The Crew
You cannot do this alone. Unless you have an air conditioning license, are a realtor, have your own insurance company and own a bank you will need help. If you own a bank forget the book.
When I say a crew I don’t mean a contractor with a ready crew. I mean all those listed above with whom you should cultivate a healthy relationship. Yes, you can mail your insurance payments in after the first meeting. But why not stop in and pay your bills in person. I do this with my banker, and my insurance agent. It really helps when they know you. Sit and visit for a few minutes if they are not busy. When hurricane Ike recently came through my area my agent was trying to get me on the phone before anyone else. When I have check issues the wonderful ladies at my bank call me to fix the problem. They could just bounce a check and let my checks bounce in return, but they don’t.
Your realtor. So many times I have heard investors talk about dodging realtor’s fees. I consider this wasting time and money. Yes I have, on several occasions, bought or sold property without a realtor. But on the whole a GOOD realtor in your corner will make you money. I had one who knew when I was in the market. Every morning and afternoon she would run my requirements through the computer to see if anything had come up. Call me if anything had and fax me the information. In real estate good deals don’t last more than a day or two. I was always first in line. Often I had a full price offer in before the sign went up in the yard.
Getting started
Why does real estate work so well as an investment? Let me save you some time and money here. The answer is simple, leverage. When you buy property, say a house, you borrow money against that property. Now that property may be worth $100,000 dollars. If it appreciates (goes up in value) 10 % over three years you have made $10,000. If you put 10% down or $10,000. then you have just doubled your money. There is the main reason it works. But you say “I made all those mortgage payments.” No, if you did it right your tenant made all those mortgage payments. That is it. It is no more complicated than that. You can read all about cap rates if you want. You can worry about depreciation and deductibility of mortgage interest if you wish. This is not a complicated business. Don’t go out of your way to make it so difficult.
There are quite a few gurus out there hawking everything from foreclosure programs to no money down shticks. Save your money. Most of the ones I have seen have more bulk filler than cheap hotdogs. This business is simple. I will tell you how to figure out what a property will cost you to own. I will tell you how to figure out what it will rent for. That’s all folks. No need to make this any harder than that. The rest of most of these programs is cheerleading. Believe it or not that is the part I have the least trouble with. You can make lots of money in real estate. You, yes you, in your underwear on the couch. I am talking to you.
The number one biggest mistake I see, and have seen, for years is death by analysis. I know buying a rent house is an unusual proposition. I am aware that people will tell you it won’t work. I know your parents, spouses, friends and coworkers will shake their collective heads. “Don’t call me from the poor house.” I heard that one a lot. My father, ever the optimist said. “Well better to go bankrupt young. You may still have time to repair the damage before you retire.” I don’t hear that sort of thing anymore. Now I get the “well, you’re lucky you have all that property”. Let me tell you I am no genius. No photographic memory either. I did not start with much. When my wife and I started in this business my wife worked for the Yellow Pages and I was enlisted in the Coast Guard. We pooled what money we had. Her profit sharing, my college savings, and went for it. I have, through the years talked to so many folks who wanted to do this but never took the chance. People a hell of a lot smarter than me. People with the money to do it right. But they never took that first step of actually buying a rent house. Please, do it for your self. Do it for your family. Just don’t over think this. If this is what you really want, go do it. I will tell you how.
What do I look for in a rental? Well I like a three bedroom house. People who want two bedrooms will rent an apartment. Nothing with a flat or nearly flat roof. Rain or snow can be an issue. Nothing with a septic tank. Tenants will flush everything down the toilet believe me. I once spent the better part of a day digging gold chains out of a toilet. I have also spent days digging fish tank gravel out of drain lines. Near schools and shopping and near some major employer is a real positive.
