Investing In Performing and Non-Performing Notes
Cash Flow Notes are legally binding Contracts which document the promise of the borrower to repay the lender. Currently, there are more than sixty types of cash flow notes. Some of the more common types include Real Estate, Structured Settlements and Business Notes.
Real Estate Cash Flow Notes are secured by real property such as a commercial building, residential house, mobile home, automobile, boat or airplane. When real property is used to secure real estate notes, a Mortgage or Trust Deed is added. Should the borrower default on the loan, the real property can be sold and used to collect on the debt - these are called Non-Performing Notes.
Structured Settlements are financial instruments used to compensate individuals who have been injured due to the negligence of an individual or organization. This type of cash flow note is secured using annuity payments provided by life insurance companies. Typically, annuity payments are paid to the recipient over an extended period of time. Depending on the circumstances, individuals might be able to sell all, or a portion of, their structured settlement to a private investor in exchange for a lump sum cash payment.
Business Cash Flow Notes are secured by assets owned by the business. This type of cash flow note is more complex and usually requires the assistance of a Financial Adviser. There are different types of business cash flow notes including: Seller Carry-Back Notes, Purchase Order Funding, and Factoring. Seller Carry-Back Notes are used when a business owner provides financing to the borrower. Owner financing is a popular choice for small business owners since it is oftentimes difficult to obtain loans from traditional lenders.
Seller Carry-Back Notes or Owner Financing is also used in Real Estate - these are usually known as Land Contracts or Contracts for Deed. A Land Contract is a contract between a seller and buyer of real property in which the seller provides financing to the buyer to purchase the property for an agreed-upon purchase price and the buyer repays the loan in installments. Under a land contract, the seller retains the legal title to the property, while permitting the buyer to take possession of it for most purposes other than legal ownership - usually as rental property. The sale price is typically paid in periodic installments, often with a balloon payment at the end to make the length of payments shorter than a corresponding fully amortized loan without a final balloon payment. When the full purchase price has been paid including any interest, the seller is obligated to convey legal title to the property to the buyer. An initial down payment from the buyer to the seller is usually also required by a land contract. The legal status of land contracts varies from region to region. Since a land contract specifies the sale of a specific item of real estate between a seller and buyer, a land contract can be considered a special type of real estate contract. Although most land contracts can be used for a variety of reasons, their most common use is as a form of Short-Term Seller Financing.
Cash Flow Notes are a legal payment contract, making them a valuable asset. Just like any asset, cash flow notes can be sold for a lump sum of cash. Many investors find investing in cash flow notes can be quite lucrative.
Home Sweet Home Investments mostly works with the two types of Real Estate Notes - Cash Flow and Seller Carry-Back. If you let us know what you are looking for we will be glad to send you what we have that meets your requirements when available - both Performing and Non-Performing Notes.
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