F.A.Q.
When you sell a promissory note, mortgage note, deed of trust, contract for deed, or another type of loan agreement – you are assigning your right to receive future payments to someone else. In exchange, you receive a lump sum of cash.
A partial note purchase is a real estate transaction that lets you invest in part of a mortgage note. In exchange for the money you invest, you receive a portion of all payments made on the note. You can collect payments until the mortgage is paid in full or until you sell your partial note.
Selling a real estate note involves sharing copies of documents such as your loan paperwork, closing statement, and payment history with a note buyer who will provide a quote and perform further due diligence. The note buyer will order a title report, property appraisal and check your borrower’s credit. Selling a note usually takes 30 – 45 days. Closing usually takes place at a title office. Other options include “close by mail” or the use of a mobile notary.
If a note had 360 monthly payments remaining, a full purchase would be the purchase of all 360 payments while a partial purchase would be for something less than all 360 payments. It gives investors (and sellers) flexibility to achieve their goals with investing or selling notes. For example, I could buy a full note (360 months) and sell the first half (or the last half) of the note (180 months) and keep the remaining 180 months of payments.
If you work with a loan buyer who pays due diligence and closing costs, selling your note should not cost you anything. Be sure to ask if the buyer expects any costs could come up that would need to be covered by you.
- Investment options SDIRAs allow you to invest in alternative assets like real estate, private equity, precious metals, and cryptocurrency.
- Tax advantages SDIRAs offer the same tax perks as traditional IRAs, including tax-deductible contributions for traditional IRAs and tax-free distributions for Roth IRAs
- Purpose CESAs are used to pay for qualified education expenses for a designated beneficiary, such as tuition, fees, books, supplies, and equipment
- Tax benefits Contributions to a CESA are not tax deductible, but withdrawals are tax-free if used for qualified expenses. You also don’t pay taxes on income or capital gains when you invest with a CESA.
CESAs are similar to 529 plans, but there are some restrictions. For example, if you withdraw earnings for a purpose other than qualified education expenses, they will be included in the beneficiary’s taxable income, and there is an additional 10% tax
You need enough to purchase a small note (maybe $10k to $20k). Some investors with little upfront cash partner with other investors or start as note brokers.
The time value of money is a financial concept that holds that the value of a dollar today is worth more than the value of a dollar in the future. This is true because money you have now can be invested for a financial return, also the impact of inflation will reduce the future value of the same amount of money.
There are 5 factors that contribute to the amount of discount.
- Sale Price or value of the property
- Amount of down payment or equity
- Payer’s credit
- Seasoning or length of time the borrower has paid on the note
- Terms of the note.
In addition to all of these items, the discount will be based on the time value of money or the present value of the stream of payments expected.
As secondary market note buyers, we take current interest rates and other economic factors into account. Pricing is also based on the property type and condition, equity coverage, borrower credit, payment history, loan terms, and the number of remaining payments. We provide free no-obligation quotes so that you can always know the value of your note.