Now let me tell you what you probably will not hear anywhere else. Rent is important. That may sound trite in the extreme, but let me explain. According to the 2000 census the average income for all of Houston was just over $36,000 per year. I made more money monthly, and over time in houses that rented for less than $700.00 per month. (With the tenants paying the utilities.) Obviously you will need to adjust this for your part of the country. When I got into the houses that rented for $1,100 or more a month I spent an inordinate amount of time fixing things for them. Why do you think that is? I will tell you. Because most of the people paying that amount of rent expect everything to be perfect all the time. As it should in a perfect world be. I have been called out for the most trivial of repairs for the higher end houses. Loose shelf brackets, chipped window sills and that kind of thing. When you rent to blue collar people they know how to use, and possibly even own, their very own personal screwdriver. Now I will show you later how to dodge this stuff, but better to never get the call. In my part of the country a slab built house is sort of standard. Stick with what is standard for your part of the country. That is it. Three bedrooms, preferably two bath houses rule.
I spent the first 18 years in real estate with a DBA. (doing business as) that’s it. Lately there have been an alarming number of new people who want to invest who overcomplicate this whole thing. I have seen people tie up time and money setting up Nevada corporations, Delaware corporations subchapter s corporations and any combination of these you can think of. I have met on several occasions people with all of this foolishness and NO PROPERTY. Some have spent years setting all this up to protect themselves from lawsuits, and never bought any property. Why would normal intelligent people with the foresight to want to invest like this go through this? Someone told them they needed it. The investors I know who do this and have done this for years and have dozens of properties don’t bother themselves. Why should you? An umbrella liability policy for your properties is really cheap. Even for several million dollars worth of coverage it is very inexpensive. People on the corporation bandwagon are thinking they have protected themselves from lawsuits. Maybe they have. So did I, very well and very inexpensively for years. With an umbrella liability policy. If you wind up with eight or ten rentals, then maybe an llc. But the rest of it seems foolish to me.
Cash Flow Money and the Note Business
First let me say I really don’t begrudge these guys their $50 programs that most of you have seen on late night television. If it makes you feel more comfortable to buy a set of cd’s to learn this business go for it. Allow me to explain the way that game works. When someone, anyone, carries a mortgage on a piece of property that obligation, or note, is listed at the county deeds office where the property is located. Mortgage brokers are the people who try to buy these notes and resell them at a profit. Often, if not almost always, they act more like a middleman or a hunter of prospects for other financial institutions. Here is how it is done. If I sell a piece of property and do not receive payment in full I, or any other investor like you, finance that note just like a bank. And, just like a bank you may then sell this note on the open market. What the buyer of this note gets is a stream of income from mortgage payments made on the property. What the seller gets is cash now instead of payments for the term of the loan. What mortgage brokers do is insert themselves in the middle of that transaction. If you choose to get into this you will try to find notes that are carried by individuals by searching courthouse records at the deed office. You will then mail that person a card or letter asking if they would rather have cash now as opposed to payments over time. I still get these cards on a regular basis. Here is the problem; you will have to send quite a few letters or cards out to get a hit. I have, over the years received hundreds of these cards and letters. If you are going to do this, try to deal with the uninitiated. If you deal with me, or you once you finish reading this, you, the broker won’t make all that much. Once I list a note at the county office I am besieged with cards from these people and I play them against each other for all I can get. You see, if I have a note for $50,000, if I sell that note I will not get all $50,000. What I will get is some percent of the remaining balance of that note. The older and more “seasoned” the note the more I will get as a percentage of the remaining balance. What this means is if I sell a note that has had 5 payments made on a thirty year note I will get maybe 70% or less. As the note is proven reliable, I keep detailed records of the payment history including copies of the checks, that percentage will go up. Also thrown into the mix is interest rate that the note is generating and actual value of the property. As is the credit rating of the new property owner.
