Note Investing Benefits

For the past several years we have experienced a low interest rate investing environment. The Federal Reserve has internally held rates at the lowest levels in recent history. Investors seeking interest income for living expenses and for retirement planning have been penalized. Earning a 1% or 2% yield when the planned earning was 5% to 7% presents a major short-fall and a serious problem for all savers and investors.

Banks, savings and loan associations, stocks and bonds are just not providing the necessary yields.

Non-traditional investing has become a necessary consideration. The non-traditional asset class we will focus on is the promissory note.

The primary benefit from note investing is a higher yield than is available in the main-stream markets.

Safe, secure notes yield 5% to 10% per year.

Why note yields exceed traditional yields?

For savvy investors the private note category presents opportunities to purchase performing notes at a discount. The discounted price provides two important benefits-higher yields and potential capital gains. Buying notes at their face value (no discount) can also provide the higher yield benefit. Either way, the investor gains an advantage.

Remember, higher yields require higher risks. The main risks associated with note investing are lack of marketability (not easily sold), lack of liquidity (not easily sold for full price), lack of professional management (must do some work yourself), and lack of market information (each note unique and no public market exists).

It depends on the skills or the individual investor if this type of investing leads to profits or unexpected financial pitfalls; it depends on the ability and persistence of the investor.

What skills are required?

Due diligence is the key skill needed. Everyone loves a bargain; don't let the discount fool you into doing a quick, sloppy job of investigating. To avoid the pitfalls of making a bad investment, careful investigation and analysis of the potential loan being purchased is necessary. It will be the unforeseen, uninvestigated problems that cause your pain.

Here are some important due diligence questions requiring answers

• Is the note a "Negotiable Instrument"? Under the Uniform Commercial Code, a purchaser in good faith for value becomes a holder in due course of a negotiable instrument and takes the note free from certain defenses that the borrower might assert. If the promissory note is not negotiable, further examination of possible defenses available to the borrower will be required.

• What is the balance owed? The note holder must be able to prove the balance owed under the note to enforce payment. The purchaser must obtain from the seller an accurate, payment history that discloses the current outstanding principal balance, accrued interest, late charges and other amounts owing under the loan documents.

• Are the loan documents accurate and complete? Regardless of the type of seller---bank, insurance company, real estate broker, and private investor---never assume that loan documents are accurate or complete. Everyone makes mistakes. Make sure that the basic loan terms are correctly set forth.

• Have the correct parties signed the hummingbird loans time extension on a loan documents?

• Has the collateral security been properly identified and described? The accuracy and completeness of deeds of trust, security agreements, and other security instruments can be of the utmost importance, particularly if the solvency of the borrower or the guarantors is suspect.

• Is the value of the collateral security adequate to protect the investment?

• Are the survey and Mortgagee's Title Insurance Policy satisfactory?

• Have the hummingbird loans direct loans for bad credit documents been modified? Part of the note purchaser's due diligence involves determining whether there have been any amendments or modifications to the loan documents; have there been any waivers of the loan provisions that will impair the ability of the note purchaser to enforce the hummingbird loans cash loans on tv.

Summary

The serious, careful note purchaser does not accept unquestioningly any information about the documents and the collateral security. Careful due diligence is necessary to making good investment decision and to have decision pay off.

Lawrence (Larry) Tepper specializes in the valuation and appraisal of promissory notes, mortgage notes, and cash-flow instruments nationally. Nation-wide services for banks, trust companies, self-directed IRA accounts, estates, attorneys, CPAs, and individual investors.

Consulting Services-Free Appraisal Price Quotes

EDUCATION AND TRAINING
Law Degree /Accounting Minor University of Denver
Managing Colorado Real Estate Broker-- Promissory Notes Specialization
Certified Commercial Investment Member from the National Assoc. Realtors (CCIM)

PRACTICAL EXPERIENCE
35 + years of national promissory note and mortgage note appraisal and valuation for Banks, Trust Companies, Attorneys, CPA's, Estates, Trusts, Executors, Administrators, and Financial Advisors.

"No charge" review and discussion of your file and documents--Fee appraisal quotes-- Call or email.