Many of you may not be aware of the various ways notes can be used. The average person’s understanding about notes is that people create them because they are desperate to sell a property. Nothing could be further from the truth.
Real estate investors are now creating notes to finance Top Tucson Realtor properties they wish to buy–then selling the notes in advance–then buying the property with the proceeds–in effect, with little to no money down; of their own.
Selling a property by being willing to create a note actually shows savvy on the part of the seller. Even some real estate agents view a seller’s willingness to sell by owner financing as a desperate…but the real estate agent who knows better is very hard to find. Most of them are missing not only the boat, but the whole ocean!
Not to demean real estate agents, but most of them have a linear kind of thinking about how to sell property and it not only limits their own income, but hinders them from being the best helper they could and ought to be to property sellers.
Real estate investors and savvy property sellers bypass working with real estate agents for mainly the above mentioned reasons……not to mention the savings realized by not using real estate agents and having to pay their fee.
Okay, so here’s a scenario we recently worked on to give you an example:
Mr. A wishes to buy Happy Trails Apartment Complex from Mr. B. The Happy Trails Apartment Complex is a 300 unit complex and is desirable when you run the income and expense calculation numbers on it.
The price is $25M and the appraised value is around $29M. Mr. A envisions that if he were able to create a note for $29M and sell it to note investors at a discount, he might still be left with enough to make an offer to the seller. Confused?
Okay, Mr. A approaches us with a proposed $29M note he wants to create in advance to buy Happy Trails Apartment Complex from Mr. B. We investigate the case and find that the property can service the debt.