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What Makes A Salable Real Estate Note

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A Real Estate Note is most salable when the following items

are addressed in the note:

1) 1st position is more marketable than 2nd position, 3d position is almost impossible

2) The face interest rate should be FNMA interest rate + 2% to 3% or more

3) Single family owner occupied residential is the best collateral, then multi-family,
then owner occupied commercial or industrial, then land and other type properties.

4) Try to have the note fully amortized over 10 to 15 years but a 30 year amortization
with a 5 or 10 year balloon is also marketable. Typically, note investors don't like large
balloons coming due as they feel the payor runs a good possibility of going into default
because they can't get this note refinanced although this risk is minimized with real
estate.

5) Have the buyer sign the note with a personal guarantee and have the spouse sign the
note too.

6) Have the buyers credit report ready to show a potential note purchaser

8) Have some proof of their income so the note purchaser can see that the note payor can
afford to make the note payments and still have sufficient monies left over to live on. A
standard 1003 loan application should provide all this information

9) Try to have proof of the cash down payment to purchase the business; closing statement
etc. Investors are Leary of low or no down purchases. Then like to see 10% to 20% or more
equity in the property. Notes with low credit scoring and thin or no equity have
practically no chance of being bought.

10) The seller should have copies of cancelled checks showing the payments from the buyer
on this note and the note should be seasoned 6 to 12 months before trying to market it.

11) When sending a note to us, have the payors name, address, birthday and social security
number so credit scoring can be verified if need be.

12) Credit scoring for the buyer/payor should be above 620 for real estate secured notes
and 670+/- to 700+ for business notes

With all of the above criteria being met, we would have a quick sale and one with minimal
or no discounting. As some of the above criteria deteriorates, the deal still may be doable but
the investor yield and hence the discount would go up.

I hope this helps and I look forward to working with you.

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