What I normally do is hold these notes for several years, then when I need some cash I start calling all those mortgage brokers who have sent me cards. That is a VERY cut throat business, and a wise holder of one of these notes will play them all for every thin dime you can get. In the end I wind up down to like two brokers and then call one and tell him what you are doing. There is no shame in that. Beat them against each other over timelines for payment, fees, and of course the actual cash you will be paid. You, as the note holder, will make thousands more than if you just bite at the first offer. Just make sure what you finally agree to you get in writing before you sign anything.
Now you know the basics of that business and can make an intelligent decision about getting involved. I will, in another section, address maximizing what you will eventually get when you sell your note.
Ok the other major thing to come down the pike from the experts is foreclosure sales or courthouse sales. Fifteen years ago I had an acquaintance that did very well with this sort of thing. It has been horribly oversold. He quit going ten years ago or so due to the crowds. The secret lists “they don’t want you to know about” of foreclosures have been well known on the street for decades. The ensuing crowds have driven up the price to the point that it is very tough to get real deals like this. I live in Galveston county Texas. When I checked this out 15 years ago there were maybe 8 or 10 guys there bidding. This is a big county. Last time I went it looked more like an American Idle audition. In addition there are laws here that allow the foreclosed people to buy back their property for two years at a fixed rate. You just put $30,000 dollars in. They buy it back and you have to sell at the fixed rate, you can really get your banana peeled. If through some set of circumstances you wind up doing this. At least in Texas board the house up for two years, and then start working on it. That is what the pros do.
No money down
Ok when I started doing this in Texas in 1987 this was not doable. Several things conspired to keep me from this. First there were no home equity loans or lines of credit available in this state. Second what caused the real estate bust here was, at least in part, inflated appraisals. So I had to put money down. Let me digress for a moment about inflated appraisals. For the uninitiated this means you pay the appraiser more than his standard fee. He then massages the numbers to inflate the value of the house. You are then able to borrow more on the property. And can therefore put less money down to reach the standard loan to value ratio your lender wants. Not only is this illegal, it is stupid as well. If someone gets wise to what is going on at best you can expect a phone call from the bank wanting the additional money NOW. They could also “call the loan”. Leaving you in the unenviable position of having to refinance immediately and you probably won’t be able to use the same appraiser. At worst you could go to jail. If you are approached by an appraiser like this you will know. Just walk away. I doubt that he will send you a bill. Just agree on the fee first. So you will more than likely have to put some money down on that property. This is not an altogether bad thing as it allows you to make more on a month to month basis due to a lower payment. You may be able to, as a first time home buyer, get by with a small down payment. Just find out how long you must live in the house before you start renting it without the lender becoming offended. Read between the lines here folks. Your loan will probably be sold quickly after you buy your house. The second owner of your mortgage is not really interested who lives there. If you make your payments on time. You can do this once. The standard used to be two years of occupancy. If this sort of thing bothers you, buy a house that needs a little work, live there while you fix it up for the requisite two years and move on.
You may also be able to find owner financed properties in your area. My caveat to you is this. Many if not most of these properties are being sold by investors. Many of these investors are not nearly as honest as one would hope. Check the house out thoroughly. That means a structural, mechanical and termite inspection by a licensed inspector. These inspections may cost you several hundred dollars. Because if you don’t know what you are looking at you are just what some sellers are looking for. Do not ever assume anything about a property. People will lie and cheat for $50.00. How much more will they lie when they are looking at making tens of thousands? Inspect everything and get everything in writing.
Your first step is to find the property you want. Kick some tires. Drive around your town looking for the kinds of neighborhoods that work for you. Is everyone driving luxury cars? You might pass on that. Afraid to get out of your car? Keep looking. Most successful investors pick an area of their town to work. Here is a helpful hint. If the property is more than a 30 minute drive during rush hour, it is a little far afield. I have done it, but only when I got a really good deal. Never more than an hour drive. When you show a house to prospective tenants you may have to drive there every night and three times on the weekend. Save yourself the grief. Don’t just look at houses for sale either. Go and look at houses that are for rent. You will get a very good idea of the market this way. I spent the first 3 months looking and learning and another 3 before I made my move on the “perfect” rental.
