Big Profits From Real Estate Notes

Discounted real estate notes provide a good return without having to actually buy or sell any real estate. This has become a competitive market, so it can be hard to get started. But the risks are low and the returns high.

What are real estate notes? They are the loan documents for real estate loans. Also called "paper" or just "notes", these are the contracts that obligate a borrower to pay back a loan on certain terms. A mortgage is actually a separate document that pledges a piece of property as collateral for a loan. It is a promise to surrender the property if the terms of the note are not met.

Real estate notes can be first or second mortgage loans. They can be what are referred to as a "contract for sale" or a "land contract" in the case of seller financing. Essentially they are the contracts for any loans or money owed on real estate.

How To Invest In Real Estate Notes

You may have seen the ads in the classified section of the newspaper. They will usually say something like "We buy notes," or "Tired of collect payments? Cash out now." These are placed by investors who want a good return without investing directly in real estate.

Suppose John sells a piece of land for $48,000. The buyer has just a few thousand in cash, so John agrees to take payments for the balance of $45,000. At 9% annual interest, amortized over 10 years, the payments are $570. It seemed like a good idea at the time.

Now a couple years later, John is wishing he had that cash. The buyer still owes him $40,000, but he has to keep collecting just $570 per month for many years to come. Or does he?

After seeing an ad in the paper, John calls a note buyer. The investor looks at the property to determine if the value is there for security. It is worth $50,000 or so. He asks John about the payments - do they come in on time? The buyer has been paying for more than the 12-month "seasoning period" that the investor likes to see. The interest rate is higher than current mortgage rates. He likes that.

He makes John an offer of $34,000 cash. John isn't thrilled, but in the end, he decides to accept. The contact is bought, and the buyer of the land is notified that he has to make his payments to a new name and address.

As an investor, you can see that it is better to be the buyer of the note than John. Since the interest rate on the note is above market rates, you have effectively bought $40,000 for $34,000. You made a profit - or you will as it is paid - of $6,000 on top of the interest you collect. Actually there will normally be a few hundred dollars in expenses (possibly an appraisal, for example), so your profit would be closer to $5,500.

Notes sometimes sell for as little as 70% of their "face value." Why? For a variety of reasons. First, if the interest rate is low, you would be better off just putting your money in the bank, right? These notes obviously aren't worth what is owed on them. On the other hand, if mortgage rates are at 6% and a note is paying 15% - that might sell for full face value.

Second, you are taking a risk, and you expect more profit for more risk. $50,000 worth of land as collateral for a $40,000 debt isn't really all that safe. If the appraisal is off and it takes a year to sell it for $46,000, and you pay the sales commission as well as the legal costs of foreclosure, you might make very little for your investment of time and money.

Finally, notes sell cheap because investors want as much profit as they can get for their time and trouble. If someone is willing to cash in their $100,000 note for $72,000, why would an investor pay more? People get desperate for the cash after years of getting little payments every month. It's their business why they will lose so much of the equity to have it all now.

What kind of return do you get? Figuring the rate of return on your investment is actually fairly complicated in these cases. In the above example, you are making 9% interest, but not just on your $34,500 that you invested. You are making that rate on the whole $40,000, plus you eventually realize the profit of $5,500 - but it takes perhaps 8 more years to do so. Annual rates of return around 20% are probably common in this kind of investing.

If you recall in Number 1, one way to make money in real estate is to buy for cash and sell with easy terms. You can buy a little house for $65,000, for example, and then sell it for $75,000 by offering a low down payment and easy - but high interest - payments. Buying notes may be a way to effectively accomplish the same thing with your cash: instant equity gain. But even better, you don't have as much work or transaction costs.

If you want to get into buying discounted real estate notes as an investment, start by getting educated. It is difficult to find good books on the subject, but you might find a note buyer who will give you some pointers, if he is from another area, so you won't be competing. If you have note of your own that you are holding, you can get a free quote or two just to see how the process works.

This is obviously an investment strategy for someone with a chunk of cash to invest. If you can average a 15% return by constantly reinvesting those payments that come in on your real estate notes, you can double your money every five years. That turns $100,000 into $800,000 in 15 years.

Copyright Steve Gillman. For a Free Real Estate Investing Course, and to see a photo of the home we bought for $17,500, visit: http://www.HousesUnderFiftyThousand.com

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Finding a Real Estate Cash Flow Note

The cash flow industry is a complex one, with interests and implications in many different industries. If you are interested in becoming a cash flow note broker, or a cash flow note buyer, the first thing you need to learn in order to be successful is the nature of a real estate cash flow note. In essence, a cash flow note is nothing more than a private mortgage. This mortgage starts between two private individuals, rather than a lending company. This allows both parties many benefits. It is also the entire basis for the cash flow note industry, which has grown to facilitate the buying and selling of these notes.

