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Real Estate Notes and Land Contracts Offer Positive Cash Flow to Investors

Real estate notes and land contracts are used to document the sale of houses, commercial properties and vacant land. Other common names for these contacts include real estate receivables and seller carry back trust deeds. Seller carry back returns to a type of private financing where the seller acts as a lender. Realty note holders can elect to provide full or partial funding to expedite the sale.

Although real estate notes and land contracts can be executed by the parties involved, it is best to retain legal counsel to ensure documents are legally-binding. At minimum, have a lawyer review contracts and make sure they include legalese which protects both buyer and seller in the event of default.

Note receivables are valuable assets that can be sold to private investors. When drafting contracts is it important to be aware of strategies which can maximize cash flow and return on investment.

Sellers who provide private financing to help buyers purchase the property or obtain financing for the balance of the sale price should obtain a minimum 10-percent down payment for residential properties, and 20 to 30-percent for commercial properties. In most cases, obtaining higher down payments can potentially minimize the risks because buyers do not want to lose their investment money.

Seller carry back financing typically extends for two to five years and up to seven years on commercial properties. It is best to keep seller carry back terms as short as possible. At the end of the term, buyers must obtain funding through a conventional mortgage lender.

Oftentimes, buyers who require seller carry back financing are credit-challenged, so it is critical to obtain a current credit report. Individuals with low FICO scores are not always high risk, but sellers must protect realty assets through iron-clad real estate notes and land contracts.

When entering into seller carry back mortgages it is best to work with buyers…

Read More…. by Simon Volkov

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The post Real Estate Notes and Land Contracts Offer Positive Cash Flow to Investors appeared first on Note Investing Seminars.

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