Real estate investors are in a position to pick income-generating bargains. There is much turnover in real estate all the time, and this benefits all types of real estate investors. There are many opportunities for real estate buyers and sellers who are in the know of properties in their area. Many times, a flexible seller is willing to provide "owner financing" to the buyer of his property in the form of real estate notes. A real estate investor must view each and every deal empathetically and find the issues or causes leading to the property disposal. This will give him an insight on how to make the deal profitable, resulting in a win-win situation for the buyer, the seller, and the investor. A seller may be facing some issues while an investor is negotiating the deal. He can then turn the negotiations toward favoring seller-financed terms. Consider the needs and objectives of the property buyer, too, to arrive at a mutually satisfying deal.

Income-Generating Real Estate Notes 
A real estate seller prefers a steady income from the property. A seller-financed note provides a steady predictable income to the seller. This is how it works. A buyer may be interested in buying a particular property but is short on cash down payment. The seller would like to dispose of the house at a handsome down payment but is willing to admit the buyer's predicament. He then becomes the creditor for the prospective buyer and finances the sale of his house. This is known as seller-financed real estate notes. The seller simply collects the checks as paid, thus generating a steady and predictable income month after month, without having to manage his property any longer. The seller no longer owns the property. He is relieved of the responsibility to maintain it, repair it, pay the taxes, keep up the insurance, or deal with the associated mundane chores connected with property ownership. The new owner assumes all these responsibilities with the real estate notes used to buy the property.

Real Estate Notes To Earn Higher Interest On The Equity
Suppose Mr. Smith has a property worth $1 million that he sells and puts that equity in a bank account earning an interest of 3-4% interest only. Instead, by converting this equity in a property he owns to a seller-financed instrument, he can earn higher rates of return. He can do this by selling it to Mr. Brown, who is keen to acquire that property, if Mr. Smith would seller-finance part of the sale and hold $1 million in the form of purchase money mortgage to be secured by the property. Mr. Brown offers 6% interest on the real estate seller financed notes. This is a profitable bargain generated with real estate notes.

Avoiding High Tax Consequences By Real Estate Notes
A property seller keen to sell the house that has gained equity over a period of time to a cash buyer will trigger a huge tax liability on himself. The seller can either do a tax-deferred property exchange to defer taxes or sell his property in installments. The property exchange will mean an additional property acquisition, which he may not be keen on. The next best thing is to sell and finance the sale in the form of real estate notes, in installments to the buyer. These real estate notes will help the seller to spread out the taxes that would be due, over a longer period of time, as opposed to owning them in the year of the sale.

Real Estate Notes For Acquiring Income-Producing Property
A buyer wanted to purchase a property worth $70,000 with cash down payment of $10,000. The $60,000 balance was to be seller-financed over 120 months at 6% interest. The seller can collect the mortgage in real estate notes to collect monthly installments. However, the buyer wanted to pay a large sum for principal reduction in the near future. The buyer then requested the seller to finance the $60,000 balance by agreeing to carry three separate mortgages and three separate real estate notes on the amounts of $10,000, $20,000, and $30,000. They all were to be financed under the same repayment terms at 6% and amortized over 120 months. In future, the buyer could pay off one of the real estate notes of, say, $10,000 denomination. This would reduce his debt service payment and improve the overall cash flow that the property generates.

Real estate notes can address the individual concerns of a seller or a buyer. They help in generating steady income and high interest rates on basic equity and also in tax saving.

 

Do you own real estate articles or stories and want to share with other investors? 
You have chance to win $100 Amazon Gift Certificates. We will give away 3 prizes for top authors each month!

Email your articles or stories to:  articles@buyincomeproperties.com

 

© Copyright 2001 - 2010 by BuyIncomeProperties.com               

 

 

Visit Real Estate Forums for every real estate investing topics!  Enter Here

    

Top of Page