A real estate cash flow note means different things to different people in the industry. For the note holder, the party needing the mortgage, this note is a means to success. Without this note, these individuals would be unable to purchase buildings in which to house their company. For buyers, these notes mean monthly income in the form of mortgage payments, with appropriate interest. For brokers, these notes translate into a great living through the commission taken on each successful sale of a cash flow note.

When you are first getting involved in the industry, it is vital that you find the appropriate training. This will ensure that you have all the necessary resources to find the right real estate cash flow note. The training that you receive will impart all the skills you need to maximize your earning potential and hone your selling skills.
If you are interested in learning more about this industry, as well as taking advantage of the best courses for your needs, visit DalbeyEducation.com. You'll find that it has much to offer.

Dalbey Education was established to help people get started in the lucrative cash flow note industry. You can take courses to learn all about how to succeed with cash flow notes. You can easily sign up today, by going online to http://www.dalbeyeducation.com/.

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How Do You Find The Best Mortgage Note Buyer?

For those looking for a mortgage note buyer, the process can be daunting. Although there are many of them out there to choose from, they are not all on the up and up, and you could end up getting a lot less than you deserve. That's why it's important to find a reputable, trustworthy note buyer who will offer you a fair deal.

There are many advantages to selling your mortgage notes, as it gives you immediate access to cash that you can use for investment purposes, payments, purchases or whatever else you need fast money for. It always works out in your favor because money today is worth more than money tomorrow. It is also a guarantee that you will receive the funds, rather than have to wait for monthly payments for years and years; you never know what the future holds.

Reputable mortgage loan note buyers will answer all of your questions and spell out all of your options when it comes to selling your note. You can sell it in its entirety, which is the most common way, or you could sell a portion of it and still retain some of the monthly payments. This is called a partial. You should discuss all of the possibilities with your mortgage note buyer to figure out which works best for your particular situation.

If you are interested in selling your mortgage note, you should know what to look for when it comes to choosing the right mortgage note buyer. As we mention above, you won't have trouble finding someone who will purchase your paper, but you want to make sure you're working with someone who you can trust.

Here are some things to keep in mind when looking for mortgage loan note buyers:

1. Find out how long the buyer has been purchasing notes, and how many they have bought. You want to work with someone who has experience and know-how, not someone who just started buying notes yesterday.

2. In most cases there should not be any initial fees, points, closing costs or any other additional payments made. All of the costs should be included in the amount you are paid for your full or partial note.

3. As with any business transaction, feel free to ask as many questions as you'd like. A reputable mortgage note buyer will welcome these questions and be happy to answer them for you. If you don't understand something, ask for clarification. If the note buyer doesn't know the answer or is not being forthcoming, that is a red flag. An experienced mortgage loan note buyer will be able to answer all of your questions.

4. Make sure you get everything in writing, and go over all of the details to make sure everything you discussed is covered. This is your contract, so make sure you know what it says so you're not surprised down the road.

5. Perhaps the most important thing when it comes to finding a mortgage note buyer is to go with your gut when making your selection. You should be able to tell right away if you're comfortable or not, if you feel this is someone you want to work with. If you're not getting a positive vibe for one reason or another, know that there are other note buyers out there. This is a big decision, and you should feel comfortable from beginning to end.

If you're looking for a quick source of cash, finding a reputable mortgage note buyer is key. He or she will be able to purchase your entire note, or just a portion of it, at a price that you are both happy with. Follow the advice above and you can't go wrong!
Jamie has been working in the finance industry for many years and is a contributing editor to http://www.selling-your-note.com. Visit the Sell Real Estate Notes website for more information and to receive a free, no obligation quote from professional note buyers.

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Mortgage Buyer Forums

Mortgage rates are always the driving factor while choosing any type of mortgage. The mortgage market has become so competitive that lenders are using all kinds of marketing strategies to lure consumers. Such aggressive marketing can at times become misleading, which may result in a wrong choice on the borrower's part. Such wrong choices often lead to a situation where borrowers are forced to default on their payments. This puts a pressure on the lenders as well as a regular source of income dries up. On the other hand, there might be a situation where the borrowers are quite reliable and still the lender may require a lump sum urgently. This is where mortgage buyer step in and offer to buy the mortgage notes from the lenders either in part or full. Because of so many different possibilities, borrowers and lenders, along with the mortgage buyers, have started to feel the need of an open space where they can discuss their problems and share their experiences.

Mortgage buyer forums are usually formed online where people with similar issues come together to form a group to exchange information. This is a great place for lenders who are planning to raise some cash against their mortgage notes. They can gain immensely from the experience of other lenders and can even get direct advice from member mortgage buyers. Lenders who have had a bad experience through any mortgage buyer can share their experience with other prospective mortgage note sellers. This enables note holders to be on guard against such mortgage buyers.

