Take the mystery out of note investing with the help of a successful expert.
On October 30, notes expert Eddie Speed (pictured) will answer your questions on investing in real estate notes. myEQUITY users: go here
to submit your questions about this topic up until October 30, and Eddie will do his best to answer all the questions submitted.
Since July, Equity Trust has hosted question and answer sessions with various industry experts including Jay Connor and Larry Goins in the myEQUITY online community. Here’s an example of the helpful, informed answers the experts give.
This is from the Jay Connor Q&A session:
Question: When it comes to investments where you are essentially utilizing other people's money, what is the best way to minimize risk? Are there any good general rules to follow for keeping risk low?
Answer: That is an excellent question! The best way to minimize the risk of your private lender is to not allow your private lender to loan more than 65% to 75% of the after repaired value of the property. My rule of thumb is not to borrow more than 65% on properties up to $100,000. If a property is worth $200,000, I would then be comfortable borrowing up to 75%. The reason is because 75% of $200,000 gives the borrower a $50,000 equity position whereas 75% of $100,000 only renders a $25,000 Equity position.
The other way to protect your private lender is to ALWAYS give a Deed of Trust or Mortgage as security in the case of default. Even though it's legal to borrow unsecured funds, I always protect my private lenders with a Deed of Trust or Mortgage. (They are one in the same - just different terminology depending on the state where you're doing business.) That way they get the same protection as a bank would if they were loaning the money. To further protect the private lender, I also name them on the Insurance Policy and the title policy as an additional insured.
Remember, the myEQUITY community is a free, educational resource exclusively for Equity Trust clients. Take advantage of this great opportunity to learn more and share your knowledge with other like-minded alternative asset investors. Get more details