Selling real estate notes is the newest investment product on the open market, and they have seen steady growth in popularity in recent years.
Real estate notes are created when two parties reach an agreement on a transaction allowing one party to borrow money in order to purchase real estate. No matter who financed the loan initially, the owner of the real estate note will receive repayment from the borrower.
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Notes are essentially agreements between a borrower and lender, where the borrower agrees to repay the lender according to the terms outlined in the note. In particular, real estate notes are promissory notes secured by real estate and are different from real estate funds.
Each real estate note consists of two parts: a promissory note and a lien. The terms of the loan are outlined in the promissory note. Liens, such as mortgage deeds or deeds of trust, are separate documents recorded against real estate titles in county land records.
In contrast, mortgage notes don't give you ownership over a property like they do with hard real estate purchases. Your role becomes that of a bank in this transaction and you become the borrower's new creditor.
There are a number of reasons why notes are used in real estate. Notes are issued by banks and credit unions when they provide a homeowner with a mortgage or second mortgage. In the course of lending money to real estate investors, hard money and private lenders originate real estate notes. In some cases, sellers provide seller financing to the buyer by carrying a note.
Real estate notes ensure that the lending party will be repaid when a party provides loan financing for the purchase of a home. You can also buy and sell real estate notes on the open market if you wish to profit from the loan repayment.
The secondary market offers all of these types of real estate notes:
A real estate note can be a significant investment, especially since interest rates are so low right now. The interest rate on performing notes is high, and they pay a monthly income. Passive investors often use them to house retirement funds as an alternative to traditional investments.
You may ask, "why should I sell my real estate note"? Selling your real estate note can be beneficial for a number of reasons. This has the obvious advantage of freeing up an immediate lump sum of cash that can be invested or used for other purposes, such as investing or needing more cash for urgent expenses.
Among the other advantages are:
The various offers that buyers make for your note need to be weighed carefully. When it comes down to it, the value of real estate assets can change over time, depending on the national interest rate.
It is relatively easy and straightforward to purchase notes for real estate. A note can be bought using the funds in an individual retirement account (IRA), equity, or funds you provide yourself. Notes may also be purchased in installments or in full, and most lenders require income statements.
It is common to buy and sell both performing and non-performing notes in the secondary mortgage market. It is also possible to purchase notes through banks, private equity firms, and brokers, or through individual contacts. The easiest way to find notes is to do so on an online exchange.
When you work with our team, you can learn more information about selling a real estate note and other investment opportunities. Don't hesitate to reach out, get in touch with us at 949-881-7128 at Saint Investment Group today!
A master in Investment, Marketing, and Capital Raising.
Nic has honed his focus on the Real Estate and debt markets with Saint Investment Group and pursues large-scale Distressed Asset purchases with his partners and syndications.