subject: The Practice of Buying and Selling Real Estate Notes [print this page] The Practice of Buying and Selling Real Estate Notes
Real estate notes are used to record details of the sale or transfer of property. Each time property changes hands a new note must be executed and recorded through district courts. Note holders can sell their notes in whole or part or use them as collateral to secure financing for other investment properties.
Real estate notes are often used with mortgage loans to secure financing. They are also used with owner will carry contracts such as seller carry back trust deeds. In this type of transaction, property owners act as the mortgage financier. Buyers provide a down payment and the balance is paid in installments until the debt is satisfied. Future payments are an asset that can be sold to a note buyer for lump sum cash.
Another use for real estate notes is to purchase stocks held in a real estate investment trust. REITs are companies that own multiple pieces of real estate. Investors partner with others to buy properties and obtain ownership shares. Investors purchase stocks and combined funds are held within the trust.
It is common practice for investors to sell notes to obtain cash to purchase additional investment properties. While selling notes is a good way to quickly raise capital, this practice is not without risk.
Note buyers do not pay full face value for real estate notes. Note holders may be responsible for the cost of obtaining property appraisals or property title fees. Additionally, note buyers assess transaction fees.
When the note is secured by property being sold under owner will carry financing, the property owner can either sell to an investor or use as collateral to secure bank financing. Owner will carry is becoming a very popular strategy for buying residential and commercial properties.
Banks have tightened lending criteria and do not have the same level of funds available prior to the banking crisis. Many people who want to buy homes cannot qualify for bank financing. Entering into seller-financed contracts lets them engage in credit repair strategies while working toward buying the property.
Buying and selling real estate notes requires a comprehensive understanding of real estate laws, IRS regulations, and personal finance. It can be beneficial to obtain legal and tax counsel; especially when commercial properties are involved.
Investing in cash flow notes can be a lucrative business for those who take time to learn the ropes. The Internet is a good source for conducting research, but to get into the meat-and-potatoes requires networking with other investors and industry-experts. This can be accomplished by participating in online networking groups or joining local real estate clubs. One good source for locating local groups is Meet Up.
Another good spot for learning about real estate notes investing practices is public libraries. In addition to books and magazines, libraries often offer investing and personal finance courses on CD or DVD at no charge. Also peruse the Classifieds section of local newspapers to locate investors offering real estate investing classes.