Your next step is to determine how much a particular piece of property will cost you. See the above amortization calculator. It shows you term, interest rate and payments for all manner of loans. Figure out what your loan payment will be. Now let me step back so everyone knows something important. There is a term in real estate called PITI pronounced pity. That stands for (principal, interest, taxes and insurance). Those are your fixed monthly expenses for owning a piece of property. They do not include PMI (pronounced PMI) and what that means is private mortgage insurance. You will probably have to pay that until you reach the magic 20% equity. You will have to ask your lender about rates for this, it is generally no too bad. You also may have homeowner association fees and flood insurance. I always buy flood insurance. It is very cheap even here where it floods. So if you think “well, it never floods here” that just means it will be all the less expensive. Of all of my insurance I have bought through this whole adventure, flood is the only one I have made money on.
How much you need to make a month. I have through the years heard all sorts of rules for this. The one percent rule seems very reasonable. This means that if a house is worth $75,000 you should get, at the minimum $750.00 a month in rent. The key word here is minimum. $900.00 or more is better. I know it seems like this may be difficult to find. It probably is difficult to find. But when you find it you will know. If you have done your homework and looked at the market you will know it when you see it. You have found a house that you think you can afford. You know what it will rent for all fixed up nice and pretty. Now here is the trick I have rarely seen except in very seasoned investors. I used it constantly and believe me it works. Write a contract on the house. Now that sounds too simple but it is called “tying it up”. If you have indeed found the perfect house, and you are close to the first to see it, someone else will buy it if it is really all that good. Now when I say that it is with the understanding that you are writing the contract with an option period. What that means is that for a non refundable option fee (generally $100.00) you can essentially stop the clock on other investors or homeowners for 7 to 10 days. You have by virtue of your option fee given yourself the sole option to purchase this property at the contract price. As an example. A great deal on a house in the area you have picked comes on the market. You walk through and say “hey this will really work” you maybe are a little unsure about the slab or the roof but you think this is it. You go and make an offer with a ten day option. If the offer is accepted you now have time to check things out more closely without the pressure of wondering if I will come in and beat you out. You have time to double check the rents in that area. You can have the inspections done. You can start to figure out how much money it will take to bring the house to rentable condition. And guess what? Lets say you missed the sinkhole in the backyard. You have only lost your option fee. You are under no obligation to actually buy the house. Another sidebar here. Always make your contracts assignable. What this means is that you may sign over your right to buy the house to someone else. If for some reason you cannot qualify for the loan you may be able to sell your contract. I met a very nice older lady once and this was her trick. She made a decent living selling her contracts. She loved the chase and the negotiations. She would write a contract on a house that she knew would work for an investor. Then she would sell her contract for $500.00 to an investor. She did what she enjoyed, looking for rentals. And she never got her hands dirty. Yes, occasionally she could not sell one and lost her option fee, but she did very well working only a few hours a day. Over time she had built up a list of investors and would sometimes call them while she was negotiating the deal. She was a very smart lady.
Ok so you have your contract on what you think is a winner. Now it the time to move. Line up your inspections. Talk to your loan officer or banker. Get a list together or repairs needed to bring the property up to par. Get some idea of what it will cost to fix those things. Any realtor will have a list of inspectors you can use. Call and get prices. They are not all the same, but remember generally speaking you get what you pay for so the cheapest one may not be the best. Let them know you are getting into the business. You may be able to get a lower price.
Before your inspections:
After you have your contract and before you call in the army of inspectors and contractors you can do some checking yourself. Here is my standard walk through to pre inspect any house. You, or I for that matter, will not catch everything. But if you find a major problem you don’t need an inspector.
