One Rate Real Estate
One rate real estate refers to obtaining a fixed rate of return on investment property. This type of investing is preferred amongst the elderly and retired people who desire a guaranteed rate of return on investments.
One rate real estate investing involves providing cash to a private investor. The investor purchases distressed properties through foreclosure auctions or lenders. When foreclosure homes do not sell through auction they are returned to the bank. Distressed properties are sold below market value and many can be purchased for 60- to 70-cents on the dollar.
Individuals engaging in one rate real estate investments should only work with investors who have a strong track record with rehabbing properties. Seek out investors with a minimum of three years experience. Ask for records and referrals of their real estate transactions. Contact each referral and inquire about the investor's ability to quickly flip houses.
Buying houses with cash is preferred over obtaining hard money loans. Hard money is also referred to as "private money" lending. Instead of obtaining financing through traditional mortgage lenders, wealthy people offer mortgage notes to investors or private individuals.
Hard money lenders generally charge a rate of interest between 12- and 18-percent; along with closing costs. Some hard money lenders instill a prepayment penalty and charge borrowers extra if they pay off the loan early. This restriction usually lasts 90 to 180 days.
If an investor purchases a house, engages in rehabbing the property and sells it within a few months, they could be slapped with a prepayment penalty. This penalty could potentially wipe out most, if not all, the profits.
By providing cash to established investors with a solid track record in house flipping, soft money lenders can earn a fixed rate of return on their investment. This generally amounts to 1-percent of the mortgage note.
For example, if you provide $150,000 cash to an investor to purchase property, you will earn $1500 per month. Once the investor sells the property, you receive your $150,000.
Mortgage notes are secured by a promissory note which outlines repayment terms and interest rates. When engaging in one rate real estate transactions it is best to consult with a qualified attorney to ensure your vested interests are protected.
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