What is a Good ITV?

Sellers and investors often ask what ITV (Investment to Value) they should target when buying or selling a private real estate note.

You may have seen that some note investors claim they will go 85, 90, even 95 percent ITV. Frankly, I have yet to really meet them when it comes down to funding a deal in the current market.

As a refresher, the ITV represents how much is invested or paid for the note in comparison to the property value.  It is a different ratio then the buyer’s LTV (Loan to Value) or the discount percentage.

The lower an ITV the safer the investment, but you still want to stay competitive. Personally, I don’t like much over 80% ITV and prefer to be around 70% or lower depending on credit. You want some room in the event of a foreclosure or a down market (either of those sound familiar around now?).

A word of caution; don’t let a higher return push you above your ITV comfort zone. If you decide you want a 75% ITV and 10% yield then don’t be tempted with an 85% ITV and 13% yield. Someone once told me yield is irrelevant if you don’t get paid – they were right.

For more information on buying or selling notes for profit please visit the bookstore for Personal Profit Series: Notes – Your Complete Money Making System to Buying, Referring, Creating and Holding Real Estate Notes!

The State of the Note Industry

Around the country real estate markets have softened leaving a glut of inventory, decreasing values, and extended marketing times.  The result? More sellers are offering to finance a portion of the purchase price for the buyer in an effort to “Move that House”!

While sellers are motivated, lenders on the other hand are hunkering down or running scared.   In the face of the credit crunch and increasing foreclosures, lenders have tightened underwriting requirements.  Fewer loans are being originated and this also contributes to an increase of seller-financed private mortgages.

While the upside is increased private note inventory, the downside is fewer notes can be sold to investors.  While seller financing is an alternative to bank financing, note investors are not Read more

What is LTV and ITV?

You have probably heard a lot of acronyms thrown around in the note industry. Some of the more common ones are LTV and ITV. 

LTV stands for Loan to Value. This is shown as a percentage. It is often used to determine “what is the likelihood the payor will continue to make payments” based on equity. Read more