For many, buying real estate notes is an enticing investment, as these notes are backed by secured assets and are typically sold at discounted prices. In comparison to standard investing and simple savings accounts, purchasing real estate notes can be a great way to save for the future with low risks of losing an investment. In fact, in buying real estate notes, you can potentially determine your own return and risk!
At Red Enterprises, we're quite familiar with buying notes. While we're also on the buying end, we'd still love to share valuable information for buying notes, from where to buy from and what to look for in a note. Of course, if you're interested in selling a note, you can request a free quote from us. Otherwise, continue reading for our guide to buying real estate notes!
Buying Real Estate Notes: Key Considerations
In looking to buy a real estate note, also known as a mortgage note, there are many things you must consider prior to purchasing. First and foremost, you need to know whether the note is performing, sub-performing, or non-performing. Performing notes are those where the payments are continually made in full and on time. Sub-performing notes, as you can assume, consist of late payments, whereas non-performing notes can be expected to no longer receive payment. Though performing notes seem more appealing, many investors actually seek out non-performing notes for the highly-discounted price.
Once you've determined the type of note you'd like to purchase you can begin the process by searching for notes. Within this, you'll want to consider much more than the type of note (performing or nonperforming), such as the interest paid and the next payment due date, among other factors.
The Process of Purchasing a Real Estate Note
As we mentioned with mortgage notes, you need to do your research prior to purchasing a note. Regardless of the type, you'll need to determine what has been paid, what's to be paid, and review the property's taxes. However, it doesn't end here. Take a look below for a list of tips for buying real estate notes:
- Once you've found a property/note, call the current holder of the note. Ask why they're selling it and what they'd like to sell it for.
- Once agreed upon, write the agreement document to be signed by both parties, ensuring the note security instrument and titler are signed to you.
- You'll then need to acquire all of the documents and make note of the balance, payment amount, and due date for the next payment. Be sure to read these documents closely and ensure everything is as agreed upon.
- Before the process is complete, determine the current market value of the real estate and ensure it at least meets the value of the note.
- Finally, have a credit check performed on the seller of the note. Of course, you'll need to provide letters to the note payor and fire hazard insurance agent, explaining the transfer of the note account.
Have a Note to Sell? Contact Us!
In short, buying real estate notes can be quite beneficial, depending on a variety of factors like those listed above. While we focus on buying notes ourselves here at Red Enterprises, we're also happy to provide insight into this fairly complicated topic. Of course, if you have a note you'd like to sell, you can get a free quote from us. Otherwise, peruse our site for additional information on mortgage notes. You can contact us with questions or comments, or give us a call at 307.213.9095