You will need a flashlight, a level, a notebook, and an outlet tool. First, walk around the outside and look at the bricks or siding. Are there any major gaps in the siding or brick work? If you see cracks in the brick that run from a door or window note them. These are some of the major signs of foundation problems. If there is new paint be sure to check the corners and look for excessive caulk. Caulk is your friend it will cover a multitude of sins. But if you see a half inch bead of caulk look very carefully for other signs of problems. Stand back and look at the roof. What you are looking for is dips or low spots. You do not want dips in your roof and this can mean problems. The insurance companies started several years ago inspecting the property after writing the policy for roof issues. Getting a letter telling you that your policy will be cancelled without a new roof is really a drag, not to mention expensive and unforeseen. Stand at one corner and look down the brick lines. If you see that they are not level you probably have some sort of problem. Put your level against the walls in several places. Ideally they should be level and not bowed out at the top. No wall I have dealt with is ever perfect. It should be close though.
Go inside. Walk through the house feeling the level of the floors. Just with your feet. You can feel really bad slabs by just walking through. Do all the doors and windows open and close properly? See any cracks if the sheetrock or plaster? Check the door frames. Have some doors been kicked in? If so this will require replacement, with new jambs and doors. Look under the sinks. See any stains on the board under the faucet or drain? Turn on all of the appliances. Check for hot and cold water in every faucet and tub. Look in the rooms that back up to the showers. See any stains or standing water? Does the dispose all work? What kind of wiring does the property have? Stay away from aluminum wiring. Another sidebar here. Aluminum wiring is fine. As long as everyone who has ever or will ever work on the house knows exactly what they are doing. Chances are this is not the case and to save yourself time and money just pass on houses with aluminum wiring. They are more difficult to sell than a house with standard copper wiring. Do the faucets all work? Are any of them hard to turn on or off? These are the major things to check. So what do you do if you find any or all of them? Well if you find all of them you had better be getting a very good deal on the house. If you find a few of these things just be sure to let your inspector know.
So let’s say you find several problems with the house. I will be honest again here. It is common, even accepted practice to renegotiate the deal based upon problems found during inspections. Lets suppose you find out that you will need a new roof. And lets further say that will cost $5000.00. You may ask the seller to “contribute” to the repair costs. Say $2500.00. The fact is if the property just came on the market the seller may pass on your generous offer to allow him to help you out. If the property has been on the market for some time I would try to get the seller to pay for a new roof. Here is where the seller’s difficulty lies. Let’s say you provide him with a letter from a licensed inspector saying the roof will cave in soon. That is then knowledge that he has in regard to the property condition and “should” be added to the sellers disclosure. In an ideal world the seller is aware that he knows of a defect in his property and any future buyers would need to be made aware of that fact. In the real world remember what I told you about people lying. Will some sellers lie if it will save them $5000.00, you better believe it
Standard repairs. Paint and carpet are fairly standard. As are window coverings. Here is one of the best money saving tips you will ever get in this game. Buy paint from a paint store. Do not go to one of the big box stores we all know and love. Pick a fairly generic off white that is in the ready mix line. Buy middle grade. They usually have three grades of paint. And buy semi gloss for the walls and ceilings and gloss for the trim. Now let me explain why. A good commercial paint does not fade with time like so many others. You can also scrub that paint to remove stains. So when your tenant moves out even years later you can wipe the walls down (semi gloss is great for this). And any spots that will not come off you can just paint that wall. Often you can avoid repainting the ceilings. Because you bought a standard color from a reputable dealer the paint is an exact match. Color matching can come close. But trust me unless you are really in a pinch use the same paint. Painting a house is really simple not easy, but simple and I will go into this in some detail later.
Carpet. Here again is a little trick to save you some cash. Cheaper carpet better pad. You can make a cheap carpet feel like a higher end carpet than it is by using thicker padding. Also avoid at all costs the berber carpet. I know it is a better carpet and I know it costs more money. I once did a nicer house in berber carpet. My wifes thing at the time. What I ended up doing was explaining that it was not in fact indoor outdoor carpet over and over again. Just go with a standard toupe or light grey carpet. Here is another trick to save you some money most people are unaware of. In a lower end house you can pay to have your carpets dyed. Now it has to be in good shape and you will have to repaint the baseboards afterward, buy I have done this many times and it is very inexpensive and done well looks ok.
