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Homes and Land in Sunny Sequim, Washington

Homes and Land in Sunny Sequim, Washington

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Email: ChuckMarunde@gmail.com

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125 Olympic Ranch Ln, Sequim, WA 98382

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Should I Invest in Real Estate Notes?

by Chuck Marunde / Monday, 05 January 2009 / Published in Investing, Real Estate Notes

Question:   Hi Chuck,   I am considering entering the world of real estate commercial note buying, and I want to make sure I have all the information I can find prior to making the move.   I heard of the field from Russ Dalbey, of Colorado.   What is your opinion of the field today?   What in your opinion are the risks of an individual entering the field?     You mention that you used to work for the largest note buyer in WA state, who might that be?     Thank you for your time.

Answer:   Yes, I worked for Metropolitan Mortgage & Securities in Spokane.   When I worked there many years ago, we had purchased over 7,000 private notes (deeds of trust and real estate contracts).

At that time, interest rates were high, so based on a required investment return of 18%, we were getting an average discount off the principle balance of about 30%.   Not bad.   Of course, with interest much much lower today, discounts of that kind are not possible.

It is a great business, or was a great business.   It has gotten to be a very competitive business, so much so that note buyers are offering as much as 97% of the balance.   Wow.   A 3% discount hardly makes it worth considering.   Of course one’s rate of return is based in part on the interest rate on the existing note, so a small discount might still work out to a decent ROI, provided the underlying interest rate is high.   Problem is, most people refied and all those private high interest notes pretty much are history.   Note buying is still a great opportunity, but it is hard to find secured notes on good real estate that is not overvalued right now and that can give you a good ROI.

There are some serious risks for the inexperienced note buyer.   Of course, you want to be in first place, so you have to be able to analyze title information like an expert, to recognize potential problems, and to know when to hold ’em and when to fold ’em.   There are unrecorded dangers, too, like a labor or a mechanic’s lien.   There is the danger of unrecorded encumbrances, like adverse possession or an easement by prescription.   There are other legal risks, like an IRS tax lien, private judgments, and spousal claims.   You could loose money real fast in this business if you are not an expert from the start, or if you don’t get an expert partner from the beginning.

If I had to compare the best opportunities right now in the real estate market, I would say that single family homes can be purchased at massive discounts, and many of these in the right areas will double in value in 5 years.   There’s a lot more to what I’m saying in this paragraph, and it would take a lot more space to type a full explanation, but I just wanted to share this info for your consideration.   Here’s a bonus for you.   I really think that a small group of 3 to 6 partners with a total of 5 or 6 million could make a fortune in a real estate partnership over the next 5 to 7 years.   Of course, it definitely would take some serious knowledge and experience in the areas of partnerships (avoiding the common pitfalls), real estate buying, investing, selling, and so on.

If you consider doing this, I would strongly recommend some serious professional help, and not just anyone.   It takes a special expertise to be able to do this without losing your funds.   That’s kind of important.   I would suggest someone with both a real estate law and a real estate brokerage background, like my background.   This is not a solicitation.

Best Regards,
Chuck Marunde, J.D.
Broker/Owner/Realtor
Sequim & Port Angeles Real Estate, LLC
618 South Peabody St., Suite I
Port Angeles, WA  98362
(360) 775-5424
(866) 733-7135 fax
chuckmarunde@gmail.com
http://SequimPortAngeles.com

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Tagged under: note buying, Real Estate Notes

About Chuck Marunde

After practicing real estate law for 20 years in Washington, Chuck opened iRealty Virtual Brokers covering the Sequim and the beautiful Olympic Peninsula. Chuck is the author of numerous magazine and Internet articles with a primary focus on real estate. He is also the author of over a dozen books, mostly about Sequim real estate. Chuck is a photographer, videographer, and Registered FAA Drone Pilot. Chuck has combined his love for real estate and technology to create a growing Internet presence in his market, and enjoys building his websites and blogs, including SequimBlog.com and Sequim4Sale.com and LuxuryWaterViewHomes.com. Chuck has degrees in Economics, Law, and Education.

1 Comment to “ Should I Invest in Real Estate Notes?”

  1. Kathy Blogger says :Reply
    January 6, 2009 at 10:24 am

    What a useful article! For more information, check out this article on investing in commercial real estate using self-directed IRA funds:

    http://www.trustetc.com/professionals/articles/tips-commercial-ratel.html

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Chuck E. Marunde, J.D.

Sequim Buyer's Agent
(Atty Ret.)
Founder and Broker of
Sequim & Port Angeles Real Estate dba iRealty Virtual Brokers
125 Olympic Ranch Ln,
Sequim, WA 98382
(360) 775-5424
ChuckMarunde@gmail.com

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From Los Angeles

It's rare, but once in awhile life provides the perfect collaborator for an important endeavor such as buying your new home. For me that person was Chuck Marunde. His two decade background as a Real Estate Attorney, his prolific career as an author of articles and books on Real Estate and his forthright and moral character made choosing Chuck a no-brainer. Chuck is dedicated, thorough, incredible at the negotiating table, knowledgeable about all local laws & regs but, most importantly, Chuck loves what he does. And what he does is find his client the perfect property. Chuck isn't about making the sale, he's about making the sale that is OPTIMUM for his CLIENT and this makes Chuck a rare bird indeed. I love my new home in Sequim and I am indebted to Chuck for making it happen. Kevin E.

From Seattle

I’ve had the pleasure of working with Chuck over the past three years in selling my parent's estate. It was a tough time to sell during the housing recession, but Chuck always kept things on the positive side. With his real estate law background, he offers sound, practical advice. He helps you along with the process using discussions and reason, rather than opinions and speculations. If Chuck doesn’t know the answers, he will get them for you. In several instances, Chuck took the initiative to meet with county officials to get up-to-date facts about zoning and regulations. I was always impressed with his company’s tech savvy communi-cations and internet presence: weekly email updates, blogs, videos, links, Linked-in networking, etc. He is truly pioneering the future of buying & selling real estate. Brian M.

From California

"Andy Romano is a successful motion picture character actor with over 40 years in 'the Biz.' Mr. Romano has a home in beautiful Santa Barbara, California, but he chooses to live most of the time in Sequim, Washington on the Olympic Peninsula in the great Pacific Northwest. Why? In his own words, 'Because it's even more beautiful and surrounded by more beauty in this incredibly peaceful and quiet place. With respect to real estate agents or brokers, well my friend Chuck Marunde, owner of Sequim and Port Angeles Real Estate, is hands down the best there" Andy R.

Intro by Chuck Marunde

From Florida

We do our homework for the task at hand and we look for and expect to enlist partners that do the same. It was our good fortune to select Chuck Marunde of Sequim and Port Angeles Real Estate to represent us as a buyer's broker in our search for a home in the Sequim/Port Angeles area. Chuck's site is all encompassing and super fast compared to many others, he knows the market at every conceivable level and his guidance through the process of selecting and purchasing a home is priceless - above and beyond that of anyone with whom we have ever worked. Add to all this his 20 year background in real estate law and you have discovered a superb asset in the adventure of purchasing a home. Greg and Marilyn

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