Valuation, Appraisal and Investing Tips for Real Estate Note Investing

Understanding Valuation and Appraisal of Real Estate Mortgage Notes

Savvy Investors Investigate Before Investing

As you manage your savings and investments, probably without realizing it, you are appraising and valuing investing opportunities, and their risks, and their future performance. You and millions of other amateur and professional investors are doing your own valuations; you are “swimming with the sharks.” Following are some basic appraisal and valuation tools that you should use to protect your savings from losses, and to improve your investment performance.

Shark Protection Tips For Investing in Real Estate Promissory Notes

Who is bringing you the deal? In many cases an investment opportunity is brought to you, and presented to you, by a stranger or by someone referred to you by an acquaintance. Your first job is to learn the investing facts about this person; learn exactly who he represents, how does he get paid, what is his professional background and training, does he have prior investing clients that you can interview as references for his capability.

If this person does not check out, don’t go any further with his investing opportunity.

What are the facts relating to the overall deal-the transaction?

Getting an overview understanding of the transaction, and then getting comfortable with its details is the first step needed to avoid having “lenders remorse”; that is, you don’t want to fund the loan now and then look back in three months and say to yourself “what was I thinking when I did it”!

In order to get that preliminary overview, get answers to these questions:

• What is the dollar amount of the loan?
• How long is the repayment term?
• What is the type and amount of the collateral security?
• Where is the transaction located?
• Where are the borrowers located?
• Why is the transaction happening?
• Do I understand the transaction?
• Am I comfortable with the thought of investing in this transaction?

What are the facts relating to the promissory note? Every promissory note is a custom made legal document. It is designed to accommodate and facilitate a specific business transaction. Be certain that you understand the transaction, and you are comfortable with the terms and conditions of the promissory note. Get answers to these questions:

• What is the interest rate?
• What is the length of the loan?
• What is the repayment schedule?
• Under what State’s laws will it be enforced?
• Does it comply with the laws of the State where it is to be enforced?
• Do I want to do business in that Sate?
• Do I have professional contacts (attorney, note broker, real estate broker) in that State?
• Is the note, and the collateral security document enforceable in court?

What are the facts relating to the collateral security? If you are buying or funding a promissory note secured by real estate learn:

Do I have a professionally done, current real estate appraisal report?
Do I have marketable, liquid collateral security?
Is the market value of the collateral security adequate to secure the note?
Is the borrower’s financial standing and creditworthiness adequate to do the repayment?
Do I have a Lender’s Title Insurance Policy?

Who will service the loan? Loan servicing services include collecting monthly payments, distributing payments to investors, mailing payment due notices to the borrower, maintaining adequate hazard insurance, keeping accurate books and records, and handling delinquencies and collection efforts.

Summing Up

You can swim with the sharks if you work with the right team. Work with experienced professionals-real estate brokers, loan brokers, attorneys and promissory note experts-who know the local market, its customs, and its laws. Don’t risk you savings by doing “on-the-job-training”.


“Advice is what we ask for when we already know the answer, but wish we didn’t.”

“Self-confidence is the first requisite to great undertakings.”

“Don’t follow any advice, no matter how good it seems, until you feel in your mind that it’s wise.”


Classic Car Insurance – A Beginners Guide For New Classic Owners

If you’ve just bought your first classic car you will need to consider not just where, but also how you are going to insure it.

As a classic car owner it matters not if you drive a perfect condition Ford Capri 3 litre from 1970, a beat up old Morris Minor from the Sixties or a sleek E-type Jaguar in British racing green, it is essential that you find the best classic car insurance cover for your cherished motor, that covers your individual risks at prices that won’t break the bank!

If you have not owned a classic car before it is important to realise that there are basic differences between what is known as a standard car insurance policy and the cover offered under one defined as classic, from a specialist car insurer.

The first thing to establish is whether your car is eligible for cover under a classic policy. One way you could do this is ask the previous owner whether it was covered under a classic car insurance policy and with which insurance company.

Different car insurance companies have different definitions of the age and type of vehicles that can be covered under this type of cover.

What might be easily covered with one provider may be excluded by another. Fortunately most online classic car cover providers provide this information on the first page of their websites, so it is fairly easy to surf around and check your eligibility with different insurance companies.

You should check that both the eligibility of the age of the car in question and also whether there are policy restrictions for your individual driving circumstances, such as your age that would prevent you from applying for cover.

The major variation between a standard policy and those offered by the classic car specialists is in the way that you use your classic vehicle, and in particular, how much you drive it. The large mainstream insurers and price comparison sites will offer cover for older cars but will charge an additional premium because of its age. They will also load the premium if replacement parts for the vehicle type are known to be expensive.

More importantly you will only be offered the current market value replacement if the car is covered under a mainstream policy and is deemed to be a write-off when you claim.

With a standard car insurance policy on a replacement like for like basis, the value of the car is often set by the market value at the time of a claim, typically taken from one of the car price magazines such as the UK’s Glasses Guide. The amount you will be probably receive for a write-off will be at the current market value of your car which is an annual depreciating amount. Inevitably, if you own a classic car and insure it under a standard policy contract, this leads to under valuation and under insurance of the true value of the car. You will also probably not be offered the salvage and a repairable classic car may often be deemed a write-off because the cost of repair is uneconomic to the Insurer.

If you purchase a specialist classic car policy you will be offered a choice of either an agreed valuation of the classic cars worth or a policy based on market value.

An agreed valuation amount is the amount that the insurance company will pay out in the event of a claim that results in a write off. This is a major benefit of insuring classics under specialist policies because it ensures that you are not just properly covered but will also receive the specialist repair services that your classic will require should you claim. It should be noted that even agreed valuation polices can change and you should ensure that the value is guaranteed for a certain period of time to avoid fluctuations in market values.

