Real Estate Coaching - Note for Private Lending

What is a real estate note for private lending?

When you start working in real estate, it can be overwhelming to hear lingo, terms, and be given paperwork that seems like a foreign language. From talk of capital gains, ROI, principals, and promissory notes, it is important that you understand what each term means. It is not really as difficult or complex as you may think. In fact, many of the necessary terms in real estate are quite simple and once you understand the lingo, you’ll be using the right definitions and impressing those around you with your knowledge.

The Simple Definition of a Real Estate Note

Once you understand the basics of these documents and how they affect your real estate transaction, it can help your business move quickly. Here are the basic elements to a promissory note, which is one of the foundational elements to a real estate transaction. Some may seem basic but it is these characteristics that make it what it is. Don’t try to over complicate the document and by understanding it, you can use it in your transactions.

  • It must be in writing and signed, signed anywhere on the document and it can be any kind of document. From a restaurant napkin to a sheet of paper, it must be written and signed by the creator.
  • The amount of the loan to include the amount borrowed and the amount owed
  • Default conditions. If the borrower doesn’t pay, what will happen?
  • Repayment dates and amounts. The note may stipulate that the first 5 payments are a certain amount while the remaining payments are another amount.
  • Interest rate and interest rate options such as a discount if paid in full and other related elements
  • Establish a record of the collateral to be used in order to secure the loan

If you want to create a legal transaction for between two parties quickly to secure the deal, a promissory note can be a smart option. It is not the mortgage paperwork but rather a record of the transaction, a promise to repay. It is the proof that money was borrowed and that there is a promise to repay that amount. When you start performing real estate transactions, it is advisable to use proper legal forms of but if you are in a situation where the deal needs to happen quickly, a promissory note on any kind of paper can be an option.

Real estate moves quickly and once you understand that a promissory note can keep the deal moving forward, you can use them to your advantage, both to protect you and to protect those with whom you do business.

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