Investing In Real Estate Mortgage Notes

The term, “sound investment” can mean any number of things to different buyers who have varying criteria and priorities when dealing with real estate.

For some people, a good investment is buying a primary residence in an area where property values are on the rise. For others, a good investment is purchasing a commercial property that’s under a lucrative, long-term lease agreement. For others still, acquiring a multi-family property and becoming a landlord is a good investment — and the list could go on.

Investing in real estate mortgage notes

One thing that the real estate investments above have in common is that the primary focus is owning physical property, as opposed to investing in real estate mortgage notes that represent the value of physical property. If you’re interested in making real estate investments that build wealth, the types of property investments above can all be good ideas, but it’s also profitable to diversify your portfolio with mortgage notes. Below, we list the reasons why.

Key takeaways

1. Buying and selling mortgage notes is faster and easier than buying real estate itself.
2. Property management companies can make your investment as a landlord completely passive.
3. In a rising interest rate environment, you can potentially increase the value of your note by raising the interest rate charged.

1. Easier to sell than physical property

By investing in real estate mortgage notes, you invest in occupied properties that have already passed inspection, had notable problems corrected, and have mortgages that are in repayment. As long as you’re agreeable to the note buyer’s terms, these simple facts make the notes much easier to liquidate — and much faster to sell — than properties newly listed in the MLS system.

2. Easier to purchase than physical property

For the same reasons mortgage notes are easier and faster to sell than physical properties, they are easier and faster to purchase than physical properties. Official records show you that a property is properly zoned, has passed inspection, has a history of on-time loan payments, etc. Many of the most important aspects of the property can be evaluated on paper, which greatly expedites the turnaround time for acquiring the real estate.

3. Earnings are predominantly passive

Unlike properties you actively maintain as a resident, properties for which you hold mortgage notes don’t require you to be involved with day-to-day maintenance. However, if you purchase a property as a landlord, maintenance will be your responsibility.

At the highest level of service, property management companies can make your investment as a landlord completely passive. The key, of course, is to determine whether your property holdings and income justify this level of investment in third party management.

4. Chance to increase value of notes

Let’s say you purchase a mortgage note from someone who sold a home using seller financing. In what essentially amounts to an adjustable rate mortgage (ARM), the mortgage interest rate for the residence is locked in for three years. You buy the property two years into the agreement.

After the third year, you can raise the interest rate. You don’t want to make life unlivable for the residents, so you raise it by a significant yet fair amount. Over the course of the mortgage, this simple move could earn you tens of thousands, hundreds of thousands, or even millions of dollars more than you would earn otherwise, depending on the note’s value.

Who We Are

Amerinote Xchange is a California-based investment firm interested in acquiring mortgage notes, mortgage loan portfolios, business notes, and other debt instruments that are purchased and traded on the secondary loan market. We’re also committed to increasing awareness of the value of investing in real estate mortgage notes.

If you have a note you wish to sell, or you need professional advice on note investing, please call us today at (800) 698-3650, or send us a message online. We look forward to assisting you!