Benefits of being a note holder

[Robert Jenkins]

I was hoping someone could clarify for me. What are the benefits of being a note holder as opposed to being an owner of real property?

Why should a seller carry financing or a full note when it seems more beneficial to hold the property and not the note?

It would really help to know all the details when i'm approaching these owners with offers for their houses and them not getting paid right away.

[Bill Gulley]

When I saw the question I was like a little school boy jumping up saying "oh, oh, pick me, pick me!" LOL Well, I was too late!

I bought properties from landlords, I looked for those landlords who were over 65, why, because they will consider getting out of the business and go someplace and play!

I'd look for those who had just had evictions, they seemed to be more motivated to get out of the business.

Don't forget, you can pick up more than one property at one time!
If your low on funds for a down, give more on the deal in the first year or two, more like a management fee for you and more to the seller to build up your down payment. This can be done as an option price. When you meet the option price, you move into the next phase of the deal, a note and close.

What you are doing here is getting the landlord in a retirement mode, you have the opportunity to show him/her that their rental problems are over!

They will no longer need to do the things mentioned above and/or
No advertising.
No Appointment to meet renters who don't show up.
No claims of discrimination
No escrowing security deposits
No lease agreements
No maintenance calls
No noisy neighbor calls
No police calls
No snow removal/lawn mowing
No slip and fall claims
No checking for unauthorized
tenants
No pets to worry about
No rents to collect or bad checks
No notices to hang on doors
No property inspections
No modifications to meet codes
No tax reports RE Taxes
No personal property taxes on non-real estate items (free standing stoves, etc.)
No insurance pemums, policies or renewals to keep track of.
No attorney calls
No more cleaning units and dumping trash
No painting, fixing holes and replacing carpets.

What they will get;
An option price/mortgage payment in a timely manner. Set the deal up so that you get rents before the note payment is due, If you close on the 15th of a month, your first note payment will be due the first of the following month, skipping 45 days with interest accruing from the date of sale.

For about $14.95 the note can be serviced for the seller and he will have nothing to do but pay taxes on the income and that part of the principal from the deal as it is received, no lump sum taxes due on the gain of this sale!

If you do not have the loan serviced, an I can't stress enough that you should require that, the note holder is responsible for issuing a 1099 interest income statement to the IRS and you. The note holder does not get depreciation, you do.

You can also make the deal a little better for the seller by assigning rents as collateral and even a maintenance fund if necessary, that would be a cash account that would be maintained with enough funds to equal one months receipts. (This account would be yours and you can use it, but any funds you use would be replaced by the next months rents) Makes them feel warm and fuzzy, that's all.

If you can, I would suggest you use a note and deed of trust or mortgage liens used in your area. In the event of default by you, even though you did a note, you could have a quit claim deed executed as a deed in lieu of foreclosure to be filed under a seperate agreement to be held by the escow agent (servicer). If you don't pay, you'll get a notice of demand to pay all amounts outsanding and if not paid as demanded, say in ten days, the quit claim deed could then be filed.
Talk to your attorney.
I would never make a note that was required to be paid off within three years. Make sure your note has no pre-payment penalty.

I just loved doing these deals! Good Luck, Bill