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Stop Pretending: An Ounce of Prevention Is Worth a Pound of Cure

April 13, 2012 | Comments: 0 | Views: 127

Do Your Homework

Doing your homework and being prepared before you buy or create a promissory note will lead you to a smooth, fast and successful conclusion.

What is Due Diligence?

What we are really discussing here is called "due diligence". This process applies if you are buying an existing promissory note or originating one. As part of the process you should try to gain a complete understanding of the proposed transaction. You should try to discover any current or future problems before you invest. The goal is to look for "red flags", and then either eliminate them, adjust your investment to compensate for them, or just walk away from the transaction.

What are the Important Factors?

  • Borrower's or Payor's Credit Profile
  • Collateral Security Value
  • Loan-to-Value Ratio
  • Terms and Conditions of the Promissory Note
  • Additional Documentation Related to the Note
  • Seasoning or Payment History
  • Market Interest Rates
  • Fixed Interest Rate vs. Adjustable Interest Rate

Get a Mentor

If you are not an experienced note investor, or if you are dealing with a difficult or unusual situation, having an experienced guide and mentor on your team will be an excellent "insurance policy" that will protect you from an unnecessary loss.

Now, after understanding what "doing your homework" and "due diligence means, you should ask yourself: am I qualified to do this by myself?

As an example, if you are planning on buying a house or a used car you will probably hire an experienced house inspector or an experienced auto mechanic to guide your through the transaction. You realize that paying an expert a few hundred dollars up-front will probably save your thousands of dollars on the back-end. This same principle applies, with double force, to investing your hard-earned money; don't be penny-wise and dollar-foolish. Don't risk your retirement savings by being too proud to get experienced guidance-before getting into a "mess".

An experienced promissory note appraiser, acting as your mentor, will shorten your learning curve, prevent you from making costly mistakes, and save you time, money and loss of sleep from worrying.

Add Value to Your Promissory Note

If you do your homework and your due diligence properly you will avoid getting into a financial "mess"; and, you will "clean-up" existing financial problems before they overwhelm you. Your investment will perform better for you; and, if at some future date, you wish to sell all or part of your note for cash, you will get a higher price and a quicker sale because you have a "clean promissory note".

Appraisal and Valuation Concepts

  • If you don't understand it, don't invest in it!
  • We have a lot of stuff in the system that is mispriced.
  • Don't proclaim to have any complicated strategies.
  • Operate on the condition of no surprises.
  • Reading a contract is useful, but you also need to be able to read people.

Appraisal and Valuation Summary

Perform appraisals to "get it right".

Perform appraisals to determine the true Fair Market Value.

Perform appraisals to avoid "messes" before they happen.

Lawrence Tepper specializes in: Promissory Note Appraisal & Valuation--and LLC Valuation and Appraisal Expert Consulting Services

EDUCATION AND TRAINING Law Degree /Accounting Minor University of Denver Colorado Real Estate Broker-- Promissory Notes Specialization Certified Commercial Investment Member From National Assoc. Realtors (CCIM)

PRACTICAL EXPERIENCE 35 + years of appraisal and valuation for Attorneys, CPA's, Estates, Trusts, Administrators, and Financial-Investment Advisors. http://promissorynoteappraisers.com/

Source: EzineArticles
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