This is the burning question among investors and individuals alike who are thinking about buying property. Whether it is residential, commercial, or any other type of property there are pros and cons to this argument. My feeling is that pros far outweigh the cons...right now!
PROS
Over the past three years property values have declined anywhere from 28 to 45 or even higher percent depending on the area of the country you are looking at. These historic price declines mean we're looking at prices that resemble the late nineties. I bought my home in 97 for 101k and in 99 it was worth 139k. Today it's worth about 155 thousand dollars.
Interest Rates are also at an historical low. Hovering around 5% we've not seen these numbers since sometime before most of us were even born. I've looked at records going back as far as 1962 and in 1965 interest rates were at their lowest until now at 6 3/4%.
Inventory is at an all time high. Most Real Estate listings across the nation are showing around a 10 month absorbsion rate and have been for some time now. This means that at the present level of sales it would take 10 months to sell everything listed today. With foreclosures speculated to remain at the highest level they've been since this all began this rate will likely remain very close to the same for 2011. As the number of new foreclosures begin to decline--as predicted--in 2012 we still have the vast shadow inventory sitting in possession of the banks. These bank owned properties will continue to enter the market place even though new foreclosures are slowing, thus keeping inventory levels high for years to come.
Opportunity abounds. As just mentioned foreclosures remain high meaning a lot of people are still struggling with their loans. This creates not only foreclosure opportunity but also short sale opportunity. Both of which sell below current market value providing plenty of opportunity to find a great deal, over and above these already low property values.
CONS
All the same factors can also be looked at as cons to this argument. Property values are expected to continue on the decline for at least the next 6 months. Interest rates are projected to increase over the same period. Large supply leads to lack of demand, and short sales and foreclosures can be a hassle to buy.
Let's work backwards:
Short Sales and Foreclosures can be a hassle; Well if you want a great deal...deal with it. Otherwise go pay full market value and still get a pretty darn good deal.
Supply is so high many are thinking "hey what's the rush". There are so many good deals out there many still are afraid to jump in thinking there's still a possibility they could lose.
The two biggie's property values and interest rates we'll look at in tandem. Property values are expected to drop another 5 to 7 percent in most areas with a few areas expected to decline another 10%+. Even at a 12% decline in value is a 5% interest rate better in the long run than 7%. We don't know that interest rates will reach 7% this year but they are projected to increase. My guess is just over 6% by the end of the year. So what you the buyer must decide is whether or not today's price coupled with the lowest interest since sometime prior to the 60's will make a better deal for you, than tomorrows lower price coupled with a higher interest rate.
I say "Right Now" is "The Best Time to Buy". Property values will eventually climb again--possibly as soon as next year. Interest rates however will not look back once they start back in an upwards direction. I say get the great rate now, and ride out the storm on value. Five years from now everybody is going to be wishing they bought now instead of waiting just one more year, maybe even less than that.
You are welcome to disagree with my opinion, that's what makes this country great, but even if you're not going to buy today you should at least start your serious evaluation of the market and make your decision to buy at the right time--very soon.
Now for those of you read this whole post and said "well it doesn't matter to me since I can't get financing anyway", go out and look for the properties advertising "Seller Financing Available". These sellers are offering to be the bank for you. They are much more flexible on who they can sell to. Just make sure both you and the seller contact a mortgage note specialist to assist you with questions on deal structuring and note creation that will create an overall deal that suits both you the buyer and, the individual who is willing to take this huge risk on you. Creating a win/win situation from the outset will keep all parties involved happy throughout the entire term of the contract.
Of course I encourage you and your seller to contact me directly at
530-318-2662 (info@psrnote-ability.com) for the assistance you need.
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Tuesday, February 15, 2011
Wednesday, February 9, 2011
Need Cash Now but Like Having Recurring Monthly Income
When you sell a Real Estate Mortgage Note you have two options available.
You can choose to sell the whole note, meaning all of the remaining payments that are due, or you can choose to sell what is called a Partial. By selling a Partial you can get instant cash now and after a period of time the note will revert back to you and the monthly payments you are receiving now will once again resume.
For instance let's say you sold a property 2 years ago that you carried the financing on. You created a note for $50,000 at 10% interest, fully amortized for 20 years.This created a monthly payment amount of $482.51. After having collected 24 payments totaling $11,580.24 you now have a remaining balance due of $48,952.59.
You could sell the whole note and receive lets say $38,000--this is just a guestimate your actual sale price may vary-- and your note would be out of your hands forever.
Or you could sell a Partial, let's say for the next two years worth of payments--you can sell any amount you wish from 1 year to 15 years since there are 18 years worth of payments remaining--but for this example you will sell just the next two years worth of payments. We already know that two years worth of payments total $11,580.24, since this is the same length of time you have already owned the note and have already collected.
You could sell this future $11,580.24 for lets say $8,000--again just a guestimate--then after the two years have passed when the 25th payment comes due, it would once again be sent to you instead of the buyer who had purchased your partial. This 25th payment along with the remaining 191 payments due scheduled to follow will all once again be yours.
At this point in time there would still be a remaining balance due on the note of $46,035.40. You collected $8,000 and your note only depreciated by $2,887.90. You got the cash you needed when you needed it, and now you have your incoming monthly payments returned to you. This is know as the best of both worlds.
Now that the note is once again back in your possession you can choose to do one of Three things with it.
1) Hold it and collect the remaining payments.
2) Sell the remainder off as a whole.
3) or Sell another Partial.
