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Alpha-Lambda Enterprises Inc.

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Note Structure

How to Create a Real Estate Note*

 

When creating a real estate note some key points are:

 

  • Sale Price

  • Down Payment

  • Amortization Period

  • Interest Rate

  • Balloon Payment

  • Payment Due Date

  • Penalty for late payment and insufficient funds

 

These details must work for both parties, of course.  When creating these notes specifically geared towards investors as in the case of simultaneous closings, pay close consideration to the following.

 

Sale Price should be neither too low nor too high above comparable properties or appraised value of the property. GET AN APPRAISAL DONE!  Too many people overlook this and cheat themselves out of thousands of dollars while others have an unrealistic opinion of the true value of their property.  An appraisal makes the real estate note easier to sell!!!

 

Down payment (min. recommendation for selling your note)

Owner occupied SFR 10-20%

Non-owner occupied SFR 20-30%

Commercial Property 30-40%

Improved Land 30-35%

Unimproved Land 40-50%

Percents are recommendations and are based on a  combination of actual appraised value and sales price. All notes are reviewed on a case by case basis.

 

Real Estate Notes That Work For You Make More Money

Interest Rates should be neither to low (as you would offer to your child or a friend) nor should they be extremely high. Both cases lower the value of you note.  In most cases 9%-10% Interest rates are the most marketable.

 

Amortization Period  should be from 10 to 30 years as customary.  Anything out of the ordinary would also reduce a note’s value to an investor.

Balloon Payment, you should always include this into your note to get the most out of selling your note.  A 5 or 7 year balloon payment (for the remaining balance at the end of 5 or 7 years) will serve ALL who are involved in the transaction. How?

1)   Investors will pay top dollar for this type of note.

2)   Buyer will have built up equity and built up his credit worthiness and can now refinance at a better rate than was possible when he first bought the property. Not to mention the property has probably increased in value!

3)   You get you the most money out of the sell of your property faster.

For a more thorough look at creating your note order your copy of The Note Owner's Manual and Checklists. Chapter 8 will cover all the criteria note investors are looking for in a privately held note or mortgage.  This is a must have for anyone seriously considering owner financing and selling their note either simultaneously or seasoning the note and selling it at a later time.  Even if you plan to keep your note you must ensure it is "sellable" in the future in case your circumstances change.

 

*Note:  This guide is offered as a starting point to getting the most out of a newly created note and is not meant to be taken as legal advise.  Persons making financial instruments should always consult with a lawyer or other paid professional to discuss all terms and liabilities of such instruments.

 

Simultaneous Closings     Get A Free Quote     Got Notes?     Fees     Create A Real Estate Note

House Flippers     Note Brokers and other Professionals     Seller Financing    Make a Note that Works for You

Example of a Simultaneous Closing    Why Owner Financing    Quick $$

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