July IRA Insights: Investments to Support You During Tough Times

By: Lisa Moren Bromma

The stock market is volatile. The sub prime mess has wreaked havoc on the economy. Gas prices are over $4.00 a gallon. And good companies are in financial trouble. I don't have a crystal ball but could safely guess the state of the economy is not planning a turnaround anytime soon.

What does an investor do to not only survive but thrive in today's market? Who do you depend on to help you get there? What is your desired return? How much control do you have in your investment strategy, and most of all, are you ready to start getting those monthly checks in your mailbox? If so, read on.

"What is this investment?" you may ask. Consider three Magic Words that can change your financial strategy-Owner Will Finance. Seller financed loans, notes, leases and cash flows are alive and well and growing in today's market. They are back in vogue. Now you maybe asking, "What is she talking about?"

A promissory note is an IOU-a promise to pay. Sue wants to buy an Italian Restaurant from Sam. She goes to her lender. If her credit is good and everything checks out, the lender would make Sue the loan. She would sign a promissory note and put up the business as collateral for the loan. If Sue defaults on her payments, the bank can take the restaurant back and resell it to another party.

Today, we are seeing a lot of foreclosures and not just in the real estate market. The borrower who cannot make their payments and has signed a note and put up collateral will lose.

In the not so long ago days of real estate when interest rates were at 40 year lows, adjustable rate and even negative amortized loans were available on every street corner. Seller financing was a rare event.

Today, this is not the case. As appraisals change on a daily basis causing uncertainty from a lender's perspective, getting a conventional loan, unless you have near perfect credit, is impossible.

People still want to buy property, businesses, cars, cows and more. And they need money. When the owner of the asset is willing to finance all or part of the sale, the borrower is able to acquire what they need, and the seller gets top dollar and current income. The worst that could happen is that the borrower does not pay. The seller is just like the bank. They take back their property to rent out or resell.

This gives the seller who is willing to offer owner financing an edge in today's market. It also eliminates a lot of the fees lenders charge in loan origination. My first real estate deal was done in 1978 with owner financing. In 1988, I started investing in seller financed mortgages from those who would rather have cash from their owner financed transaction. In those days, we were able to acquire these notes at a decent discount which positively affected cash flow and return on investment.

Now more than ever, I would encourage an investor to know what they are doing before they lend money or buy seller financed mortgages.

Fortunately for us, the NoteWorthy Annual Convention is just around the corner. From October 2-4, you can learn from investors who have the experience and know how to obtain seller financing and bring in cash flow.

Whether you use your personal portfolio or your self-directed retirement plan as a vehicle to do this, now is the perfect time to investigate and see if this kind of investment is right for you.

If you are interested in attending this convention, NoteWorthy has offered a special discount to all IRA Insights and Wise Women Investor readers.

Invest in your success. I know I will. See you in Vegas!

Lisa Moren Bromma has been a real estate investor since 1978, a note investor since 1988 and a consultant to the cash flow industry since 1991. She is President of Ocean Park Marketing and Advisor to The Entrust Group, the nation's largest network of self-directed IRA Administrators. She is the author of Wise Women Invest in Real Estate and Real Estate Investing for the Utterly Confused. Visit Wise Women Investor to learn more about Lisa's appearance at the NoteWorthy convention.