SET YOURSELF UP FOR SUCCESS by Thomas Standen Sr.
It is no secret to anyone who has been in the real estate business or financial market for more than a decade; the the Real Estate Market is cynical. When the market suffers from a downturn due to any cause including increase in interest rates and/or inflation, the willingness of the institutional lender to provide highly leveraged loans declines. Unfortunately, at the same time the ability of buyers to pay significant down payments also declines.
As you know, one of the benefits of investing in real estate is the ability to leverage your investment that is. Although you control the entire asset, you only are required to pay a portion of the purchase price down; the balance can be financed over time. During the present cycle, interest rates are low and inexpensive institutional financing is plentiful. However, when the economic conditions tighten – and history declares they will – sellers who want or need to sell will once again be faced with carrying back a note secured by either a first or second Trust Deed on the property – or waiting out the cycle.
There is a Proverb that declares: “a wise man sees the problems ahead and prepares for them”, as a Cash Flow Specialist or Investor involved in the purchase, flipping or sale of promissory notes secured by real estate, it seems that right now you would be wise to get ahead of the curve and learn all you can about how seller carry back financing is structured, bone up on the variables, be able to recognize nuances in the note and be in a position to analyze the effect of specific clauses affecting the value or transferability of the note.
The new Cash Flow Consultant may not be aware of the many variations in the type of notes and variations in the payment schedules. So, here is a little run down not intended to be absolutely all-inclusive. To read the rest of the article
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