How To Make Money Selling Real Estate Notes
Investing your money in different asset classes and securities, such as selling real estate notes, not only protects you from market swings, it can provide another practical way to increase your income stream and build wealth. Beginner and experienced real estate investors turn to real estate notes because they’re profitable, secure, and generate passive income.
Selling Real Estate Notes – How’s It Done?
The process of selling real estate notes is simple. Many companies or private investors are willing to buy your mortgage note and take on risk because these are collateral-backed securities.
Once you decide to work with a company or investor that buys mortgage notes, you reach out to them to get an offer. Offers are based on the current market, an appraisal of the property, the terms of the note and the company’s competitive rates.
Your selling options are not limited to the total amount you have to sell. You have the following selling options under your belt:
- Sell your entire mortgage note, so you stop receiving mortgage payments and get cash now.
- Sell a specific dollar amount, so you receive a lump sum of cash now in exchange for giving up some, but not all, of your future mortgage payments.
- Sell a percentage of each scheduled payment, so you continue to get smaller payments and a lump sum of cash now.
Get The Best Value From Your Mortgage Sale
A couple of insider industry tips that could help you get the best value out of selling your real estate note. Remember that not all mortgage notes have the same value. While some are difficult to sell, others can be purchased with a low discount rate, which means you get more money.
Tips For Selling Real Estate Notes
- Contracts that include a building and land are more likely to be approved.
- You may receive more value if you sell only a portion of your note.
- Sell payments due in the next few years to get higher value.
- Notes with shorter overall terms will receive a greater cash value.
- It’s easier to sell notes with clear terms in the deed and promissory note.
- The value of your mortgage will increase when low interest rates dominate the market.
- It will be difficult to sell a note if a borrower has missed note payments.
- If a borrower has excellent credit, your discount rate will be smaller.
How Much Is My Note Worth?
How much money, do you think, will you receive for your payments on selling your real estate note? Check out the factors that determine the value of your mortgage note once you decide to sell. You can find most of this information on your promissory note and deed of trust:
Factors That Determine Note’s Value:
- Underwriting pay history (credit rating of the borrower)
- Property appraisal
- Clear title
- First position
- Date, amount and interest rate of remaining payments
- Length of mortgage term
- Down payment amount placed on note
Expanding your income with selling mortgage notes is a practical way to expand your real estate holdings. The risks are low since the property provides security, returns exceed those of other asset classes and the profits receive favorable tax treatment.