How to get a high FIXED income from a SECURED note
You get to have your cake and eat it, too. You can get both good FIXED INCOME and SECURITY of your investment. The security is more than just the promise of an individual or company. It is a first position interest on a specific piece of real estate valued far in excess of your investment. And this value is not based on some appraisal or guess—as if we will try to sell the house. Instead, the value of the house is related to the income it produces. The income from the property itself will always have the ability to make the payments to you. The house is not for sale--it’s for income. Everybody doesn’t need Google stock. Everybody needs a place to live. Talk about a known investment in these uncertain times!
Here is the typical Michigan rental house in our markets in the 2009 - 2011 period:
| Per Year | |
|---|---|
| Net Income (incl. allowance for vacancy) | $ 13,000 |
| Less: Property Taxes | (4,200) |
| Insurance | (1,000) |
| Maintenance | (800) |
| NET OPERATING INCOME | $ 7,000 |
That means if the typical amount of capital we require, including purchase price, closing costs, and re-modeling expenses is around $35,000, you can see that the income of the property pays for the whole project in FIVE (5) years ($7,000 X 5 years = $35,000). At 10% fixed interest, you would receive $3,500 per year in income from us. But since there’s $7,000 to go around, you can see why your investment is safe. The income from the property itself will always have the ability to make the payments to you. In this example, you became what is in effect a 50/50 partner in the cash flow.
We will pay you 10% on a fixed, monthly basis. You get SECURITY in the form of a first position mortgage. After a period of time--at least three years--we cash you out in full.
The Great Lakes Secured Investments FIXED, SECURED Note: Step by Step
- You get to know as much about us and your investment as you feel comfortable.
We talk in person and / or by phone at the time and location of your convenience. If at that time it sounds like something that would interest you, let us know how much you would like to invest, for what period of time, and we can quote you rate and terms. If this is an investment that affects family or other loves ones, such as heirs, we explain to you how they are protected should you pass away before they do. We can leave you with blank documents for review with your attorney or other adviser, if you’d like. - Our company gets a contract to buy a property (single-family house) that meets a specific investment criterion.
These are bank or government foreclosures that we buy direct from the source. Getting deals like this consistently requires experience, credibility, market knowledge, cash, patience, and a day-in day-out watchful eye and focus. We are licensed in real estate in Michigan and watching key areas within the metro Detroit market on a daily basis (the same area we already own other cash-flowing rental properties). We have relationships with the local real estate professional community. We purchase houses on a monthly basis. Our methods and presence assures we can buy much more effectively than the public at large. When we see a great deal we immediately get it under contract with a deposit and a Purchase Agreement. - We provide you with detail on the subject property that will collateralize your Note.
You will get pictures and description of the house in its current condition, inside and out. You will receive a detailed estimate of the re-modeling costs. We will also determine what rent we will charge, other carrying costs such as property taxes, insurance, and maintenance. We will give you additional community, school, neighborhood, and demographics data. You can drive by and look at the house. You can compare the house to others we have in the area. We create a projected Profit and Loss Statement for the next three years.
Of course you understand that our payment to you is fixed every month, as dictated by the Note, regardless of whether the property is currently occupied. But we provide you the backup detail on the subject property and its income just so you know your collateral is an appealing, solid, well-managed, quality property in a desirable location. - You will fund your investment.
You will fund an escrow account at a title company designated by the seller. Because our properties are purchased from large institutions such as banks, Fannie Mae, or government agencies such as HUD or Treasury, the terms of the sale are typically not negotiable. They will not allow us to close the transaction at a title company or attorney’s office of your choice—it must be their appointed title company. However, the closer is always a reputable, usually national, firm whose credentials can be verified by you before you send funds. - We close the transaction.
A closing is scheduled in Michigan or by other means (depending on where you live) at which time the ownership of the property, in the form of a deed, free of all liens and encumbrances, is transferred from the selling bank or government agency to Great Lakes Secured Investments.
At this time, in exchange for allowing us to borrow the funds you've deposited, the Note is granted by us as Maker to you, your company, heirs, and/or family members who you designate as Beneficiaries. This Note states all the terms of the loan you are making to us as previously agreed, such as the payment amount, interest rate, loan term, etc. The security instrument is the Mortgage. This is the document that secures the Note with the property. Consequently, in Michigan, it is the Mortgage that gets recorded in the County Register of Deeds. Michigan has its own unique recording requirements that must be adhered to.
In addition, we receive title insurance to protect both of us from any future claims of interest or liens on the property that may have been there before we purchased it. We also purchase insurance to protect against fire, theft, damage, and liabilities. You will get an insurance binder showing you and any other beneficiaries as the loss payees, meaning you have an insurable interest in the property in case a claim should ever need to be made.
