Today, I want to focus on real estate notes. Most folks are familiar with real estate because they either live in a home they own or a home they rent. The ground below us and the place we live in is real estate. Real estate notes are another matter. While many folks have seen shows on HGTV where someone buys a home or builds a home, fewer folks understand about real estate notes.
A note is a promise to buy for a period of time into the future something you get to enjoy right now whether that item of enjoyment is a home… a car… or a piece of jewelry. Obviously, a real estate note is promise to pay into the future for real estate that you get to enjoy right now. Since there is a lack of clarity about real estate notes and the steps to buying notes, I want to focus today on the steps to buying real estate notes. They are as follows:
STEP 1- Form your enity (LLC, partnership, C corp, etc.) or open S DIRA with capital
STEP 2- Decide what you are looking for including….goals… Performing note or non performing note… price range… states where note is located…whole note or partial note
STEP 3- Provide your purchasing info. To note seller including who is buying note and signing non disclosure agreement
STEP 3- Due diligience of the following… house and community… title and taxes… loan documents… payment history… BPO… update on this info. as necessary!!
STEP 4- Execute purchase contract with note seller
ALTERNATIVE STEP 4- If purchasing in SDIRA…. Give to IRA custodian a direction of investment… support documents… closing docs from note seller to SDIRA
STEP 5- Funding of note purchase and closing closing documents from note seller to note buyer
STEP 6- Select loan servicer (if new loan servicer, initiate transfer of loan documents)
STEP 7- Collateral file shipped to loan servicer or to note buyer
Best wishes to you in all your real estate pursuits.- Randy L. Wall