Glossary...Amortization: The payments on an amortized loan are established to contain both principal and interest so that the loan will be paid off in full by the end of the amortization period. Balloon Payment: A large payment on a note, usually due at the end of the payment schedule. There can also be partial balloon payments during the note term. Beneficiary: The person entitled to receive the payments on a note. Cap Rate: Formerly known as Capitalization rate, is a ratio used to estimate the value of income producing properties. Put simply, the cap rate is the net operating income divided by the sales price or value of a property expressed as a percentage. Investors, lenders, and appraisers use the cap rate to estimate the purchase price for different types of income producing properties. A market cap rate is determined by evaluating the financial data of similar properties which have recently sold in a specific market. It provides a more reliable estimate of value than a market Gross Rent Multiplier since the cap rate calculation utilizes more of a property's financial detail. The GRM calculation only considers a property's selling price and gross rents. The Cap Rate calculation incorporates a property's selling price, gross rents, non-rental income, vacancy amount, and operating expenses thus providing a more reliable estimate of value. Carry Paper: For a property seller to take part or the entire price of the property in the form of a secured note. Example: the seller carried $10,0000 in paper to facilitate the sale of his property. Closing Costs: The various fees and charges involved in closing a transaction. Collateralized Loans: Property pledged as security for performance of an obligation, such as a loan, mortgage loan (such as mortgages and/or notes secured by trust deeds) Deed of Trust: A security instrument which utilizes a neutral third party called a Trustee to foreclose in the event of default. Deed of Trust is generally faster and easier to foreclose than on a Mortgage. Double Escrow: Two separate but related escrows or closings, each contingent or dependent on the other. First Loan: A Note, A Mortgage, A Deed of Trust – the first loan to be recorded as Market Value: What a normal buyer would pay and a normal seller would sell for in terms of price. Matching: Slang for the act of referring a note to a purchaser. Mortgage: A security instrument, which pledges a property to insure payment of a note. In case of default, it is foreclosed in the courts. Mortgage Broker: A party who joins borrowers and lenders for loans, earning a placement fee. Also, an intermediary who buys and sells secured notes. Mortgagee: The party who is the beneficiary of a mortgage. The seller of the property who receives the monthly payment and holds the mortgage contract as security. Mortgagor: The owner or buyer of the real estate. Also the borrower making monthly payments to the mortgagee. NOI (Net Operating Income): Revenues Less Operating Expenses Non-Performing Note: Whenever a Borrower is late in making payments or fulfilling the obligations as set forth in the Deed of Trust and there is no means for the Borrower to ever correct the non-performance. Note: A written document that states a promise to pay, as well as the payment terms, which includes the total amount due, interest rate, amount and dates when payments are due, where to send the payments and the length of time given to pay the full amount. Note Holder: The person(s) currently in ownership and possession of a note and entitled to collect all its remaining payments. The holder might not be the original beneficiary. “Note holder” and “note seller” usually refer to the same person(s). Owner Financing: When the seller of a property takes a note secured by the property as part of the payment. Promissory Note: A legal written promise to pay a certain amount according to its terms and conditions and is backed by a security instrument that pledges the title or other interests in real property as collateral to assure payment. See also Secured Loan. Secured Loan: A loan (note), which has specific collateral, pledged to secure its payment. In the event payment is not made, the collateral will be sold to provide funds to pay the note. Seller Carry-Back Financing: When the seller of a property takes a note secured by the property as part of the payment. See also Owner Financing. Straight Note: A note having no payments during its term, with a balloon payment at the end. It may have either simple or compound interest. Tax Shield: The reduction in income taxes that results from taking an allowable deduction from taxable income. For example, because interest on debt is a tax-deductible expenses, taking on debt creates a tax shield. Since a tax shield is a way to save cash flows, it increases the value of the business, and it is an important aspect of business valuation. Triple Net Lease (NNN) - Fortune 500 Single Tenant: Our Triple Net Leases are lease agreement on a commercial free-standing building where the tenant or lessee agrees to pay all real estate taxes, building insurance, and maintenance (the three 'Nets') on the property in addition to any normal fees that are expected under the agreement (rent, premises utilities, etc.). In such a lease, the tenant or lessee is responsible for all costs associated with the repair and maintenance of any common area. The investor enjoys the security of a Fortune 500 Corporation guaranteeing the payments, the long term Triple Net lease, zero on-site management, the annual high interest cash return on a passive investment, annual Rent Bumps (increases), the annual cash return is not diminished by expenses related to the property, and normally can expect a fairly sound investment. Typically, triple net leases (NNN) are 'equity investments', rather than 'cash flow investments'. For example, the investor will finance a significant portion of the purchase price on a property and pay the resulting mortgage with the lessee's monthly owed rent. There is usually a small amount left over as monthly profit for the investor (positive cash flow), but the greater investment payoff comes from the tax shields afforded to the investor through the use of leverage or gearing. The resulting property is then sold after a period of equity-building, usually five years - the typical commercial mortgage term. Consult your CPA or Investment Advisor regarding this type of investment. Trustee: One who holds property in trust for another to secure the performance of an obligation. An example of a trustee would be a title company or attorney. Trustor: The person who conveys property in trust. One who deeds his property to a trustee to be held as security until he has performed under the terms of a deed of trust. Payor: The person who makes the monthly payments to fulfill the terms of a note. It is also the mortgagor with a mortgage contract or a trustor with a trust deed. Under-Performing Notes: Whenever the Borrower is late to fulfill an obligation of the Note and Borrower will correct performance soon. Wrap-Around Mortgage: A larger Mortgage that “wraps around” a smaller senior lien. The debtor pays to the holder of the “Wrap-Around” and the holder of the “Wrap” pays on the included senior lien.
We always suggest you consult your CPA or trained Investment Advisor to determine risk and profit potential of any investment you consider making.
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DISCLAIMER: Mortgage Note Buyers, LLC is NOT a United States Securities Dealer, Broker or U.S. Investment Adviser. Mortgage Note Buyers, LLC is acting solely as an Intermediary and makes no warranties or representations as to the Buyer, Seller or Transaction. All due diligence is the responsibility of the Buyer and Seller. Any documents received are never to be considered a solicitation for any purpose in any form or content. Upon receipt of any documents, the Recipient hereby acknowledges this Disclaimer. If acknowledgment is not accepted, Recipient must return any and all documents in their original received condition to Mortgage Note Buyers, LLC. Mortgage Note Buyers, LLC always recommends you seek a competent Lawyer, CPA or Financial/Investment Advisor to determine what is an acceptable Risk for you when considering purchasing any investment opportunity. HOME | Your Requirements | How We Work | Document Check List | For Investors Only | Contact Us What is a Note vs a Deed | Under Performing Notes | Terms of Sale | Types of Real Estate | Types of Security | Why Sell | Glossary Email Notification of Notes For Sale << Investor's Area Copyright ©2009-2011 Mortgage Note Buyers, LLC - All Rights Reserved. |
a lien against a specific property (first in time and seniority).