Changing out outlet covers and switch plates also gives a house a very nice look and can be done in an afternoon with a screwdriver.
Flip or Rent
You have your first property and you are ready to start making some money. I am sure that quite a few of you have watched all those television programs about flipping houses. It can work. Remember you are in this game to make money. I would much rather flip a house than rent it. After you have rented it for several years you can actually flip your own rent house. If you have watched all these investors flipping houses where they remodel everything, put in granite countertops and hardwood floors you have seen the budgets. Lets be realistic, most of us don’t have a $50,000 budget to renovate a house after you just spent all that money to buy it in the first place. Think small. Nice white paint and new carpet and a few minor improvements work just as well only on a smaller scale. And here is something I bet most of you did not know. I have made far more money, as a percentage of the money I invested, on smaller and less expensive houses. Let me give you an example.
I bought a house from another investor for $21,500. I did all the work myself. New countertops and plumbing fixtures. I refaced the kitchen cabinets. I put in a tub surround. I painted and carpeted and replaced some trim work. I sold the house on a contract for deed (I will cover this later) for $50,000 at 10 % interest. I put around $5000.00 in the house. I put $1,500.00 dollars down and the owner carried the note for me at 8 %. I got a $2,500.00 downpayment from the buyer. So I had a total of $4,000.00 out of my pocket. I did not use a realtor to buy of sell the house and had my lawyer do all the paperwork for the purchase and the sale. So my payment was around $210.00 the payment I received was close to $500.00. This is where you make the money. Listen carefully. I carefully documented every payment made to me. When I received it and made copies of all the checks. After three years I sold the mortgage on the open market to a company that buys mortgages. I got slightly over 80 % of the outstanding balance of the loan. Lets do the math. I made $280.00 a month on the property. After three years that amounted to $10,000. when I sold the note I had to repay the first loan to the investor I bought the and I walked away with $26,000. When you add the payments I received and the downpayment I made $38,500 on a house that I had very little money in.
There is a lesson here. I am not just trying to sound smart. I have known many investors who only operate this way. They buy a house that needs work. They fix it up a little and sell the property with the full intention of selling the mortgage fairly quickly (1-3 years). Now you might ask why not just sell the house and cash out now. Let me explain. When the people you sell the house to try to get a loan, or you try to sell the mortgage, it will require an appraisal. Your purchase price will be the main comparable sale and chances are the appraiser will not believe that the property has doubled in value in the few short weeks you have owned it.
Maximizing Profits from Owner Financed Notes
First let me say that selling a property and carrying the note is something I have done for years. As is shown on the homepage that little yellow house was a rental first, to allow for appreciation, and a fix and sell later. This is something I have had great success with and I have made far more money than I originally bought many properties for. By holding a property as a rental for several years you kind of bypass the chance that your purchase of the property will be used as a comparable sale when the property is appraised. Now when I say appraised I am talking about the appraisal you will need to sell the note, should you wish to, not any appraisal you will provide to you purchaser. I would not provide an appraisal for a house I am selling. Let me digress for a minute about appraisals. There seems to be some confusion on many peoples part about the difference between assessment and appraisal. An assessment is a number arrived at for property tax reasons. An appraisal is an opinion of value that someone pays for from a licensed appraiser. You are taxed on your property’s value. An appraisal is required for a sale of your note, should you choose to sell that obligation, or by a lending institution prior to that institution taking a mortgage on that property. Granted, in the past the appraisals by someone who will be buying your mortgage have seemed kind of loose. I believe that with the ongoing mortgage problems this may tighten up to some degree.
