INVESTMENT PARAMETERS WHEN MAKING A PRIVATE MORTGAGE LOAN - PART 2
Cash Flow of PropertyThe third investment parameter we’re concerned with is the cash flow or income potential of the property being put up as security for the note. Although many private mortgage lenders are liberal in this area, the monthly interest payments to keep the note current must come from somewhere. If the property is rented out and is producing cash flow after all expenses of an amount at least equal to the note payment, the monthly payments can be covered by the property income alone without the borrower having to come out of pocket. This adds a great degree of safety to the note. Cash flow from other income properties or other sources can be substituted for cash flow from the property being placed as collateral; however, the income to pay the mortgage payments must be available from some source.
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