Classic Car insurance polices are therefore tailored to the needs of cars considered to be collectable and effectively the valuation is a rating factor for the condition of the car.

The other major difference between standard and classic policies is in the way that you are allowed to use your car under the terms of the agreement. Originally this type of vehicle insurance was designed for drivers who do not use their classic cars much.

All classic car policies have a limited mileage clause which only covers the vehicle for an agreed amount of miles per year. Depending upon which specialist car insurance company you use, there will be a limit to how far you can drive your classic. Some providers will only cover a couple of thousand miles per year under the policy, but many specialist providers are now offering cover up to ten thousand miles per year. These policies reflect the fact that many drivers now use modern day classic cars as their main form of transport.

As with all car insurance it is important to compare both covers and prices when shopping around. There are many specialist classic insurance providers available online today and many specialist schemes that are targeted at particular classic owners. Compare the premiums offered by these with those from the price comparison sites, but if you want to avoid disappointment if you need to make a claim, be sure to understand the difference in policy covers.


Find Investment Property Financing and Get on the Road to Financial Freedom

As a real estate investor, there are a number of institutions you can seek out for investment property financing. Your options include banks, mortgage brokers, private lenders, and what are called hard money lenders. Many times the economy will dictate which source of financing you will choose. In this article you’ll learn about the differences between these lenders. Each institution has a place in this market. Some are better options than others.

The banks are the ideal place to apply for a loan. Their fees are low, and interest rates are usually much more competitive. However, they’ll want you to have a high credit score. An important point to keep in mind is that banks may not approve a high LTV (loan to value) like other institutions may. The LTV is the percentage of the amount financed in relation to the appraised value of the property. The bank may only approve up to 70% and other lenders may offer up to 80% of the appraised value. You must weigh your options carefully to determine the best financing option for you.

The easiest and most efficient scenario is to use a mortgage broker. The mortgage broker, unlike the bank, will shop your loan to different lending institutions. You can go to one company and they’ll present your loan to several different lending businesses. Generally a bank will only try to qualify you with their institution. If it doesn’t work they’ll just deny you and the process must start all over again with a new lender. A mortgage broker will only run your credit once. They will keep “shopping” your loan to different lenders until they find someone interested in the deal. The downside is that interest rates and fees are probably going to be higher for this service. When the bank can’t work the deal, the broker most likely can.

Private and hard money lenders really provide similar services. Both types of lenders will do things that ordinarily can’t be done. They don’t have to adhere to the guidelines of traditional lenders because they are lending their private money. This allows them to lend to whom they want and whatever project they choose. Their fees and interest rates are generally much higher, but when no one else can do the deal, they can. You can use this type of lender on an investment property that you’re going to flip (rehab and resell). The interest rate won’t matter because the fees can be calculated into the deal.

Now you should understand the roles of the different lending companies that will provide your investment property financing. If the economy is bad, sometimes it’s easier to negotiate with the private or hard money lenders despite the high fees and interest rates. When the economy is thriving, you should generally work with the mortgage broker or a bank. All of these lenders have a function within the real estate investing landscape. Use them to your advantage.


So You Want to Start a Small Business?

The United States is home to millions of small businesses. While many thrive, there are certain risks and challenges that often accompany operating an independent company. If you’re thinking about starting a small business, keep these considerations in mind.

· Create a business plan. When you’re fired up about an idea, it’s easy to overlook the details. A business plan forces you to define your business goals and how you plan to achieve them. It also helps you examine your competition and identify where your products or offering fit in the mix. Lastly, a thorough plan includes the strategies and tactics you will employ to move from ground zero to profitability and the costs and timeframe for getting there.

· Beware of going “all in.” You may have read about people who maxed out their credit cards or mortgaged their homes to fund a business that brought them quickly into wealth. Unfortunately, this is not the norm and the odds are stacked against this financial house of cards. Think twice before putting everything on the line for your business. Invest as much time and energy as you can afford, but avoid overextending yourself financially as you pursue your business plan.

· Test the waters. To minimize your financial risk, consider launching your new business on a small scale before quitting your day job. Many small businesses have been started on the side while entrepreneurs maintain a fulltime job. The idea here is to keep income flowing until your business is viable and you can pull a salary without compromising your income.

· Save for a rainy day. Even the savviest entrepreneurs can get caught in a market down cycle. And no one can predict all the things that might affect your bottom line. Individuals who are in business for themselves are doubly in need of a financial buffer should things take a turn for the worse. If sales falter, you’re still on the hook for your business expenses, and you need to pay yourself too. Build savings into your business plan and keep your credit in good standing so you have access to cash if and when you need it.

· Invest wisely. When you do need to put money into your business, be smart about spending so that your dollars multiply down the road. Hire competent people who are as passionate about the business as you are.

· Protect yourself. Every business is vulnerable to potential risks, and it’s important to think about the worst case scenarios and how you’d handle them. What if a fire destroyed your office? Would your company collapse if you or a key employee were injured? If a customer, vendor or employee sued your business, could you afford your day in court? There are insurance products made to address all of these risks. Factor in adequate protection as part of your cost of doing business.

· Create an exit strategy. When you’re just starting out, it’s hard to envision the day you’ll turn the reigns over to someone else. Succession plans are an essential part of a sustainable business, especially if you hope to sell and use the proceeds to fund part of your retirement.

· Seek financial advice. If you’re serious about starting your own business, get on the right track with financial guidance. Find a qualified financial advisor to look over your shoulder as you develop your business plan and launch your new career. Their financial acumen and fresh perspective can help you steer clear of financial trouble.