Structuring Your Note For The Future Sale

Sellers that offer owner financing would do well when putting together financing for a buyer to consider the future sale of the note even if selling the note in the future is not a consideration presently. We have no idea what the future holds so it is in the best interest of the seller to structure the financing in the beginning in such a way that top prices can be obtained should you decide you want to “sell my note” in the future.

Although a seller would like to obtain at least thirty percent of the sale price in the initial down payment, this is unlikely especially in the current economy. Twenty percent is the norm you should expect and in some cases, ten percent. If at least ten percent cannot be obtained, you should seriously consider finding another buyer since future potential for receiving a good price for your note if you sell will be seriously curtailed. Obtaining a higher percentage down payment reduces risks substantially since a buyer is less likely to walk away from a property or be foreclosed on with a higher rate of investment in the property. Future investors will also be less likely to consider your note with a low down payment since this elevates their risk levels as well.

Your buyer’s credit rating will also have a substantial evaluation impact when investors consider your note for purchase. Owner financing can often help people with less than perfect credit scores, but sellers considering the sale of their note to investors at some time in the future, should consider the impact of your buyer’s credit rating on a future sale. Investors will look at your buyers credit rating since their habits of paying in the past will determine how they will pay them should they buy your note. The interest rate of your owner financing note will also be a consideration and should be a minimum of two to four percent higher than what can be had a traditional lending institution.

It’s true, by offering owner financing to people that cannot obtain traditional financing gives you a wider market in which to expose your properties, it does have a down side if not structured properly. Working with your buyer and negotiating terms of the financing can be ideal for both parties. However, if you give too much a way in the structure of the financing, you may be severely limiting your ability to market the note properly in the future.

What Motivates A Seller To Offer Seller Financing?

We all know cash is king and at the end of the day, most sellers would prefer to walk away from the closing table with the cash from the sale in hand without holding a note. However, we know this is not always possible so individual sellers take the next best option, owner financing. But what are the benefits of owner financing other than if you decide you want to “sell my note” eventually, that motivates sellers to offer owner financing?

The largest reason to offer owner financing is it exposes your property to a larger market. People that can’t get financing through traditional means are many times, very good candidates for owner financing. Although some of the people that fall into this category are not creditworthy for various reasons and not worth the risk, others are of acceptable risk and can be considered viable candidates for owner financing. Considering these people as possible buyers can open your marketing efforts up to a whole new segment of potential buyers.

You do however, need to consider the reasons they are unable to obtain a loan through traditional financial institutions. Small down payments or no money available for a down payment may be one of the reasons. These people usually have jobs with an extended history but have for various reasons been unable to save enough money for the necessary down payment. Less than stellar credit history is another reason they have been turned down by traditional financial institutions, especially with the current credit crunch we are now experiencing. A lack of credit history is yet another reason. A recent job change or a change in career with no established record yet or self-employment income which can be a substantial obstacle for obtaining credit.

Some properties do not lend themselves very well to easily obtainable credit for a potential buyer. Houses located in neighborhoods with low property values are always a challenge and owner financing may be the only option. Properties in need of substantial and essential repairs often require creative financing in order to be sold. Properties that have been rental properties or multi-unit properties can be difficult to obtain bank-approved financing. Properties located in mix areas of both residential and business zoning many times are difficult to obtain traditional loans for.

There is the traditional reason sellers may offer owner financing - Investment. The housing market has been slumping for a few years now but this does not negate the fact hat people still need a place to live and call home. Owner financing offers the seller the opportunity profit off his property in slow times as will as hard times. In hard times it may be just a little more difficult to find a suitable buyer and require extra effort, but the choice is simple. Choosing between your property sitting idle and giving you a return on your investment is a strong motivator to get out there and find a suitable buyer rather than loosing money every month and draining your portfolio returns.

Cash For Notes - Taking The First Step In The Cash Flow Business

The Cash Flow Business

When the term cash flow notes is used, it generally refers to the entire notes industry as a whole, encompassing many different types of notes which are bought and sold. Private note investors as well as financial corporations specializing in the “paper” industry pay out millions in cash for notes to private note holders and other investors each year. Notes come in many forms and each transaction is unique. Although the real estate note is by far the most common type of note transaction, it is by no means the only game in town when it comes to the cash flow business. Below, we have compiled a list of the most common types of notes that are bought and sold.

