How to Structure, Appraise and Value a Real Estate Mortgage Note

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Five Key Factors that Impact Risk, Value and Income

What is a real estate mortgage note?
Legally speaking, a mortgage note is two legal documents: 1) A promissory note, and 2) An encumbrance or lien recorded against real estate. But, based on every day conversational usage, most people, lawyers excepted, think of it a one document. To be technically correct in this discussion we will deal with the two separate documents-the promissory note and the mortgage or deed of trust.

To determine the best way to structure a real estate mortgage note we must first consider our goal or our purpose. Remember, we are discussing a “financial instrument” an “investment instrument”. The function of a financial investment is to generate income/cash-flow at the highest rate possible rate commensurate with the risks involved. We will assume the investing goal provides at least a market rate of income, recognizing the risks involved.

5 Key Factors Impacting the Fair Market Value of a Real Estate Mortgage Note

1. Borrower/Debtor
2. Interest Rate
3. Payments & Terms
4. Collateral Security
5. Document Language

Borrower/Debtor
Always deal with a borrower that has good credit. A person’s FICO (credit score) shows how reliable they are in paying off debts-keeping their promises. Avoid buyers who object to having their credit history pulled; there is a reason they want it kept confidential. Don’t take their word for their past paying history, do a credit check.

Interest Rate
The interest rate should be reasonable and fair to both parties; it should reflect the market rate for the mortgage loan with an appropriate adjustment for risk factors. Over charging can lead to hard feelings, inability to make the payments and possibly violating the usury laws of the state. Undercharging devalues the loan and renders it a poor investment.

Payments & Term
The periodic payment should be within the budget of the borrower; the payments should be monthly; the term of the loan should be less than five years, three years is better; avoid making long-term loans. A note with a 3-year term is more valuable than one with a 15-year term. The longer-term notes are discounted much more to account for the longer waiting period.

Collateral Security
Obtain a substantial down payment; keep the loan balance at or below 75% of the value of the collateral real estate. The down payment amount reflects on a borrower’s financial stability. The higher the loan-to-value (LTV), the more risk there is to the investor. Use real estate as the collateral security backing-up the bower’s promise to repay. Be certain to evaluate the condition and location of the property used as security. The mortgage or deed of trust documents collateralizing the promissory note should be recorded in first position; it should be a first position mortgage loan.

If you are structuring a business promissory note, its value will be much greater and it will have less risk if the real estate of the business is part of the note’s collateral security. This means that companies that lease property face bigger financing discounts, unless other real estate is used as security.

Documents and Language
Preparing the mortgage loan documents yourself is high risk folly; it may seem simple and easy to do, but it is not either if it is done correctly; you may save some money on the front end, but you will give the savings back plus way more on the back end. On the internet you will find hundreds of ads and offers proclaiming “free promissory note forms”, “free tips”, and the answers to legal questions “free”. Don’t take the bait! Only an experienced promissory note specialist who really understands the legal and practical meaning of the terms and conditions can keep you safe; each state has different laws and customs. There are state laws and federal laws to be considered.

