Any one have experience with a Promissory Note?

Question

BP, I am looking to do private financing on a tax delinquent property.. I am looking for any advice, and explanation on promissory note.

Cameron Ellis · Answer

Bill Gulley  I am actually looking into purchase a tax delinquent property(county has already taking possession). Cost is 9k, rehab is 21k, APV is 93k. Rents are $925-950 in that area.  @Michael smith thanks! Really a lot of help

Wayne Brooks · Answer

Cameron, all loans are based on a promissory note-the promise to pay.  Usually for real estate, they are coupled with a mortgage instrument, which simply pledges the real estate as security/collateral for the promissory note.

Curt Davis · Answer

Even if you win the bid on a tax sale you still have to wait a minimum of 1yr for the right of redemption period.  If you can get a lender to provide you funds thats great but you will be out of the property is redeemed and you pay all that interest to a lender.  They only allow for a certain % above what you purchased it for.

Cameron Ellis · Answer

@Wayne Brooks in Memphis we have tax auctions and delinquent tax properties that can be sold without a auction from my understanding according to the county officials. I could send you the list with the information on sales via email

Wayne Brooks · Answer

Cameron, if the county took possession, then that means there were no bidders at the $9k amount, and no one wanted it since then for that price.  I think you're probably missing something, or else someone would have bid/taken it if it has that kind of spread.  There are a Lot of investor eyes looking at tax auction properties.

Chris Martin · Answer

County has taken possession, but it is tax delinquent? So has there been a tax sale already? How does the county take possession without a tax deed?

Bill Gulley · Answer

You need to borrow enough to cover the tax obligation, only an idiot would make a loan on a property with outstanding taxes due as that can lead to a tax sale and any new mortgage would then be subject to taxes as opposed to existing prior to the tax lien which is usually the case and may dictate how sale proceeds are paid, check on that in your state.

After doing thousands of private loans, I've never seen one fully amortized for 30 years. At 5 years you'll be lucky, most are 3 years and less on residential. Saying private includes loans from brokers for individuals.

Have you considered seller financing since the  seller is obviously in trouble and assume the taxes by lowering the price?   That might be an option. :)

Michael Smith · Answer

no @Cameron Ellis a promissory note is the part of any loan agreement that legally creates a debt, whether secured of unsecured, private or not. If you sign up for a credit card you will sign a promissory note. If you get a loan to buy a house you will sign a promissory note that includes allowing the lender to record a mortgage. The note creates the debt, the mortgage creates the lien.

Cameron Ellis · Answer

@Wayne Brooks@Michael Smith  A promissory note is basically a loan through a private lender with the promise to repay, usually using putting the properties deed of trust as collateral?

Michael Smith · Answer

As far as actually structuring a promissory note, assuming you have a willing private lender in place, the terms are very flexible and up for negotiation. If you want to hold onto the property try and get the lender to agree to a fixed-rate, fully-amortizing loan over a longer period of time (ideally 30 years, but depending on the lender this may not be an option).

Make sure to include provisions that protect the lender, for example the borrow agrees to secure insurance on the property, and record a mortgage deed with the county so that the lender can obtain a first lien on the property. This will go a long way to demonstrate that you are serious and professional, and are concerned with their interests and not just your own.

Any one have experience with a Promissory Note?

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