All Forum Posts by: Tom Goans

Please Seek Legal and Professional Advice

Legally, legal advice can only be provided by a licensed attorney in the state where the property is located. You should only consider legal advice that is provided by an attorney you hire. Any other legal advice is ILLEGAL and may be very incorrect.

Seeking legal advice from an attorney in the area where the property is located can be a wise and very economical decision considering the alternative. An attorney will assure you are abiding by the federal and state laws. It is not wise to consider any legal advice from someone who is not a licensed attorney where the property is located. Otherwise, the advice may be incorrect and cause you harm.

• Every state has unique laws.
• Every state has unique legally acceptable legal forms with legally acceptable legal language.

The attorney will review your specific situation and then provide the best advice and options for your specific needs with a consideration for your future. The results will be legally drawn up agreements for your use.

Please do not rely on legal advice from anyone other than a lawyer you hire. Protect yourself, your investment/money, and your future.

Yours is a legal question that should be answered by the lawyer you hire. Please do NOT rely on suggestions from this blog ... that is if you want to be sure you are following all federal and local laws and procedures and that your investments/money are secure.

Hiring a lawyer may be much cheaper than the alternative. The old saying applies, "It is better to be safe than sorry."

• I am a third generation of loan originators, buyers, and sellers with almost 50 years of personal experience and hundreds of law classroom hours. My experience spans from single small loans of less than $5,000 to several million dollar loan packages purchased from financial institutions.

@Heajin Kim,

A 10 percent return would be too low to get the attention of most seasoned investors, especially active seasoned investors.

Every Investor is Unique

I believe that every investor is unique in that they must determine their own level of risk and workload vs. reward. There are no magic numbers or standards. This is your life, your investment, and your future.

Moreover, many people determine the return (reward) in many different ways. Some improperly neglect to include their personal time when calculating the reward and return. Some improperly neglect to factor in the use of their personal money, equipment, etc.

With that said, your question is of a personal nature. It is similar to asking how much money is enough. Or, how much money do I need to retire. Warren Buffett is worth Billions, yet he still works. By some people’s definition, he should be sitting at home ... retired and living off his retirement nest egg.

The best way to answer your question is for you to contemplate your personal and family goals, desires, and requirements. Then develop a plan to achieve the goals and requirements. Do you want a vacation home in Aspen, Colorado? Then what you need to do to accomplish this would be different from those who only want a BBQ grill in the backyard.

Enjoy developing your own plan.

I know if it is a good deal or not long before any title search consideration. In fact, a title search is at the bottom of the list of considerations.

Pledging a real estate loan is similar to pledging any real estate property to secure a bank loan. The process will be similar. It is my opinion, this could be a less risky loan because of the number of sources for repayment. Yet ... there are so many yets.

To give some perspective, a bank will make a loan of $5,000 with a used car as security. When you walk out of the bank, the car is worth less. The same applies to a new auto. To me, making a loan secured by real estate can be a much better gamble.

So, yes, banks will make a loan with a $40,000 real estate loan as security if all the circumstances are within the bank's tolerance, just as they would for a duplex or other real estate investment.

Hello @Steven J.,

Glad to see you are continuing to pursue real estate investments in your new home area.

Real estate finance is far more complex than buying and selling real estate property. Far more. The huge hurdle are the legal issues regarding finance - both federal and local. You can very easily and quickly lose every investment cent dealing with real estate finance. It can also cost you a lot of money should you violate any laws.

You have seen me advocate education to be in the real estate investing business. This is a must critical step prior to any dealings with real estate finance.

Let me give you one example that happened just 2 days ago. I was hired to provide consultation regarding a real estate transaction.

• The original seller of a house carried the financing for the buyer.

• Whomever did the paperwork failed to include a Deed of Trust.

• Years later, the co-buyer takes out a loan from a "hard money lender".

• The buyer has defaulted on the original seller-financed loan. So the seller hires an attorney to foreclose. The attorney realizes the Deed of Trust error and creates and records in the public records the new Deed of Trust WITHOUT THE SELLER HAVING IN POSSESSION THE ORIGINAL PROMISSORY NOTE.

• In Colorado, the loan position is determined by the recording date and time. Therefore, the once presumed "first" position loan is technically a second.

The number of errors are incredible. The value of the second is about the value of the paper it is written on. Wait ... they no longer have possession of the original Promissory Note.

It is my opinion (not a legal one), the original seller is in a huge pickle, to put it mildly.

What are the chances of collecting on the now second? What will it cost? How long will it take? This looks like a good cash flow project for an attorney with no winners other than the attorney.

Steven, be very careful. Real estate finance requires thorough research. There are no short cuts. It also requires thorough knowledge and understanding of laws and legal procedures.

By the way, forget the fires and floods, it has been snowing in Colorado the past couple of days. This morning it was in the mid 30s in the Springs. The ski areas west of Denver have been breaking out the snow-making equipment.

From what I have been reading for months, in fact almost 1 year, the real estate market slowdown should not be a surprise. In fact, it should be expected and continue for some time to come.

From what I am reading, the real estate market has peaked in numerous markets around the country. In fact, foreclosures are once again increasing in several major markets.

There are numerous contributors, you have mentioned several. The present market has many similarities to past historic plateaus and declines.

Real estate market strengths, expansions, and declines are generally local in nature. However, some national factors affect every real estate market in the country. Always have and always will.

@Linda L.,

I agree with Bill. There is still not enough information to make a reliable judgement.

However, from my personal experience, I would not consider this opportunity. Primarily, it is not enough yield. I would anticipate this would be the same response for most seasoned note buyers/sellers.

One red flag that comes to my attention:

Why does the present holder want to sell the remaining balance with such a short payoff? If the note holder needs money, and it is such a great deal, the note could be pledged at the bank for a loan for the note holder.

Something may be wrong. It could be rumors of what is happening to the adjacent properties. Or a long list of other problems, including tax related.

There are better risk vs. rewards out there. Especially if you do not have much experience in buying and servicing loans.

What about the tax consequences and considerations - especially for the seller?

@Lauren Lucas,

My Education

Since graduating high school, I have hundreds of classroom hours with a primary focus on law, business law, real estate law, and tax law. My education also includes many hours of finance practice and law.

Over the years, I have constantly continued my education by attending seminars, reading books, and listening to hundreds of hours of audio tapes. Even after all these years of personal experience and education, I continue to read approximately 2 hours or more a day to continue to educate and evolve.

Moreover, I have spent many hours reading actual state statutory laws and federal laws.

Probably most importantly, I have spent many hours with numerous mentors, very experienced and seasoned mentors that are my father’s age or older. Several have been partners in some of my real estate and business ventures. The lessons learned and tips provided are a tremendous addition to the other forms of education.

I grew up in the real estate business and lived on a family owned and developed mountain resort. Both my grandfather and father were in the business. Even with this background, my father insisted I obtain a formal education

I now have almost 50 years of personal experience that spans many segments of the real estate, finance, and business professions with many different sizes of projects, including a year-round ski resort.

This much education is not a requirement to be successful. However, it does make it easier and more enduring.

Personal note: I am not in business for a fast buck. My goals are long-term and so is each project/investment.