What to consider when you prepare the promissory note

I would suggest almost everyone have their closing agent prepare the promissory note and that’d be the normal way. I’m just telling you exactly the way we do it so that you know. What we’ve got for the closing agent and the insurance is a one-page form that we put in, so that way we can just write our private lender’s name down one time and zip it off to them. If we have to take any money in for the insurance binder, we might – we just put it there. And, if we have to send a check then I sign that, I sign all checks, add the property to the reports, begin advertising, run an ad, create a flyer, if there is a second mortgage, make sure it is recorded. Verify at the courthouse all mortgages are recorded. We had situations to where, we’d close on a house and the second didn’t get recorded. Anybody ever have that happen to them? Well, we have and so we decided to stick that on there to make sure that it got recorded and make sure everything is recorded.

Notify the Mortgage Company to send the payment book to us if it’s a 72. And, place the promissory note in the manila envelope for the file and then you can see who is responsible for all this stuff. Utilities; then I just put the phone number down, one-stop shopping. That way when your administrative assistant, or you, let’s say you don’t have an administrative assistant yet, then you just go ahead and put that down and they can just continue to work with the check sheet. Add the trash service. Set up a contractor meeting. What happens is, the day I buy the property; we walk out of closing with a fistful of cash. We have the key to the property and since we deal with private lenders, we have a fistful of cash and so, therefore, I can start my rehab.
And that’s exactly what we do and we have a contractor’s meeting and we get everybody in the room at the same time. Everybody meets at the property at the same time. So, let’s say we close at ten in the morning and at one in the afternoon, everybody’s at the property and we walk through.

And that way, you’ll see that they can talk to each other and decide who’s going to be doing what. Start the contractors, fill in the admin sheet, create a property insurance expense, tenant hanging folders, file promissory note, copy settlement statement and put it in the tax folder.

We have a manila envelope sitting on the desk and every time we sell a property we run a copy of the HUD statement, put it in that folder so that when it’s time, at the end of the year, to turn things over to the tax folks, all we have to do is pick that up. I don’t have to sort through all the property files to find all the HUD's, got it right there.

My administrative assistant Donna reviews all of my documents. She then has me review them before she sends anything out. We make sure that whoever is writing up a document isn’t assuming anything. This could easily turn your business into chaos. Chaos is a dirty word.

I have caught errors that could have been costly. Donna is someone I trust immensely, but errors do happen. Imagine that a private lender gives you $50,000 four different times. That’s a significant chunk of change. What if the address isn’t on the files? It would be very easy to get these promissory notes shuffled around and mixed up.

We have decided that we want the address on the promissory note. If you are doing deals in volume, you need the address on the promissory note to keep things organized. You don’t want information on a $50,000 deal slipping though into chaos. That lender probably won’t want to lend to you again if they find out this has happened.

If you start going back and looking at records from a year ago and start trying to match things up, it can be difficult without an address. Please make mental note of this point, have the address on your promissory notes.
The lender gets the original promissory note, that makes sense. They are essentially purchasing this note. We keep a copy in our files at the office.