Are you wanting to get into the real estate game but don't know any of the lingo? Parse through this plethora of lessons where you will learn the meaning and specific application of dozens of real estate terms taught by the incredibly successful Michael Burer.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Definition Magician: Balloon Payment: The final payment of the balance due on a partially amortized loan.
Lesson Nugget: A balloon payment is an oversized payment that is more than your typical monthly payment, and is the final amount due on a loan including both principal and interest.
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-All right, we are here on Thrive15.com, an alternative to Lynda.com, with Michael "there is no real estate topic too obscure" Burer in sunny San Diego, where the-- I haven't been outside in like a decade or so, and so I can't really open my eyes. So bear with me. I can see you-- it just looks like I can't see you. But Michael, we're talking about balloon payment. I'm going to go ahead and read the definition. And then I would like to go ahead and have you provide an ample example, so that the average thriver can know what you're talking about here.
So balloon payment-- this is the final payment of the balance due on a partially amortized loan. The word amortize snuck up on us there. What does this mean? What's an ample example?
-So if you get a loan, it may have a repayment term of over 30 years. So you're going to pay back the principal or amount you borrowed over that 30-year period. But the loan term may be shorter. Maybe it's only 10 years. So at the end of that 10 years, you started with a million dollar loan. Maybe you paid back principle-- a couple hundred thousand-- now you owe $800,000.
When that loan comes due at the end of the 10 years, you have a balloon payment or a payment of all the outstanding principal. $800,000 is referred to as the balloon payment.
-Do you see a lot of times where people don't expect there to be a balloon payment? They go, uh-oh. They didn't plan. They go, uh-oh. You ever see a deal where you're trying to-- you're working with somebody. They're trying to close a deal, and they say, uh-oh. And they didn't plan for it?
-Hopefully, real estate investors know when they're signing a loan the term of the loan and what's outstanding, so it shouldn't come up as a surprise.
-Thrivers, if you're watching this, you cannot be surprised with a balloon payment.
-I only mention this because I do know people who've been freaked out by this before. So this is--
-This is a deal where you got to be aware of this.
-Yep. Now Michael, I don't want the thrivers or you to feel like I have to write down on a piece of paper witty ways to explain how much I appreciate you. So this one is totally just off the top of my head. I appreciate you in the same way that red hats appreciate the sun blocking ability of Banana Boat SPF 75. Boom.