How much to sell your property for.
Well here is another kind of stumbled upon trick that has really made me quite a bit in selling my properties. The accepted way has always been to check the sales in the neighborhood and use that as a way to determine that sales price. I go at this more like a car salesmen. Find out the going rental rates for your particular property. Then use a computer to back into your sales price using a mortgage calculator. Let me give an example. Suppose that properties are renting for $800 per month. You the know people will pay that amount to rent property in that neighborhood. If they will pay $800 to rent a house they will pay a little more to own it, say $50 more. Find a good computer loan program and insert that $850 figure in the PAYMENT AMOUNT column. Figure out what you want as an interest rate. Remember that the higher that rate the more you will make in cash when and if you sell that note. Just like any financial instrument, interest rates matter. Then play with the term of the loan until you can get the program to give a reasonable sales price. If the sales price looks too high by far shorten the term, too low then increase the term of the loan. I have done 20 to 30 years with great results. The reason for all this has to do with first maximizing the value of the note. Secondly it is a sad fact that lots of people these days don’t really care what they are paying in total for anything. They are only interested in the monthly payments. I have on more than one occasion had a signed contract where my purchaser never even asked the sales price of the house. You may think I am kidding but as I said I have no axe to grind here and will only tell you the truth as I have seen it.
Interest rates.
Ok I will probably make some people mad here but this is just the truth. When you sell a property and carry the note you don’t really want people with great credit ratings. Those people may baulk at the interest rate you are charging. I have in the past charged between 9 and 10 percent. I will allow that this was before interest rates came down but I have charged this rate when rates were nowhere near those numbers. As I have said one of the prime factors in the amount of cash you will get, should you choose to sell your mortgage, is the interest rate and a 9% rate when all others are at 6% will make a BIG difference to you as the mortgage seller.
Downpayments
Here we get into a bit of a problem. People who buy mortgages like to see a good downpament on the buyer’s part. One of the reasons people will come to you as opposed to buying outright is that you will generally not require a huge downpayment. I generally require about 5% as a downpayment. This only really becomes a problem for you if you try to sell your mortgage quickly (say 1-2 years) after that it seems not to matter as much to the person buying your note.
So let us suppose that you sold a house and carried the note. Let us further assume 5% down and a 9% rate, with a 20-30 year term. Here you MUST keep scrupulous records. By that I mean copies of all payment checks and some way of showing that those payments were the deposited in a bank. Lets say you have had this note for 3 years. What I do is keep a few of the letters from mortgage buyers in a file, you will, upon recording this loan at the county office, get quite a few letters from these companies and individuals. Then when you need cash start playing them against each other. Remember that what you are selling is an obligation to pay on the home buyers part. There will be a fair amount of spread in the offers you receive. Do NOT jump at the first offer. Get everything in writing and watch the fees that they will try to charge you. Mortgage brokers are a very cut throat lot, somewhere along the lines of used car salesmen. And you MUST play them against each other to maximize your profit. This is a business you are in to make money. Do not listen when they give you some absurd reason that this note of yours is small fish or has some major problem. I generally will start by calling 4 or 5, work down to 2 and then beat them to death on appraisal fees, recording fees, legal fees and the like.
You MUST do this as well
1) Require your home buyer to provide you with paid copies of property taxes and assessment fees. (If your property is sold for back taxes you are really out of luck)
2) Require that the property be insured with you or your company listed as a secondary insured.
3) You will be required by your state to provide your buyer with an annual statement regarding interest paid and further loan information. The penalties to you as a mortgage holder can be severe for not following these requirements.
4) Have a licensed attorney prepare and go over all your documents. You will have many thousands of dollars at stake and $500.00 to the lawyer is very cheap peace of mind.
All that being said do not be intimidated by this. It is one of the best ways to maximize profits and minimize your work. This is not some obscure way to take advantage of people. Ask your lawyer if you doubt this information