Gaur Atulyam offers best buy for home buyers

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Gaur Builder is a highly renowned leader in the Real Estate industry that has created several landmarks in the Residential and Commercial Properties. The group has covered the market up to a great extent and with the combination of consistent efforts and performance it has been winning the trust from past few decades. Gaur Atulyam is a brand new presentation by the group that has uplifted the living standards and made the dream fulfillment an easy task to accomplish. The targeted location of the group is Greater Noida but after the exposure of business and increasing demands at a rapid rate some other regions are also coming into action to change the overall structure of the country. The credit for such an achievement goes to the dedicated teammates who always focus on the Vision of the company and to attain it at any cost. Gaur Atulyam Greater Noida is a residential project that acts as a perfect place for those who always want the performance. The project offers the choice of 2, 3 and 4 BHK luxurious apartments and including all the advanced features and facilities to increase the living standards and the brand credibility. It is really a fantastic residence with beautiful Site layout where the top level of comforts and luxury met together. To make a better tomorrow, investment in this project is a nice idea. Not onlt this, all modern amenities are offered in Gaur Atulyam in order to make the living comfortable and luxurious. Avail a home here, and enjoy some unforgettable moments with your loved ones. The floor size of Gaur Atulyam Greater Noida shows variations according to the apartment type and the general range starts from 955 to 1665 Square Feet. The project comprises of several specifications that acts as a part of its increasing beauty. Some of them are pointed as – vitrified tile flooring, oil bound distemper, modern interiors, fire fighting system, high speed elevators, multipurpose hall, swimming pool, security, parking and gymnasium. It is located at the most promising location Noida and Greater Noida. This project is having very excellent connectivity from Delhi, Noida and Greater Noida via Noida-Greater Noida Expressway. Just only 10 minute drive from Pari Chowk. Upcoming Metro will make the connectivity easier to its residents. There is upcoming night safari and cricket stadium adjacent to this project. Formula1 race Track is already present in Sport City. All this features makes it’s a perfect Homes. Gaur Builder believes in delivering the promise. House of by thousands of happy families, Gaur Group has always upto customer’s trust and committed in providing a lifestyle with world class construction, design and quality.

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Capitalisation Rate In Real Estate And How To Calculate It

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Capitalisation rate is the percentage figure used to find out the current value of a property based on a figure of future net operating income. When divided with the capitalization rate, the net operating income of a real estate property will provide the approximate market value of the property.

When determining the capitalization rate of a property, the rates applied to real estate properties of the same nature sold most recently is used. When determining the capitalization rate, the sales value of an asset sold most recently is divided by the income it generates decisions. This provides a more objective way of valuing real estate properties which can be used not only by the seller but also by the buyer alike. It will assist the seller get the right piece for his investment while the buyer prospective buyer will use it to make informed decisions as to whether or not the value of the property is properly estimated.
This acts as a good base for estimating the value of income generating real estate properties when buying or selling. By looking at the sales price and income of other related properties located in similar environment, you can come up with an acceptable capitalization rate that will enable you determine the value of your asset based on the current income.

Determining the capitalization rate need not be an arduous task. You can start by collecting the statistics of recently sold properties in similar or the same locations as your property. The chosen property should correspond with that of your property. You need to determine with high degree of accuracy the net realizable rentals by the owners of the property. For instance, you can take the net rental income realized by the owners to be $30000.Get the sale price of the asset and divide the net income by the sales price. This will give you the capitalization rate. If in this case the property was sold at $900000,you have it divide by the net income of $30000,the resulting figure will be 0.33.Then convert this figure to percentage points by multiplying it by 100.This will give you a capitalization rate of 3 percent.

Capitalisation rate have become a great help to the owners of property owners who have the intention of selling them. Without capitalisation rate, it would be hard to value real estate assets. Many people would be deceived to accept lower prices by the buyers of the same properties. Since you will use other properties that are independent from yours when working out the capitalization rate, you will be assured of a better return when you finally decide to dispose your property. The determination of this rate need not be a headache. The procedure is quite simple. Get the net income of a real estate property sold in recent times and divide it with the sales value. Then you convert the figure obtained to percentage form. This figure will aid you in working out the real market value of your asset.

Southern Utah Real Estate Market Conditions

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With just 60 days to go before the 2014 Real Estate market hits -Reset- and dives into 2015, the October St. George Utah real estate market conditions and statistics continue to look positive.

In drilling down on the current inventory, it’s hard not to notice the the greater St. George Utah area – primarily in the cities of Ivins, Santa Clara, Hurricane, Washington, St. George, Brookdale, and Pine Valley – currently has an inventory of 3,978 active real estate listings. Of those listing, only 196 are listed as condo/townhomes for sale; with 275 townhomes sold thus far this year on the Washington County Board of realtors MLS.