There are some mortgage buyers who are also a part of these mortgage buyer forums. The advantage that mortgage buyers have from being on the forum is that they get proper understanding of the requirements of the note holders. Further, this also helps them promote their business and find out lenders who might be willing to selling to mortgage notes.
Mortgage Buyers provides detailed information on Mortgage Buyers, First Time Mortgage Buyers, Home Mortgage Buyers, Mortgage Note Buyers and more. Mortgage Buyers is affiliated with Exclusive Internet Mortgage Leads.

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Buy the Mortgage Note on a Defaulted Property to Get Some Real Estate

You've been buying mortgage notes for a little while and are comfortable with the practice. However, you've noticed that there are a lot of pre-foreclosure homes out there with mortgages on them too. This is a large section of the mortgage note industry that remains untapped, but how can you get in on the profits with a defaulted property in the mix?

It is possible to buy the mortgage note on a defaulted property. When you use this method of real estate investment you still begin with the normal means of contacting the homeowner in pre-foreclosure through direct mail.

After you've spoken with the homeowner and they've agreed to sell to you, you'll have the homeowner under contract to sell their home to you. This is even though you are going to buy the note on their mortgage. You'll just have them sign the contract so they are locked in with you, and the homeowner doesn't turn around to try and sell the house to someone else while you are working with the bank. Once, you buy the note the contract becomes irrelevant.

How to Approach the Bank

Go into the bank and ask them if they would consider a Short Sale to you. A short sale involves buying the actual real estate property at a reduced price and the bank writes off the remainder of the mortgage. Usually they'll say yes and begin to give you all kinds of information to turn in for final approval on a short sale. Then, you can come up with, 'Hey, wouldn't it just be easier if I bought the note from you?"

If the bank knows how to do a note sale on a defaulted mortgage, then they'll usually jump on your suggestion because it is so much easier to sell the note than get the process of a short sale through their system.

Once You Buy the Mortgage Note

After some negotiation the bank agrees to give you a note purchase on this property and they accept your offer of say, $70,000 for their mortgage of $115,000.

By purchasing the note to the property you basically become the bank. You buy the right to collect the remaining $115,000 left on the defaulted mortgage. That's crazy, right? Nope.

Once you have the mortgage note you have a few options to move forward. You as the mortgage note owner could continue on with the foreclosure and kick the homeowners out of their home, not very nice since you did approach them first. Or you could get a "Deed in Lieu of Forclosure".

The Deed in Lieu of Foreclosure basically means that the property owner gives you the deed to the property when they can't make payments on the mortgage. When you first approach the homeowners about helping them out of their property, you'll want to let them know that you aren't going to save their mortgage you're just trying to give them a clean escape from having that defaulted mortgage on their credit.

This means that you aren't going through with the foreclosure and the homeowner gets out without having a foreclosure mark on their record because they are just giving you the deed to the property.

The process of buying the mortgage note on a defaulted mortgage adds one more step to the basic process involved in a short sale. However, it's usually quicker, easier and lets you get your piece of real estate investment property.
Isn't it time you learned how to capitalize on one of the best markets for real estate investing that this country has ever seen? With the recent flood of foreclosures now is the time to learn to invest correctly in real estate from the hosts of the nation's leading show on real estate investing, Judson and Lynn Voss. Visit http://www.yourrealestatefortunes.com and learn for free, the no-hype truth about choosing the right real estate investing strategy to start making you money, today.

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Buying Mortgage Notes: How To Make Money Note Brokering

By note brokering you can make money without much investment (just time, phone, and advertising). It has become a more competitive area, so it may be tough to get started. It may be worth it, though, considering this is almost risk-free, while potentially very profitable.

Real estate notes are the loan documents (the contracts) created when real estate is financed. They include mortgage notes, second mortgage notes, and contracts-for-sale. If a seller agrees to take payments from the buyer for part of the purchase price, he has a contract - a note. If at some point he wants a large chunk of cash instead of monthly payment, he sells this note.

These notes sell for as much as a 30% discount off face value, making them a potentially profitable investment. How would you like to buy $100,000 for $70,000? But what if you don't have that kind of cash to invest? There is another way to make money with real estate notes.

Note Brokering - How To

There are large investment companies that buy real estate notes. They are ready to buy them virtually anywhere in the country, but they can't be everywhere at once, this is where you come in. You find the note holder who want to sell, and get a chunk of the sales price. Let's look at an example.

