subject: The Importance of Real Estate Note Transactions in Portfolios [print this page] The Importance of Real Estate Note Transactions in Portfolios
Would you like to know how important it is for you to learn how to deal with real estate notes? If you wish to become a real estate investor, then this is something that you definitely need to learn about.
Portfolios, Real Estate Loans & Investors
When you mention the word transaction, what it usually entails is that you are paying cold, hard cash in exchange for goods and services. But what is the equivalent of this when it comes to the real estate industry? Although there is still cash involved when you sell or purchase a real estate property, that is not all that a transaction entails.
Because of the huge amount involved in purchasing either a commercial or a residential real estate property, you might need to borrow a portion of the amount in the form of a loan. This loan is something that needs to be paid back over a period of 5, 10, 15, 20 or even 30 years, depending on the total amount of the mortgage that you will borrow. The only time that you will actually put down cash is when you have to pay for the down payment of the mortgage loan.
As you can see, the number of years that a lenders funds will be tied up is quite long. If you are the lender or the bank, will you allow your funds to be tied up for such a long time? In order to liquidate a portion of your assets and possibly even get a return of your investment, what you can do is deal with or engage in mortgage notes.
The lenders can either act independently or work with a real estate broker or investor. What they will basically be dealing with is mortgage notes. Now, if a mortgage note holder decides to sell to a note investor, he or she will not receive full value for the mortgage note. Instead, the note investor will offer a lump sum cash payment. Any discounts or deductions for the value of the property will be lessened.
For this, the note holder will get to decide if the reduced lump sum is what will be exchanged for the mortgage note. Any discounts given will represent the risk that the mortgage note investor will be taking on the loan, until such time that the mortgage note is paid.
When you are a mortgage note investor, there are other ways that you can liquidate your assets by means of cash flow notes. Keep in mind that cash not investors proactively look for ways that they can acquire mortgage notes for a lesser value so that they can take risks while getting profit for it at the same time.
At the end of the day, the idea is for you to engage in dealing with real estate notes as a form of investment. Once you have enough, you can slowly but surely build a solid portfolio that will help you invest in bigger, better properties in the future.
