When you go to purchase a piece of real estate, you have to get the transaction financed. You have to do two things. First, you will have to put a down payment. The rest of the purchase price will be financed. You will get a promissory note for the balance of the loan. The term of this note can vary from state to state. Watch the video to find out why negotiation the note can be a very important part of your success in real estate investing.
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“Hi, Jay Massey here, with the CashFlowDiary.com and in this video I'm going to explain to you real estate financing in two minutes or less.
Now, when you go to purchase a piece of real estate let's just say for example that it's a hundred thousand dollars. Okay, you're like “Well I don't have a hundred thousand dollars.”
Okay, that's fine, and then you have to get the transaction financed so that you can go ahead and purchase it today. What does that mean? That means you're going to do two things.
You’re probably going to make something known as a down payment. And for the sake of this example let's call those twenty thousand dollars. And then the rest are the purchase price is going to be financed and you're going to receive what is known as a note. Now in some places the call it the mortgage note sometimes it’s secured by a trust deed, but at the end of the day, you have a promissory note that is for the balance and in this case thousand dollars.
Now the term of this note can vary, from state to state, transaction to transaction typically, though, monthly payment for comment interest this comment, it usually can be 30 years, 15 years; you can have all kinds of changes that happen within this note.
Understanding specifically how to negotiate this note and everyone's best interest is hypercritical. This is the success you’re operating the asset and again if you're the seller understanding how to negotiate so that you make sure you secure your investment properly, is also important.
One of the key concepts to understand is a loan to value. and you're simply going to take the value of the promissory note in this case 80,000 divided by the value up the actual property which would give you 80 % LTV. So with that, you now understand some of the basics of real estate financing.
Thanks for watching.
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