In our last post (Ways to make your private notes a lot more secure. Part 1) we discussed 5 ways to keep your private notes more secure. In this post we are going to wrap up our conversation on this topic with the remainder of our top 10.
Private notes are a great way to earn above market interest rates and this is a few ways to keep them more secure and well protected.
6. Check how committed your borrower is to their promises by asking them to put things in writing. That’s what a loan agreement is for—to spell out every term of the loan. You will find a lot gets promised and don’t try to commit it to memory.
7. Walk away if a borrower offers outrageous rates. If it’s over market rates, it’s probably a scam. Good borrowers don’t want to pay inflated rates. In fact, they want to pay and negotiate the lowest rate they can get.
8. Always escrow funds for fix ups. That means you hold the renovation funds back at closing and release them later, as work is completed on the property. This will ensure the property value is reached by all the worked being completed as agreed.
9. Ask for a borrower’s “story.” Learn about the good, the bad, and the ugly. This will build trust and prove if a borrower is trustworthy. If their story changes each time you talk to them, walk away. Don’t be talked into a bad loan relationship. Get all of your agreements in writing and fact check as much as you can.
10. When someone needs to close a deal SUPER-fast (in hours or a day or two), run, don’t walk. This “emergency” to fund NOW will likely become a pattern and those loans will become a headache for you for years to come. The borrowers will also likely want to skip steps that protect your money…there are too many loans out there to take on this extra risk.
If you have any questions on how to keep your loans as secure as possible please reach out to us on the Contact Us form.
Have a great day.