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Tips for Selling Real Estate Notes to Mortgage Buyers

April 14, 2011 By Leave a Comment

Article by Simon Volkov

Mortgage buyers are private investors and investment groups that buy real estate notes for lump sum cash. Buyers purchase a variety of notes including mortgage notes, promissory notes, land contracts, and trust deeds. These cash flow notes can be sold in whole or part dependent on sellers’ needs.

When mortgage buyers purchase notes sellers are required to assign payment rights using an Assignment of Mortgage contract. This document records the number of transferred payments and sale terms. If partial payments are sold, sellers execute a Partial Purchase Agreement. In order for the transfer of payments to be legally-binding the contracts must be recorded through local courts.

Security documents remain in the property owner’s name when partial payment rights are transferred. However, property rights are transferred to mortgage investors. When partial sale terms are fulfilled, property rights transfer back to the seller.

For example, John Smith requires ,000 and holds a real estate note valued at 0,000. The property is secured with a seller carry back trust deed that provides Mr. Smith with income of 00 per month. In order to obtain the ,000, Mr. Smith could sell 34 future payments to mortgage buyers.

John Smith must record the assignment of future payments via a partial purchase agreement. Once the investor receives final payment, property rights revert back to Mr. Smith.

The actual payment amounts will vary dependent on fees assessed by investment groups. Investors can charge a flat fee or percentage of advanced funds. Sellers should consult with several real estate note investors to obtain the best price.

Most mortgage buyers are legitimate, but unfortunately there are some scam artists. It is imperative for note holders to conduct due diligence before assigning property rights and future payments.

The Internet can be a good source for investigating private buyers, but sellers should also ask for referrals and check with state business licensing boards to ensure real estate investment groups hold appropriate business licenses and are allowed to conduct business in the state where real estate is located.

Sellers who are unfamiliar with the process of selling real estate notes would be wise to become educated about the process. Good resources include local real estate clubs and online investor networking groups. Real estate networking forums are a good place to obtain quality leads and referrals for mortgage buying companies.

Sellers should organize all documents pertaining to the property as mortgage buyers will require specific information to determine a fair offer. At minimum, investors will need to know the outstanding balance of the mortgage note, interest rate, asking price, lien holder contact information, and whether the loan is current or delinquent.

In most cases, sellers will need to obtain a current real estate appraisal. Most mortgage buyers will accept a broker price opinion appraisal, but others will require a traditional property appraisal. The type of appraisal needed, along with who will be responsible for the cost should be determined prior to signing a purchase contract.

Many reasons exist for selling real estate notes and land contracts. Some of the more common include obtaining lump sum cash for additional investment products, paying off high-interest loans and credit cards, and obtaining funds for college tuition. Regardless of the need for cash, sellers should carefully assess the advantages and disadvantages of assigning future payments and property rights to mortgage buyers.

The process of selling real estate notes typically takes 30 to 45 days to complete. Once contracts are signed and notarized and assignment of property rights recorded through the court, the transfer is complete. It is best to obtain legal counsel to ensure documents are enforceable and rights are properly transferred to mortgage buyers.

About the Author

Selling real estate notes and land contracts to mortgage buyers can be confusing. Real estate investor, Simon Volkov shares what is involved and ways to simplify the process at www.SimonVolkov.com.

National purchasers of owner financed residential and commercial real estate mortgage notes, trust deeds and land contracts.
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Generating Positive Cash Flow Through Real Estate Notes

April 14, 2011 By Leave a Comment

Article by Simon Volkov

Cash flow refers to money left over after all expenses have been deducted from real estate investments. If an investment property has an unexpected expense, such as a water heater replacement or other major repair, an investor could have a negative cash flow.

Negative cash flow once in a while won’t bankrupt an investment business. If funds continuously remain negative investors may want to consider selling the property. Cutting losses before losing everything is a smart financial move that can protect overall profits of the business.

One way investors can generate profit is by purchasing real estate notes. Investing in mortgage notes allows investors to charge interest on properties. Although private lenders are bound by usury laws which limit the amount of interest charged, interest payments are free money and keep profit margins in the black.

Investors purchase mortgage notes for buyers with less than perfect credit or those who cannot obtain approval for the full loan amount from a conventional lender. Because of the risk involved, investors typically assess the highest allowable rate of interest. Higher interest rates equate to larger profits.

Just like a mortgage company, real estate investors can foreclose on property if borrowers do not make payments. Foreclosure is something most people try to avoid as it is a costly process that cuts into profits. Investors must do their due diligence when purchasing mortgage notes.

