What Investors Should Know About Real Estate Note Buying

There are many options for investors to consider, when trying to diversify holdings. One trend that’s been gaining popularity is the buying of real estate notes. Before jumping in, however, it’s important to understand a little more about what this type of investment entails.

The 411 on Note Buying

There are many companies that make a business of buying notes, such as Amerinote Exchange, but that doesn’t mean individual investors can’t do it, as well. First, it’s important to understand that a note in these financial terms regards the promissory note that defines the terms of a loan and establishes the money to be repaid. The note, in real estate, transactions is just the promise to pay, but is also supported by the mortgage or the deed for the property.

When an investor buys the note, he also obtains the security instrument, meaning he holds the dead or other collateral. Essentially, the investor then becomes the lender, instead of the original financial institution. The investor often buys the note at a discount, making it a positive investment.

An Example of a Simple Note Buying Transaction

To understand this process a little better, it’s a good idea to broker a few of these transactions for other investors first. This helps you to observe first-hand how underwriting and closing processes are managed in the purchase of real estate notes. It may also help to look at a simple example of how buying a note benefits the investor.
On a transaction for a home selling at $120,000, the buyer would pay a down payment of $20,000, resulting in a $100,000 loan. In a note for this loan, there might be a 10% interest, creating terms for repayment that involve 360 payments at $877.57 each.

You can get the best deal on buying the note by waiting for the buyer to build up some equity, so suppose you buy the note after five years. At the time you buy the note, the balance left to be repaid is $96,574.32, but you will pay the lender $83,322.39. This allows for the possibility of earning 12% on your investment.

Conversely, if the borrower fails to make the payments, you can exercise the same rights as the original lender. You can opt to reclaim the property as your own, which means you have whatever had been previously been repaid, plus the property valued at $120,000.

Another option investors pursue is to buy just a portion of the note. They may pay anywhere from $10,000 to $50,000 for a limited portion of the note’s repayment terms. For instance, you may buy the note for five years, collecting the payments within that time frame. At the end of the five years, the note reverts back to the original lender.
Of course, there is much more to learn about buying a real estate note and it’s important to understand how your local laws affect this type of investment. Once you learn about the process and fully understand the … Read More

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The Importance of a Quality Accounting Department

No matter how large or small your company may be, it is critical that you have a dedicated accounting department. Ideally, it will be staffed by a person or group of people who understand basic accounting principles and how they apply to your business. Whether you choose to hire an in-house staff or decide to outsource this function, you won’t be able to survive without a good accountant on your company’s payroll.


Your Accounting Department Can Identify Wasteful Spending

An accounting department will do more than just create payroll checks and collect invoices. In addition to those tasks, it can take a detailed look at your company’s expenses to find ways in which the company may be wasting money. For instance, it may be paying workers more than the industry average or putting too many workers on the sales floor during slower times of the day. Identifying wasteful spending and making adjustments can save a business thousands of dollars or more per year.

Accounting Professionals Can Create Financial Records

If you are looking to get a bank loan or want investor capital, it will be necessary to reveal information about the company’s financial health. For instance, a lender may want to know how much money the business has made in the last quarter or what its future projections are. Investors may want to know how many customers the company has or how much it costs to acquire those customers. An accounting team can gather that information and put it into a format that lenders and investors understand.

You May Not Be Qualified To Be an Accountant

There is a good chance that you aren’t qualified to work as an accountant. While you may have basic math skills, accounting requires a sophisticated knowledge of accepted reporting and other best practices. If you oversee a growing company, it may not be enough to have an accounting software program helping to manage your books. Instead, it may be best to have a boutique consulting firm to oversee this department.

An Accountant Can Help With Compliance Issues

If your company operates as a corporation, there are likely monthly and quarterly forms that must be supplied to the government. Furthermore, sales and other taxes may need to be deposited regularly. Those who operate as a publicly traded company may need to submit regulatory filings with the SEC as well as state oversight agencies. While you may have an understanding of what your obligations are, it may still be easier to have a dedicated team ensuring that you are compliant at all times. Even a small mistake could result in a large fine or a tarnished public image.

A business is generally more successful when it has good people at key positions within the organization. Therefore, it is in your best interest as a business owner to hire a dedicated accounting team. This team can make it easier for you to focus on growing the business instead of worrying about financial or compliance issues.

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