Great Returns with Private Note Investing
One of the best kept secrets in real estate investing is clearly the practice of Private Note Investing. While purchasing or investing on notes which are also known as home mortgages, many homeowners think it is like a complicated process. But it really is not that complex because once you take the time to understand how it works, it will be very easy for you to get involved and sell your property smoothly. Also, another good angle of this transaction is that you can set yourself up to be the note broker and still able to make money for simply brokering the sale of a note from the seller to the buyer without even touching your own savings and investments to finish the whole deal, that by itself is a great return on your time and expertise. If you have cash to invest, you could also buy the note and wait for monthly payments on your invested money, which easily yields you a return 3-5 times what a bank CD pays these days, again not a bad return for learning more about private mortgage notes.
What exactly is a Private Mortgage Note?
A mortgage note is simply put as a mortgage loan which is being secured by a piece of property. A mortgage note can represent a first mortgage, a second mortgage, a land contract, or even a contract for sale. A private mortgage note is a loan on real estate done by a private party instead of banks of lending institutions.
Why are these Mortgage Notes Being Sold?
If you have experience to borrow money on a home, in the form of a mortgage, then you have been the borrower on a note. Most often than not, once you borrow from a bank or home financing, or any lender you will be told that that your mortgage note is now being held by another lender. With this scenario, your payments may stay the same, the terms of the contract will be the same, and however, you need to send your mortgage payments to the other lender instead of the one you originally borrowed from. This usually happens when your lender has sold your mortgage note.
A Simple Example of a Private Note Investing
Let’s say that you took a home mortgage with your bank for $100,000. Your bank then process your mortgage loan and then you start your amortization payments on the property. Soon for some reason you are informed that you need to forward your payments to a new bank. This scenario happens only because your original bank loaned you $100,000 to be repaid over 30 years, then the new bank offered your bank a payment of $80,000 cash to purchase your mortgage note fast today, from then and there the new bank has the right to ask payments from you hence on over the life of the rest of your loan. This lets your old bank have again a ready $80,000 to be invested again by loaning it to other needful people straightaway rather than sit and wait for your monthly payments.
In addition to the big banks making mortgages and then selling them to other lenders, often people who carry back mortgages on their paid for properties will sell their notes as well. That is called selling a private mortgage note, for the same reason to get back a large discounted cash sum immediately instead of waiting for the monthly payments of the note to come from the property owner. So if you have cash to deploy, investing a one of these private notes by buying it at a discount from the original note holder, will let you invest your money in a note with a great yield returned on your money. Contact us for specifics of a note and the return you could expect, easily making 3-5 times what your bank is paying on CD locked money in this market.