That's absolutely correct, you can choose to sell another partial segment of your remaining payments and have the remainder of the note returned to your possession at a later date. You can do this over and over again. Only until the payments run out of course, but as long as payments are due you can sell just a portion of them.
So if you are in need of some cash now but would like to retain possession of your note, selling a Partial just might be the answer you've been looking for.
We are always looking for answers to solve your financial needs. Partial Mortgage Notes sales are just one way we can help. Call today for more information on the options mortgage note ownership can provide to you. Or visit our website and sign up to receive free information on the mortgage note industry.
You can choose to sell the whole note, meaning all of the remaining payments that are due, or you can choose to sell what is called a Partial. By selling a Partial you can get instant cash now and after a period of time the note will revert back to you and the monthly payments you are receiving now will once again resume.
For instance let's say you sold a property 2 years ago that you carried the financing on. You created a note for $50,000 at 10% interest, fully amortized for 20 years.This created a monthly payment amount of $482.51. After having collected 24 payments totaling $11,580.24 you now have a remaining balance due of $48,952.59.
You could sell the whole note and receive lets say $38,000--this is just a guestimate your actual sale price may vary-- and your note would be out of your hands forever.
Or you could sell a Partial, let's say for the next two years worth of payments--you can sell any amount you wish from 1 year to 15 years since there are 18 years worth of payments remaining--but for this example you will sell just the next two years worth of payments. We already know that two years worth of payments total $11,580.24, since this is the same length of time you have already owned the note and have already collected.
You could sell this future $11,580.24 for lets say $8,000--again just a guestimate--then after the two years have passed when the 25th payment comes due, it would once again be sent to you instead of the buyer who had purchased your partial. This 25th payment along with the remaining 191 payments due scheduled to follow will all once again be yours.
At this point in time there would still be a remaining balance due on the note of $46,035.40. You collected $8,000 and your note only depreciated by $2,887.90. You got the cash you needed when you needed it, and now you have your incoming monthly payments returned to you. This is know as the best of both worlds.
Now that the note is once again back in your possession you can choose to do one of Three things with it.
1) Hold it and collect the remaining payments.
2) Sell the remainder off as a whole.
3) or Sell another Partial.
That's absolutely correct, you can choose to sell another partial segment of your remaining payments and have the remainder of the note returned to your possession at a later date. You can do this over and over again. Only until the payments run out of course, but as long as payments are due you can sell just a portion of them.
So if you are in need of some cash now but would like to retain possession of your note, selling a Partial just might be the answer you've been looking for.
We are always looking for answers to solve your financial needs. Partial Mortgage Notes sales are just one way we can help. Call today for more information on the options mortgage note ownership can provide to you. Or visit our website and sign up to receive free information on the mortgage note industry.
Tuesday, February 1, 2011
What To Do With Defaulted Mortgage Notes
Every homeowner and Investor alike who sells a property and carries financing have the same fear--Default!
With the recent economic downturn millions of homeowners have stopped paying on their mortgage notes--traditional and seller financed.
What do you do when your buyer stops paying? You have 5 choices:
1) Do nothing and hope the person who owes you money will one day do the right thing and try to make it right. Don't hold your breath though.
2) You can continually harass your buyer in an attempt to collect the money they owe. This can become a tiresome routine which may also build animosity and create a potentially volatile situation that could produce property damage or worse yet personal injury.
3) You can pay for a collection agency to perform the same tasks from option #2. This can be an expensive proposition with a start up fee and a percentage of the take commission.
4) Of course you can always foreclose and take back the property. This can not only be expensive but also complicated and time consuming. The best way is to hire an attorney and we all know what that can cost. Doing it yourself can become quit a complicated hassle.
5) You can simply sell the the defaulted note, get some cash, and rid yourself of this dead end situation for good.
Of course you are going to take a steep discount from the face value of what is owed to you, but when you consider the alternatives and what cost you may incur there, this may be your best option. Let someone else take on all the headache that comes with defaulted paper.
No matter how old your note is or how long it has been since you last received a payment, we are very interested in possibly buying your defaulted mortgage notes. Call or email today for more information on how you can eliminate the hassles of the defaulted real estate mortgage notes you are holding.
With the recent economic downturn millions of homeowners have stopped paying on their mortgage notes--traditional and seller financed.
What do you do when your buyer stops paying? You have 5 choices:
1) Do nothing and hope the person who owes you money will one day do the right thing and try to make it right. Don't hold your breath though.
2) You can continually harass your buyer in an attempt to collect the money they owe. This can become a tiresome routine which may also build animosity and create a potentially volatile situation that could produce property damage or worse yet personal injury.
3) You can pay for a collection agency to perform the same tasks from option #2. This can be an expensive proposition with a start up fee and a percentage of the take commission.
4) Of course you can always foreclose and take back the property. This can not only be expensive but also complicated and time consuming. The best way is to hire an attorney and we all know what that can cost. Doing it yourself can become quit a complicated hassle.
5) You can simply sell the the defaulted note, get some cash, and rid yourself of this dead end situation for good.
Of course you are going to take a steep discount from the face value of what is owed to you, but when you consider the alternatives and what cost you may incur there, this may be your best option. Let someone else take on all the headache that comes with defaulted paper.
No matter how old your note is or how long it has been since you last received a payment, we are very interested in possibly buying your defaulted mortgage notes. Call or email today for more information on how you can eliminate the hassles of the defaulted real estate mortgage notes you are holding.
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