FUNDAMENTALS
NOTES
Noteworthy Risks
REAL ESTATE NOTES OFFER YOU NUMEROUS OPTIONS TO MITIGATE RISK
by W. J. Mencarow
e live in risky, uncertain times but when have we not? Every
know what to do with it. But what would you do with a gas station, a gravel pit, or a factory? If you don’t know, don’t buy the note. HAVE SEVERAL EXIT STRATEGIES. For example, a foreclosure. Modifying the note (temporarily or permanently lowering the month- ly payment/interest rate, forgiving missed payments and/or penal - ties, adding arrears to the balance). Cash for keys (paying the default- ed debtor to move). Why would you give money to someone who owes you money? Because it would be
a lot cheaper than foreclosure. All potential exit strategies have their pros and cons and must be tailored to the specific situation, such as how much equity is in the property, the time it takes to complete fore- closure (that varies widely by state and locality, so be sure to know that before you invest), the financial and mental costs of foreclosure, your willingness to throw a strug- gling family out of their home, etc.
W
investment carries risks. Those who are unaware of the risks and/ or do not prepare for them will be the first to suffer when the unex - pected happens. Real estate notes offer you numerous options to mitigate risk. Here are some of the ways that notes can alleviate the level of risk in your investment: ONLYBUYNOTES SECURED BYPROPERTYYOUWOULD LIKE TO OWN. If you had to foreclose on a single- family house, you would probably
HAVE MODIFICATION STRATEGIES.
Know what you would do if you wanted to cash out of the note,
54 | think realty magazine :: june 2021
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