Sellers usually offload notes for the "Three Ds": They might need cash for a medical emergency, a new investment, or they are simply tired of "clipping coupons" and want to exit the management of the debt. 6. The Risks
The borrower is paying on time. Your goal is passive income. You buy these at a modest discount to the face value to achieve a yield higher than traditional bonds or CDs.
Buying and selling "notes"—specifically real estate mortgage notes—is the "invisible" side of property investing. While most people focus on the physical structure, note investors focus on the . When you buy a note, you aren’t buying a house; you are buying a legal promise to pay, effectively stepping into the shoes of the bank. buy and sell notes
The "magic" of note investing lies in the . Example: A note has a balance of $100,000 at 6% interest.
Buying and selling notes is the ultimate "passive" real estate play. You have no tenants, no toilets, and no termites. You simply own the debt. However, it requires a high "financial IQ" to navigate the legalities of the paperwork and the nuances of the discount. Sellers usually offload notes for the "Three Ds":
When a property is sold via , the seller carries the mortgage for the buyer. The legal document created is a Promissory Note , secured by a Deed of Trust or Mortgage .
Eventually, that seller might want a lump sum of cash rather than small monthly payments over 30 years. This is where the note buyer steps in. They buy that stream of future payments at a , providing the seller liquidity while securing a high-yield investment for themselves. 2. Performing vs. Non-Performing Notes The market is divided into two distinct worlds: Your goal is passive income
For performing notes, "seasoning" (a history of 12+ months of on-time payments) is gold. 5. Why Sell a Note?