You get a copy of all documents for your files. You will usually receive your first payment around 30 days from time of closing, and then monthly after that, regardless of whether a tenant is living in the house or not. - We re-model and prepare the house for market.
Your job is done, but ours really gets underway now. We get all utilities hooked up. We clean out and strip the house of unwanted debris to prepare for the re-model. We change locks to provide easy access, and begin to schedule the contractors. We make sure they get paid upon completion of their part so you can be assured they won't place liens on the property, thereby jeopardizing your interest. Although we take great strides to keep re-modeling costs to a minimum, we use only licensed, insured, reputable contractors.
Many of the communities we hold properties in will require a city inspection of rental properties prior to a tenant moving in. Also, any building permits that needed to be pulled get approved at this time. - We market the house to a long-term tenant.
We use a variety of methods. More than 80% of the time we will find a family that currently lives in and has ties to the general area, meaning they are more likely to be a long-term tenant. We generally have so much demand that we maintain a tenant waiting list. In our neighborhoods, there may be properties available for sale (that few people can get financing to buy), but there's next to nothing available for rent, let alone a property that has been professionally re-modeled and managed. Often the best they can do is rent a property from someone who was really trying to sell and doesn’t want to be a landlord, but got desperate. Our tenants don’t want a short-term lease or a non-committed landlord. We stand out, and this is why we can pick and choose the best of the best of tenants.
For the foreseeable 2009 – 2011, there will be a very strong demand for middle income rental housing in Michigan. WE PICK ONLY QUALITY NEIGHBORHOODS WITH STRONG SCHOOL SYSTEMS AND COMMUNITY SERVICES—no Detroit, Pontiac, or Flint properties. We estimate that at least 300,000 new tenants—families, not individuals—will come into the rental market in Michigan between 2009 and 2011. These are almost all people who have been displaced from their current house because of foreclosure on their part of their landlord's. What are the options for such a family? They can't buy a house because of tight credit, especially with their now lower credit score.
And, although there are a lot of homes for sale, what is available to rent? And, since we want a long-term tenant, why would we expect the good ones to tolerate the properties and “professional” landlords that exist out there. The fact is, most “rentals” are only available because its owner couldn't sell it—they are accidental landlords.
Just because they have bad credit or have been through a foreclosure doesn’t mean they don't have the income, or will trash the house and refuse to pay the rent. We get to know the person, due a lot of due diligence, and look at the specific reasons if they have poor credit.
Can you see why location and type of property is so critical? We cannot capitalize on most of these opportunities if we just pick any old cheap house, because most of what's available to buy cheaply is not where the quality tenants want to live. Finding the right house and getting the right tenant is a delicate balancing act but, when we meet, you will see that we have done it hundreds of times successfully right up to the minute. I have hundreds of tenant examples to prove this.
Demand, Residential Rental Property, Michigan
- The tenant puts up a deposit, signs the lease, and moves in.
Utilities are transferred into the tenant's name. A walk-through inspection is completed, and any final repairs or alterations are usually made within 30 days of the move-in, or as weather permits for exterior work. - We manage the property and your investment on an ongoing basis.
We do it. Proactively. No depending on live-in amateurs or “professional” property managers who will never treat the property or tenant like we will as owners. This is our third decade of property management. It is our full-time profession. We have our own supply warehouse, office, licensed contractors, equipment, tools, and systems. For an investment in real property to be successful it must be properly managed on a 24 / 7 basis, recognizing that it involves relationships with people, not just a building. - You receive income and updates on a monthly basis.
On a quarterly basis, you will receive an update, including photos, a current cash flow statement, copies of insurance and property tax documents and paid receipts, and any other relevant information about the property, neighborhood, or any improvements we've done.
In January of every year, you’ll received a substitute Form 1098 which shows mortgage interest income you received, for tax reporting purposes.
We will pay referral fees to you if you help us find other investors (which you will be happy to do after you see the way we treat you!). - Get paid off in full or reinvest more for more income..
Within 60 days of when the term of the loan is up, you and / or your beneficiaries will receive a notice from us indicating the payoff amount and date. We may offer you an attractive option at that point to re-invest the money again if you'd rather continue to receive income rather than cash out. If you want to cash out, we would make a single balloon payment at the maturity date of the Note. We would then require you sign a customary Discharge of Mortgage, releasing your interest in the property for recording in county records. Either way, since most (if not all) of the cash you receive in the end will be principal invested (rather than interest income), it is not subject to capital gains or income taxes!