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First things first as we begin. The Cash Flow Business can be very lucrative! Lucrative for those individuals willing to put forth the effort to build a business based on "paper" transactions which take place everyday. What makes this business so great is it is open and available to anyone. It doesn't require a four-year degree or a talent for accounting. One thing it does require though, is a willingness to do some hard work, especially in the beginning. If you are looking to get rich quick, then this business is not for you. There is a learning curve before you will be profitable for sure, as there is in any legitimate business venture. However, the beauty of this business is anyone can do it and there are readily available resources that can be purchased inexpensively in study course format that can help you get up to speed a great deal faster. One thing for sure is there is money to be made!

Mortgage notes or real estate notes are without question the cornerstone of the cash flow notes industry and rightly so. Note brokers and investors actively seek out private mortgage notes also referred to as owner carry-back or owner financing. With these types of mortgage notes, the owner acts as the bank and carries the note until the balance is paid in full by the buyer. Owner carry back financing is offered by the seller for different reasons but usually owners offer to be the bank to make their property more profitable and marketable, making the property available to a wider market than would be possible if traditional financing were used through banks and other lending institutions.

First time home buyers and buyers with less than perfect credit also benefit from owner carry-back financing since financing is generally easier to acquire through a private seller than through traditional lending institutions. Private seller financed mortgage note holders often decide they do not wish to hold the note for the term of the mortgage and often offer up the note for sale for a lump-sum payment and cash out of the note. Cash for notes of this type is big business and note investors search for quality seller financed private notes.

Note investors build cash flow notes portfolios with various types of notes, however, owner financed private notes are the cream of the crop and aggressively sought out. The private mortgage note holder may choose to cash out of the note for all manner of reasons. Other investment opportunities may arise and the note holder may need to free up cash. A family emergency or college tuition for their children may be needed, Whatever the case, owner carry-back privately held notes are excellent sources of cash flow business income for both note investors and brokers.

Structured Settlements

Structured Settlements are another form of cash flow notes sought out by investors that pay cash for notes to sellers so they can add to their investment portfolios. Structured settlements usually are settlements awarded by the civil court system to compensate the injured party in a lawsuit. First appearing in the 1970’s as an alternative to lump sum payouts as a result of lawsuits, structured settlements have grown in popularity as a structured financial solution of compensation for injured parties. Most often the settlement takes form as a annuity which guarantees future monthly payments to the awarded defendant until the total amount is paid in full. The awards may come in any variety of judgments including lawsuits, medical malpractice suits, personal injury lawsuits or wrongful death settlements.

In April 2009, Suzy Orman is quoted as saying that structured settlements provide ongoing payments and reduce the risk of blowing a lump sum payment through poor financial choices. However, structured settlements often do not meet the needs of those people that have been awarded settlements and lump sum payments are needed. People that have been awarded structured settlements can sell their structured settlements to a cash flow notes investor or a financial firm specializing in purchasing structured settlements. However, when choosing to sell a structured settlement careful financial planning should be utilized since once the lump sum payment is received, financial prudence should be the foremost consideration. Cash flow note investors or financial firms offer a lump sum payout for the balance of the structured settlement less a discount off the total balance. The discount is to compensate the investor for assuming the risk of collecting future payments and providing the lump sum pay out to the structured settlement seller. Note investors seek out these settlements on a daily basis to add to their cash flow business portfolios.

Lottery Winnings

We very often hear about people that win the lottery but we seldom hear that many times the winnings come in the form of an annuity that is paid out over an extended period of time rather than a lump sum payout. Because the winnings take the form of an annuity with a structured payout schedule, they are considered a note and are actively bought by cash flow notes investors, providing a lump sum payout option to lottery winners so they can receive most of their lottery winnings rather than waiting years. Again, sound financial advice should be sought before selling your lottery winnings for a lump sum payout. Not only can lottery winners cash out there future payments, but slot winners and contest winners can also sell their winnings to cash for notes investors.


Inherited Annuities

Many people receive inheritance in the form of an annuity rather than a lump sum payout. As above with lottery winnings and structured settlements, inheritance annuities can also be sold to a cash flow notes investors or financial institutions specializing in purchasing structured note payments. Although it is not recommended to sell a inherited annuity, in some cases there is no other choice available to annuitants. Medical or emergency situations may arise and other financial options may not be available to the annuitant and selling the inherited annuity may be the only choice. Whatever the case may be, inherited annuities are also another form of cash flow notes available to the notes investors.

Learn How To Get In The Cash Flow Business