DICARO & ASSOCIATES Issues 6 Tips on How to Safely Invest in Discounted Mortgage Notes, Trust Deeds, and Land Contract Installment Loans

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The 6 top tips on how to safely invest in notes receivables like mortgages, trust deeds, and land contracts secured by real estate are issued by nationwide mortgage buyers DICARO & ASSOCIATES, LLC.

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Earning 12% Fixed Annual Yields are Probable with the Right Formula

Many real estate investors have never heard of a Lender's Title Insurance Policy

Many people want to dabble and play with different types of investments, including discounted mortgage notes. These 6 top tips issued by DICARO & ASSOCIATES, will help the most novice beginner and remind the professional investor how to protect themselves so they only enjoy an upside profit without worrying about a downside risk.

1.    Don’t loan it, unless you want to own it. In other words, don’t buy the loan secured by a garbage dump, unless you don’t mind owning a garbage dump some day. The best security is a single family residence because there is the largest pool of buyers in case you ever get the property back. Commercial properties are very tough to evaluate the appraised value because, many times, it is tied to the earning potential of the property. If the earning potential is zero, well guess what, the property isn’t worth much either.

2.    Mortgage funds are riskier than you think. Can you say “2008 sub-prime mortgage meltdown”? The whole reason there was a downturn in the entire economy is because hundreds of billions of dollars of mortgages were overvalued, pooled, cut up (turned into derivatives) and most large corporation’s retirement plans, pension plans, and the entire world invested in mutual funds who then invested in an overvalued mortgage pool which subsequently defaulted and caused a massive crash. If a person cannot put their finger on exactly one investment and understand how and why it was originated, then the entire outcome is left to others, who for the most part, don’t have your best interests in mind.

3.    Don’t invest in hard money loans to start off. A hard money loan is a loan that is lent to real estate investors for investment purposes. They are usually short term, high interest loans, designed to be used for renovation purposes. The loan is then repaid from the sale or refinance of a property. What if the loan comes due and the property is repossessed before the renovation is complete? Is this an investment or a speculation? Buying and originating these loans are left for the professional investor.

4.    Owner financed loans can provide the highest return with least risk… if done properly. There are a few companies in the marketplace who buy and sell first position owner financed mortgage loans safely and at double-digit returns. The challenge here is that there aren’t many seller financed notes (aka owner financed notes) that are created in comparison to traditional bank originated loans. Usually these companies only work with accredited investors, as well. Also, make sure you’re not funding a note sale where the collateral is a vacant lot in the Nevada desert.

5.    Make sure the loan has a lender’s title insurance policy. Many real estate investors have never heard of a lender’s title policy. Additionally, many title companies don’t offer a lender’s title insurance policy whenever they are involved in a transaction where a privately held mortgage or trust deed is created. Why? Because they are ignorant. The fact is that mortgage note investment companies who buy and sell notes require a lender’s title insurance policy is in place before they fund the transaction. In the event of a title issue after the fact, only the owner of the property would be covered without a lender’s title policy in place. Not a good place to be as an investor in real estate notes.

6.    Make sure the collateral property has a hazard insurance policy. What if you buy a mortgage loan on a property and the property subsequently burns to the ground? You will want to be paid what you are owed from the insurance proceeds, right? Well, that will only happen if a hazard insurance policy is in place, and the lender is listed as an “additionally insured party” or “additional lost payee” or “mortgagee lost payee”. Otherwise the insurance check will only be paid to the borrower, who probably won’t pay off the loan instead of spending the money elsewhere.

Nicholas di Caro is the Founder and Senior Investment Partner of DICARO & ASSOCIATES, LLC. Based out of their Chicago, Illinois location, they buy, sell, hold, and service privately held mortgage notes, trust deeds, land contracts, and installment sales agreements in all 50 states. They are actively buying performing loans secured by single family residences, mobile homes with land, and commercial properties. They have the ability to buy and sell notes that other companies have denied, in addition to providing creative purchase options that are new to the industry. Additionally, they have the ability to partner with accredited investors nationwide who can earn double-digit annual yields.

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Nicholas di Caro
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DICARO & ASSOCIATES, LLC
since: 08/2013
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