Most new real estate investors start with a traditional method like rehabbing or buying and holding single-family rentals. They buy the property and manage the asset by fixing it up to sell or renting it to a tenant. Depending on how you manage the assets, these investing methods can be great ways to generate income, receive tax benefits, and build wealth — but they aren’t the only ways.
Mortgage notes are an alternative asset class within real estate investing that has many benefits. Among the benefits, notes and deeds earn higher-than-average returns for real estate investments.
Since most people buy homes using mortgage financing, notes are another name for mortgage agreements. After the home purchase closes, banks and other lenders usually sell them to government entities like Fannie Mae, Freddie Mac, and the Federal Housing Administration.
Today, we have millions of homeowners in financial trouble because of COVID19.
The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance stands at 5.48% of servicers’ portfolio volume as of December 6, 2020. MBA estimates 2.7 million homeowners are in forbearance plans.
As Covid dissipates, government agencies will sell delinquent notes to big institutional investors in bulk. According to government data, the agencies have sold more than $28 billion in distressed loans since 2012. The selling of delinquent notes and deeds presents an opportunity for knowledgeable investors. By buying notes and deeds, you can become the bank and service the notes and deeds yourself or hire a third-party servicing company that also deals with late pays.
The Deed is a legal document that gives rights to something. In real estate, a Deed transfers ownership title and gives the new owner the right to use the property.
The Note (or Promissory Note) is a contract where a party promises to pay a sum of money to another party under specific terms. In real estate, the Note is the legal document that binds the borrower to repay a mortgage loan. This agreement will contain essential loan specifications, such as the loan amount, interest rate, due dates, late charges, and mortgage terms. Individuals can bid on and purchase these notes and start receiving payments from the borrowers
Here’s an example of a note sale: Somebody sold a note on an Atlanta-area home for $24,360; according to estimates from Zillow and local agents, its market value was between $50,000 and $70,000.
The previous owner owed back taxes, and a payment history showed that while the homeowner was making erratic or partial payments on her $500 monthly mortgage, she hadn’t quit. She had some equity built up in the house, another sign of commitment. We made some change to the note and was able to keep the woman in her house.
I am always saying as note investors we can help people stay in their homes after “life” happens to them
For more information on ‘How to Buy and Sell Notes and Deeds,” attend one of Paige Panzarello’s classes on Building Wealth with Notes Workshop. You can register for her next class, go online for training, or listen to these powerful podcasts.
Paige Panzarello, the “Cashflow Chick,” Founder of The Tryllion Group, Investor/Entrepreneur having done $150 Million+ in real estate transactions; Specializing in Non-Performing Notes. She has been a regularly featured guest on “The Cashflow Guys” podcast, and you can also find her on many other Real Estate and Entrepreneurial podcasts, and in the Wall Street Journal as well. She also speaks at various Real Estate Investing clubs and conferences across the country. Paige teaches the “Building Wealth with Notes” Workshop that drills down into the details of how to successfully buy Non-Performing Notes, create passive income, and mitigate risk. www.CashflowChick.com/training
Surviving the crash of 2007, Paige knows how “life happens” every day. Her passion is to help people build wealth, secure their financial future, to enjoy life, and to be ready-not broken! Whether it is improving communities one house at a time, helping borrowers stay in their homes, or working with other investors to learn a new way to earn higher investment dollars for their retirement years potentially, Paige dedicates herself and her business to helping people improve their lives in every way. For more information got to www.CashflowChick.com