Make sure the property has plenty of room between purchase price and re-sale value. You must protect your investment money, avoid risking it on a property priced at or above the market value, it is not worth the risk. True you will be paid well in interest, still if you do NOT want to manage a rental, choose properties that can easily be re-sold.
You must have a clear and concise plan of action and a good attorney!!! Put everything involved in the deal on the loan papers.
If the borrower is required to put a certain amount of the loan into fixing defects on the property, include these requirements on the loan documents and specify the date the work is to be completed. If the borrows fails to complete the work put in the ramifications, a late charge, spike in interest rate, you can even go as far as calling the loan due and payable. If the borrower is not able to come up with the whole amount you can foreclose and take the property back citing specific performance.
Keep excellent track of who is supposed to do what in the transaction, and make very sure it is clear and admissible in court. You want it clear enough you can show a judge and they will understand exactly what was agreed to.
Most homes that can be financed by a traditional mortgage broker or directly from a bank will give you a lower return than financing homes that need work. It’s highly recommend though, doing any large jobs before anyone moves in. For instance if the investment needs a foundation, that is not something that can easily be done later and is required for a traditional mortgage. Make sure and factor that in to the deal.
Don’t let your emotions get in the way! The only numbers that matter are the comparable sales, comparable listings, and the amount of money you are making on the deal. Don’t let attachments to the house or the borrowers get you into financial trouble.
It is NOT worth it for you or them.
Always use an escrow officer!! We can’t stress this enough. For the couple of hundred dollars it will cost you, not only will you have a professional handling the closing of your investment you will have title insurance! Then you can be sure the property you are buying has a clean title, doesn't have past liens or encumbrances, and all the paperwork is structured exactly how you and the borrower have agreed upon. Then there is no confusion.
Always use a neutral party to keep track of payments made. An escrow company usually has the option of having all payments the borrower makes go into an escrow account, then are released to you either on a set schedule or can be accumulated in that fund, which ever you prefer. It is very cheap usually under $5 per month, and it keeps everybody on the same page.
Finally, Make sure you review all of this, even this report with an attorney before making any financial decisions. Laws and restrictions are changing all the time, so make sure you get the latest information with a qualified local attorney.
Rules To Follow When Selecting A Borrower:
Follow these rules to be successful with the person you choose to invest in.
It is true; if the borrower should default you have security because you will then own the property. It is also true repossessing a property is a huge hassle and very time consuming. By using these simple techniques you will stay out of a courtroom, and still make lots and lots of money for you time and investment. lasiyam
Make sure the property has plenty of room between purchase price and re-sale value. You must protect your investment money, avoid risking it on a property priced at or above the market value, it is not worth the risk. True you will be paid well in interest, still if you do NOT want to manage a rental, choose properties that can easily be re-sold.
You must have a clear and concise plan of action and a good attorney!!! Put everything involved in the deal on the loan papers.
If the borrower is required to put a certain amount of the loan into fixing defects on the property, include these requirements on the loan documents and specify the date the work is to be completed. If the borrows fails to complete the work put in the ramifications, a late charge, spike in interest rate, you can even go as far as calling the loan due and payable. If the borrower is not able to come up with the whole amount you can foreclose and take the property back citing specific performance.
Keep excellent track of who is supposed to do what in the transaction, and make very sure it is clear and admissible in court. You want it clear enough you can show a judge and they will understand exactly what was agreed to.
Most homes that can be financed by a traditional mortgage broker or directly from a bank will give you a lower return than financing homes that need work. It’s highly recommend though, doing any large jobs before anyone moves in. For instance if the investment needs a foundation, that is not something that can easily be done later and is required for a traditional mortgage. Make sure and factor that in to the deal.
Don’t let your emotions get in the way! The only numbers that matter are the comparable sales, comparable listings, and the amount of money you are making on the deal. Don’t let attachments to the house or the borrowers get you into financial trouble.
It is NOT worth it for you or them.
Always use an escrow officer!! We can’t stress this enough. For the couple of hundred dollars it will cost you, not only will you have a professional handling the closing of your investment you will have title insurance! Then you can be sure the property you are buying has a clean title, doesn't have past liens or encumbrances, and all the paperwork is structured exactly how you and the borrower have agreed upon. Then there is no confusion.
Always use a neutral party to keep track of payments made. An escrow company usually has the option of having all payments the borrower makes go into an escrow account, then are released to you either on a set schedule or can be accumulated in that fund, which ever you prefer. It is very cheap usually under $5 per month, and it keeps everybody on the same page.
Finally, Make sure you review all of this, even this report with an attorney before making any financial decisions. Laws and restrictions are changing all the time, so make sure you get the latest information with a qualified local attorney.
Rules To Follow When Selecting A Borrower:
Follow these rules to be successful with the person you choose to invest in.
It is true; if the borrower should default you have security because you will then own the property. It is also true repossessing a property is a huge hassle and very time consuming. By using these simple techniques you will stay out of a courtroom, and still make lots and lots of money for you time and investment. lasiyam