Creating a note can be crucial to selling a note later or if you come across someone who has created or will be creating a note the note structure has to be created successfully.
Let me explain:
Who is Dean Graziosi?
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