Mortgage notes are not the only type of real estate notes that can be purchased. Commercial notes are available as well. Commercial properties require more in-depth considerations than residential houses. Information must be researched on the property and potential buyer.

Generating positive income by financing mortgage notes is less work than purchasing properties or house flipping. Flipping houses oftentimes results in several months without any money coming in, but plenty of money going out. Once the property sells, the house flipper makes their profit.

To generate consistent income similar to what mortgage notes produce a house flipper must have properties selling every month. In today’s market this is often difficult, if not impossible, for the average investor.

Unlike rental property investments, if property damage occurs investors holding the note do not have to pay for repairs. Instead, the borrower is responsible for the repairs and property maintenance.

Unlike other real estate investments, mortgage notes are investment opportunities that can generate immediate cash flow. Profits can be used to fund additional investments to build and expand investment portfolios and businesses.

About the Author

Simon Volkov is a private investor who specializes in buying and selling mortgage notes to generate cash flow. Simon offers a variety of investment properties at wholesale prices through his free Investors List available at www.SimonVolkov.com.

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BUYING AND BROKERING REAL ESTATE NOTES

April 14, 2011 By Leave a Comment

Article by Frank O’Hara

Real estate investment has long been recognized as one of the surest paths to wealth and financial independence. And one of the most attractive ways to make money in real estate is to buy and to broker notes.

Sellers of real property often take back a note–an “IOU” for part of the purchase price.

Marketable commoditiesThis note is usually secured, depending on the state, by a trust deed or a mortgage. These privately held notes are marketable commodities and can be bought, sold, and traded at a discount.

Note buyers often make more income buying a note secured by real estate than they could by buying the actual real estate.

Owning only the note–rather than the real estate–allows investors to avoid property management, property maintenance, and rent collection.

Furthermore, notes can offer investors a high degree of risk control. Knowing the loan-to-value ratio on a property and the credit history of the payer, you can predict a transaction’s return very accurately.

The “THE TIME VALUE OF MONEY” – The time value of money is the reason that notes are sold at a discount. Due to inflation, a dollar today is worth more than a dollar tomorrow.

Therefore, if an investor is willing to give you cash today for promised future payments, he or she must discount the face value of these payments to account for inflation. In addition, the investor can determine the economic risk in receiving these payments and can request an additional discount.

The total discount is referred to as the investor’s yield. This yield is the return that an investor requires to assume the risk.

THE MARKET – Privately held real estate notes are created at an estimated rate of nearly 0 billion per year in face value. At any one time, there are approximately 260,000 notes that are available in the United States. And new notes are created at a rate of nearly 40,000 a year.

BROKER’S COMMISSION – When the holder of a note needs cash, he or she looks for an investor to buy all or a portion of the note.

A note broker earns his or her commission by bringing together both the note holder and the note investor.

Some of the many reasons a note holder may decide to sell all or a portion of his or her note could include:

•Other investment opportunities.

•Debt relief.

•Asset purchase–boat, car, RV, etc.

•Medical bills and emergencies.

•Children’s educations.

•Business expansion or inventory.

•Vacation, weddings, etc.

•Funeral or probate expenses.

•Getting involved

You can enter the note-buying business, which is often referred to as the “cash-flow industry,” in any one of the following three roles.

1. As a note investor: You can buy real-estate-secured deeds of trust or mortgages from brokers or note sellers.

2. As a finder: You can find note sellers and then refer them to brokers or investors who will buy the notes and then pay you a finder’s fee.

3. As a broker/investor: You can find and buy the notes for your own portfolio, then resell them to private investors, recast them for greater profits, keep part of a note and sell part, or use notes acquired at a discount at their full face value as a down payment when you buy other real estate.

PROS AND CONS – The first two participation options don’t involve paperwork, don’t require a license, and can provide a good way to get started. The third and most lucrative option does involve paperwork, some technical knowledge, and the ability to work with other professionals.

Note brokering is a service that people need. It provides investors and the customers they serve a great deal of satisfaction.

SOLID REPUTATION – By serving buyers and sellers well, note brokers/ investors are not only respected, but are sought-after professionals.

© 2011 O’Hara Publishing Enterprises. All Rights Reserved.

About the Author

Frank O’Hara is a freelance business writer, author, publisher, webmaster and CEO of O’Hara Publishing Enterprises. and offers additional real estate know how on how to make money with foreclosures, REO’s, probates, fixer-uppers, no money down deals, commercial and residential properties and much more at his web site: http://realestateknowhow.tripod.com.

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