Active Vs. Sold Listings

The Southern Utah real estate market has no doubt survived some rather dramatic vacillation over the past 48 months. During the ordinarily quiet month of September, Realtors in St. George Utah sold 280 real estate listings via the MLS, representative of significant deterioration over 2013s 301 sold properties for the same month. Exploding onto the MLS during September 2014, a total of 2005 Active Listings were listed for sale in the hopes of finding a new owner, representing a significant jump from last year’s Active Listings of 1691 during the month September.

Cumulative Days On Market (CDOM)

With the 2015 holiday rapidly approaching, it’s beneficial for southern Utah’s would-be home sellers to understand that traditionally, while the holiday season is fun for the family- It ultimately means increased -Cumulative Days on Market.- Example: when comparing the average CDOM for a listing in September, a properly listed property lasted on the southern Utah MLS for roughly 78 days. Conversely, that same listing, with the same Realtor – and at the same list price could expect to spend an additional 20 days on the WCBR MLS if listed in during December – a not so welcome Christmas gift.

Southern Utah’s Popular Price Range

The bread-and-butter of the “Palm Springs” of Utah’s (i.e. St. George) real estate inventory, homes under $300,000 remains popular. As the remnants of St. George’s housing inventory gets picked over by the newest -snowbirds- in town, those with access to the WCBR MLS can easily tell that one of the more desirable list price ranges remains those properties under $300,000. When examining some of the available data sets for the past 30 days of MLS activity, we see those properties listed under $200,000 enjoyed a greater proportion of buyers competing for their property – perpetuating a long and healthy trend in southern Utah.

Generally speaking, St. George’s homebuyers feel most comfortable in this price range. For their $200K, today’s buyers are looking for that perfect home; comprising approximately 1800 sq. ft., with a flexible floor plan. Additionally, today’s buyers want a home that backs up to green space – think an open park-like space in many of the newer communities. Upon close review of the single-family residential sales for southern Utah, we see the housing sector standing firm and holding its own.

Currently, the southern Utah MLS absorption rate is increasing incrementally; the cumulative days on market for a properly priced single-family residential list have declined dramatically. Representing a 2.91% increase in the median priced home sold in greater St. George area, our median price sales jumped from $232,000 in 2013 to $249,000 in 2014 – not a bad increase. Learn More At: Southern Utah Real Estate Market Condition

Ottawa Neighborhood Tips When Purchasing Real Estate For Investment

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It is important for you to investigate the city neighborhoods when you have made up your mind to invest in a property. Ask yourself this question: ‘Will investing in a swanky neighborhood be cost-effective as a form of investment?’ Generally homes in an expensive part of town will cost too much and are not worth your money. While you may be able to find rare gems and bargains once in a while, it is safer to purchase a home in a less classy Ottawa neighborhood.

At the same time, you should not focus on real estate in a low class neighborhood either. Some homeowners don’t take proper care of their property in these areas. Not only are the properties more difficult to rent, it may also be challenging to sell them in the future.

Be cautious of communities where there are too many homes for sale. There could be an underlying reason for this situation. Perhaps everyone is leaving the town for greener pastures elsewhere since they do not feel safe living there any longer. You do not want to come in and take over such a property.

Visit the local police to ask for crime statistics of the neighborhood to determine if it is a safe place to reside. If you take a look at the multiple listing service or MLS, you can also assess recent property sales in the area. Make an appointment with a real estate evaluator to check for the price averages in recent years and ask if that neighborhood is a good place to invest in property.

Network with fellow real estate investors and get a feel for the value of certain neighborhoods. Ask for recent trends of a given Ottawa area and find out its future potential value.

Overall, you need to look for gems in Ottawa neighborhoods that are not too luxurious but at the same time are not low-value areas. If an area appeals to you, evaluate its market value as a community and start looking for a property. Remember, the better the area, the better your chances are for landing a great investment deal.