Real Estate Notes Business
What is Real Estate Note Buying business?
There is a less popular type of real estate
investing that almost did not make it on this Investing
Tax Free website. It is referred to as " real estate note
buying." The real estate note buying
business involves real estate notes, rather than real
Real estate notes business downside
The real estate not buying business is
much more risky than the three traditional types of real estate
investing and has very little in common with them, but
technically it is within the realm of real estate
Have you ever seen one of those
"fast-cash-for-your-car-note" businesses? Some small business
offer cash for your car note, charging an outrageous interest
rate until you pay your loan off. There are rates as high at
38% or even higher! Even worse, if you don't pay off within a
certain time, you'd lose the car entirely!
How to invest in real estate notes?
Basically, Note Buying in Real Estate is the
same thing, albeit slightly less evil, and you or your real
estate investing group can offer a high-interest loan to some
poor shmoe needing fast cash that can't get a loan from his
bank. Obviously, the risk involved is hefty. To be done right,
as much care should go into each real estate investment
decision as a bank's whole mortgage loan application and
appraisal process. In fact, many lenders tried fill
in this void and offer these types of loans themselves, so
fewer and fewer of these opportunities exist all the time for
private real estate notes investors. If you can
professionally weigh the risks of such an opportunity, also
consider all of the following factors, you may find yourself a
goldmine in real estate investing.
With each and every Note you bought, one of
four things will happen to it:
The real estate note will run the course, and
you've made between 10% and 20%.
The real estate note will be refinanced, you've
made much less, depending on how long it took them.
The buyer will default on the note, or the real
estate note will be foreclosed, you will have to
evict the ex-owner and then you'll have the
property back. Since this is a strong likelihood in
most cases, you should only buy properties that you
are willing to own and look after personally. But
if this does happen though, you're yield just went
through the roof!
What is the Real Estate Note Buying Yield?
When real estate notes are foreclosed
because the buyer defaults on them, the yield on the real
estate notes usually sky-rockets, rising from 10%-20% to
150%-300%. This is because you would then own and have the
whole ownership of the property with all the extra equity on
top of the real estate notes you own. At that point you can
then sell the property for a very large profit! The
possible payoff is huge, however a capitol gains tax will be
imposed, and of course evicting someone from their home is
never a pleasant experience.