First you have to find one of these investment companies that work with note brokers like you. A quick search online will get you started. Some will charge you an up front fee of as much as a few hundred dollars to join their organization. This is okay as long as you know what you are paying for - are they definitely a regular buyer of notes, and do they give you some support?

Now you place an ad: "Tired of collecting payments? I can cash you out." Alternately, you just start listening to people until you find a friend or acquaintance who has money owed to him for real estate, and wants to get a chunk of cash instead years of payments. You find a friend of a friend who is still owed $120,000 on a piece of farmland he sold years ago.

You get the details of the loan, the land, and the borrower. You forward this information to the investment company and they eventually make an offer of $102,000 for the note. Some companies pay you a percentage, but this one just lets you set your own price with the note holder to get your profit. You tell the note holder that you can get $94,000 for his note. He tells you that he can't do it for less than $97,000. You agree.

After the note buyer completes the transaction, you get a check for $5,000. You can see that this is a good way to get involved in making money in real estate when you have no money to start. I have spoken to investors who do this in addition to their other real estate investing, and some of them claim to do a couple deals like this every month.

Of course this is a simplified example, but many of the big note buyers will do all of the negotiating for you once you find a note holder who wants to sell. They also handle virtually everything else, from arranging for an appraisal of the property that is collateral, to doing the credit check on the the person paying on the note.

More About Real Estate Notes

1. Most note buyers don't ask for up front fees from note sellers. There are many note buyers who will do a credit check of the person paying on the note and give you a quote without charging the holder of the note. Work with one of these.

2. Note buyers figure their expenses before making the offer, so there are only a couple fees that a note holder may have to pay. He may have to pay for the title policy, but only if there are problems with the title that prevent purchase. Also if the property appraises at less than the sales price, he may have to pay for the appraisal. Be sure you understand what these expenses may be and explain them clearly to your prospective note seller.

3. Seller's of notes should get a written purchase agreement with purchase price and contingencies. Work with a note buyer that will provide these.

4. Note buyers should check the property buyer's credit up front. Unethical companies quote one price initially, and then lower it later, using the excuse that the property buyer's credit score is low. Called "bait and switch," this isn't ethical. Don't associate with companies that do this.

5. As a note broker, you'll be gathering information like the type of property, sale price, payment amounts, current balance, etc. Know exactly what information you note buyer(s) need.

6. Once you have an agreement, your note holder will need to provide copies of the Mortgage or Deed of Trust, the Note, the closing or Settlement Statement, and the Title Policy. If an appraisal is required, the note buyer will usually arrange for that (and they will pay unless it comes in below the sales price).

7. Be aware of what the average processing time is. Once a note seller agrees to an offer and sends the documents (if it is done by mail), he should receive a certified check or electronic transfer to his account within two to three weeks. Ask when you'll receive your check as well.
Get enough commissions as a note broker, and you can start buying real estate notes for your own investments as well.
Copyright Steve Gillman. This article was an excerpt from 69 Ways To Make Money In Real Estate. Want to know the other 68 ways? Visit http://www.99reports.com/make-money-in-real-estate.html

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Buying Mortgage Notes: Mortgage Note Buyers

Note buying is especially prevalent in real estate. Suppose a seller sells his house and takes a certain amount of down payment and for the rest of the amount he accepts monthly payments till the time the due amount is paid off.

Take the case of a house which is available for sale for a price of $100,000 and for which the seller accepts a down payment of $25,000. For the rest, he agrees to accept a monthly installment of a certain fixed amount from the buyer.

Now consider a situation where the seller is in an urgent need of liquid cash. It is here that note buying comes into the picture. The seller can contacts a note buyer to whom he can sell the promissory notes. These promissory notes refer to the monthly installments, which the buyer of the house has to pay.

The buyer will now pay the installments to the person who has bought the promissory notes from the seller of the house. The seller can sell all the promissory notes, or a part of them, with an agreement that all or the partial fixed (in case only part of the promissory notes have been sold) mortgage payments would go the note buyer until the debt is paid off.

There are other ways also on how notes work. The seller and the note buyer can also decide to divide the monthly installments between themselves. The option, which the seller chooses, will depend upon the urgency and the amount of his or her cash requirements.

There are certain fixed standards upon which note buying is based. First consideration is the outstanding balance and the period of time until the value of the note materializes. The value of property is also taken in to consideration.

There are many companies, which buy mortgage notes in exchange for a lump sum payment. The process is very simple. The promissory note holders put their notes on bid. The investors review these notes and ensure if they fit in their portfolios. Then they bid on those, which are of interest to them. At the end of the deal, the investor gets the notes and the seller the payment.

The process of note buying and selling also involves additional fees like transaction fee, appraisal fees, tax certificates, and escrow fees. This additional fee is allocated between the seller and note buyer during the contract phase of the transaction.
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