Promissory Note Investing: Understanding the Basics

Learn the Fundamentals and Avoid Unnecessary Losses

Investing Basics
All investing has two goals: 1) receive a return on the investment; 2) receive the return of your investment. Those two goals drive all investing decisions. They are simple to state, but are difficult to do. This article focuses on how to earn reasonable profits while being reasonable safe, by investing in promissory notes and mortgage notes.

These guidelines are based on my 35+ years of personal experience as a promissory note investor and as an appraiser of notes. We can call this information “basic investing survival skills learned the hard way.”

1. Understand the Borrower’s Attitude
Successful note investing depends on understanding the borrower’s attitude; the borrower is the foundation of the promissory note transaction; the borrower receives the money, uses the money and repays the money. If the borrower is unsuccessful, the note holder (investor) is faced with unwanted extra work, expense and anxiety.

Consequently, forming an opinion of the borrower’s attitude, character and capabilities must be done before money is advanced. The borrower’s character is of utmost importance. The borrower’s desire to do the right thing, the honorable thing, is critically important. Dealing with a borrower whose goal is to get something for nothing, or to gain the upper-hand in the transaction leads to problems.

2. Understand the Borrower’s Financial Condition
If the borrower has the right attitude, but lacks the financial capacity to perform, making the investment is a mistake. Before making the investment, review the borrower’s Credit Score; this indicates the prior payment pattern. All humans have patterns of behavior; the patterns are consistent over follow time. If a person has a bill paying pattern that is good, it usually continues the same; if the bill paying pattern is irregular or poor, that pattern usually lasts.

Financial…

Source by Lawrence Tepper

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Promissory Note Investing: Understanding the Basics published first on http://www.noteseminars.com/