Archive for December, 2010
Private Lender Note Clauses That Make You Money!
One of the most important documents you will ever sign with a private lender is the actual Note that creates the loan obligation. In a typical private lender transaction you the real estate investor borrower borrow money from a private individual private lender and that transaction is documented by a Note and Mortgage.
The Note lays out the terms and conditions under which the private lender is willing to lend you money and under which you are willing to borrow money. The Mortgage is the security document for the borrowers performance under the Note and usually is secured by a piece of real estate you own or are about to purchase.
The Note is where you want to control the private lending process in your favor and give you the control and flexibility you may need in the future. If the Note does not contain the right clauses you are potentially giving away tremendous control to your private lender and ultimately tying your hands.
When dealing with private lenders it is critically important that you remain in control of your future options.
If you were to go to your local office supply store and buy a template note form you are potentially leaving your future control over to your private lender without even knowing what is happening.
We recommend the following two clauses in any Note with a private lender:
Prepayment Penalty Clause
“The Borrower reserves the right to prepay this Note in whole or in part prior to the due date with no prepayment penalty”
The prepayment penalty clause allows you the right to pay off a Note prior to maturity without a prepayment penalty. Without this clause you may not be able to pay off a Note early or worse you may have to pay a large penalty for the right to prepay the Note.
For example if you have a three year Note secured by a piece of real estate you own and you get a great offer to sell the property you may see a big pay day in your future; But without the prepayment penalty clause you may have to pay the lenders full three year interest for the right to pay off early or the lender may require a penalty of several percentage points to allow you out of the Note.
With the prepayment penalty clause you have the full right to pay the Note off early with no prepayment or interest penalty. The benefits of this clause can be very powerful and beneficial to you down the road.
Substitution of Collateral Clause
“The Borrower has the right to substitute like collateral of equal or greater value”
The substitution of collateral clause allows you to sell the underlying real estate without paying off the private lender Note by substituting the collateral with a different piece of real estate of equal or greater value.
With this clause you can flip a property without having to pay off your private lender every time you sell a property. Imagine the work and inconvience to you and your private lender if every couple months you sell a property and have to pay off the previous loan and draw up a new Note. This can be real burden on both you and the lender alike and eventually the private lender grow tired of the process.
A much better solution is to use the substitution and collateral clause so that every time you want to flip a property you have the right to transfer the Note to another property of equal or greater value without paying off the private lender. The private lender is much happier because his money is always working without any inconvenience of new documents every couple months.
By using the prepayment penalty and substitution and collateral clauses you are more likely to have a big payday coming because you will have the flexibility and ability to realize that payday.
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Preparing To Buy Mexico Real Estate
This article explores the question of how to get informed and prepared to successfully buy Mexico real estate.
So youd like to consider buying Mexico real estate. First lets establish some basic principles. If you are serious about buying Mexico real estate you need to get informed about the challenges you may have to master and technicalities you may have to overcome in order to complete a successful deal. Remember all these challenges and technical issues go away if you purchase from a reputable North American developer like Replay one of the major new players in the country. However if you decide to venture into a purchase without that safety and ease of process youll at least need to find a good local expert to guide you.
Personally I think those who choose to buy Mexico real estate away from the resort developments should make some effort to understand the language. Mexican professionals are no more or less dependable or honest than their North American counterparts. Along with the good come the less than scrupulous in any country including Mexico. If you prefer not to learn Spanish you should focus on buying from a highly reputable North American developer as I did.
The good news is that Spanish is relatively easy for Englishspeakers to learn unlike Japanese or Russian. The structure of Spanish is quite like ours and there are thousands of words that are almost identical. In fact you can buy an audio course that is entirely based on these similar words. Learning the language isnt just good for protecting yourself as you make your purchase. Its also the best way for you to get on the inside of the culture. Even if you end up buying Mexico real estate from a North American developer you will still enjoy life more if you can casually venture into the neighboring villages and chat with the locals.
Now that said the next big piece of preparation is to decide where you want to be. You can read my article on this but in principle you need to conduct thorough research through books and the Internet to find the place that is right for you. One point here that people often forget is accessibility. You want to be able to get back to friends and family easily for celebrations or in emergencies.
Once you have chosen a location of interest for example the beautiful Baja Peninsular your priority should be to go and spend time there. You will never gather from books and websites the kind of firsthand knowledge of a place you get from a visit. If you are looking at a resorttype location such as Loreto Bay where I live you can really get close to the lifestyle you will enjoy when you purchase. Youll be able to stay in the resort hotel and get a feel for the community architecture and amenities.
Buying Mexico real estate doesnt have to be hard if you prepare yourself well. And the rewards both personal and financial can be enjoyed for decades to come.
About the writer: Eliot Stearne is a journalist and real estate investor who researches vacation and retirement opportunities in resort locations around the world particularly Latin America. He divides his time between his homes in Chicago Heights Illinois and Loreto Bay in Baja California. Heres more information on buying Mexico real estate.
Most Frequently Asked Questions On Real Estate In Toronto
Selling or buying a house is never an easy task. However there are many guides that can help you answer some of the most common questions that come up. When you wish to buy real estate in Toronto certain things may seem confusing and you will need to clarify them prior to purchasing your new home. The following are some of the most frequently asked questions by people wishing to buy or sell property.
The first question that many people ask is when the best time to sell their property is. The answer to this question will be determined by many factors when you are in the city. One of the things to consider is the season. Most people move in late spring or early summer. Again you will need to consider the availability of similar homes at that particular time because that may mean that with the competition high your asking price may be reduced. Taking these factors into consideration you will be able to gauge the best time to sell your property.
Another question that is commonly asked is whether you need to put a for sale sign on your lawn when selling home. The truth of the matter is that it is wise to put the sign out when selling property as it announces to all your neighbors and other people in the neighborhood that the property is available. There is no advertising like word of mouth.
The third question commonly asked by people who wish to sell their Toronto real estate is whether to sell a house first or buy one if you wish to do both. In this city it is advisable for people to get some experience in the market by selling their real estate before acquiring another property. Toronto is a city filled with great diversity and the market can prove to be quite tricky.
There are those who choose to go through different agents in the industry and this might prove very convenient for you. Buying or selling properties is made easier by realtors who offer different assurances and guarantees. For example many promise to get a house for buyers within a week or two. Others offer market analysis and free evaluations of property. There are many such package deals that you can take advantage of so that all your burning questions can be answered.
When it comes to the question of property appraisals and mortgage payment calculations you may need help from your lender or realtor. The best appraisers to use though are those with no vested interest. Make sure that they are not linked to your realtor or lender. However if they insist on sending their assessor as they most likely will be ready to have your own independent assessor come by for a second opinion of the value of your Toronto real estate.
About the writer: MyCityToronto is Toronto’s premier source of Real Estate information. Whether you are buying selling or leasing you will find the best professionals to represent your interests by visiting http://www.realestate.mycitytoronto.com.
