Short Sales

What You Need To Know About Note Purchases

Smart investors often make an extreme profit by investing in promissory notes. See, a note purchase means the purchaser is buying a lender’s promissory note instead of the actual property. The foreclosure process can be expensive in time and money for financial institutions. When a loan under-performs, these institutions are often willing to sell them at a discount. Note purchases are a risky business though. Legal counsel is strongly advised for all note purchases.

Again, when an investor purchases a promissory note, the buyer buys a lien right from a lender. This means, the buyer can’t actually possess the property. Consequently, the buyer often can’t have the property inspected. The property is generally occupied by the original borrower.

Now, this is important: If the borrower can’t repay the loan, the buyer will then have to go through the lengthy foreclosure process that the first financial institution was trying to avoid.

Now, here’s the deal. These can work, especially if the buyer is able to reduce the borrower’s monthly payment. The buyer will also have to make a profit, of course. So, a low-priced note means all the difference.

Investors purchasing a promissory note can view a foreclosure like a landlord views a tenant eviction. Well, except that a foreclosure is far more expensive and time consuming. Foreclosures usually require lawyer and trustee fees upfront.  The potential for having to foreclose on a borrower is the main reason so many investors shy away from note purchases.

Thankfully, there are many ways to invest in real estate.

Paces Funding is a Hard Money lender offering hard money loans to purchase and renovate non-owner occupied residential and commercial properties throughout the Atlanta, Nashville, Florida, North and South Carolina metropolitan areas.
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Cashing in on Short Sales and Foreclosures

When you find a “diamond in the rough” house or commercial property, you must act quickly! Day after day, investors are hunting for houses and commercial properties—and they probably have their eyes focused on the same prize. Discovering a spectacular property at the right price is the name of the game.

If it is a short sale or foreclosure—you need to act right away. Banks are around to lend money and make money. They are not in the business of property management and most certainly want to dispose of the property as soon as possible. When a building or house reverts back to the bank, the lender then becomes responsible for things such as maintenance, insurance and property tax. Again, this is not their forte—so you must work fast!

After you decide that this is the right investment for you—what will give you an advantage? Cash in hand is still king when it comes to real estate. Considering that time is of the essence—a traditional lender will not be able to accommodate a fast turn-around—causing you to miss out on the deal of a lifetime. In addition, you are probably going to need some extra money to get the house or property back in tip-top shape, and the banks actually make it more difficult for you to qualify for a loan on a distressed property. Banks have stricter requirements for investment and commercial property loans.

Foreclosed properties aren’t going anywhere and investors are in the position to make this work in their favor, provided they move quickly. A hard money loan can get you the money you need to purchase the property—as well as fix it up—in less time than the traditional loan process.

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