For many years, with the exception of the recent recession, the property has proved to be a very astute investment, providing the savvy investor with an excellent rate of return, year after year. The secret to making money in real estate has always been to buy low; most novice investors believe that the profit is made when the property is sold. But the reality is that buying the property at a steal is where the real profit is locked in, and it is then released upon the sale of the property.
The problem when going down this route is that you are exposed to the risk of poorly behaved tenants, who might decide to change their Harley Davidson oil in your living room, or the hassle factor of constantly having to deal with all of the little maintenance jobs, that can be such a drag on resources. That is why dealing with notes provides a number of perfect investment opportunities, while at the same time reducing a lot of the hassle factor.
The best way to maximize profit as an investor is to understand the market and then take advantage of that knowledge, primarily with first-mover advantage. After the recession, banks are much more cautious in their lending procedures, expecting borrowers to jump through many more hoops, and even then turning down many applications. If you are a seller struggling to sell your property, then this is not good news, and many sellers in this situation start looking for alternative solutions. Seller financing drastically increases those options, and with buyers no longer constrained by the whims of banks, suddenly the situation changes from driving down a small country lane, to speeding along a six lane highway.
Imagine being able to reduce the red tape to a minimum, completing the sale within a few days; well, without the intervention of the bank’s this is exactly the situation sellers can experience.
When dealing with notes, the most important factor is that your investment is relatively safe in comparison to some other financial products, because it is secured on the property itself. In the worst case scenario where the buyer stops making payments, the seller can foreclose on the property, keeping any monies already paid, and put the property back on the open market again. There are other benefits to going down this route, as it is often possible to obtain a higher selling price, and generate a better rate of return than achievable via a conventional bank deposit or other conventional investment option.
Although this all sounds extremely positive, and for the most part it is, take extra care to verify the buyer’s credit and employment history. Although foreclosure is always an option, it does involve expense and hassle, which can be avoided provided the seller completes their due diligence.
A large number of people have stumbled into the field of self-financing their homes, to get a quick sale. Their preference would always have been to get the cash in hand, but circumstances dictated that taking out a carry back mortgage was their only solution to get their property sold, so that they could move forward with their life. For the shrewd investor, this provides yet more opportunities in the form of note flipping. Provided there is a positive history of prompt and regular repayments, somewhere between six and twelve months, then it is much easier to convert the note and mortgage into cash.
Flipping notes is a much easier process than flipping a property, for instance, there are none of the common hassles such as simultaneous closes. And what makes note flipping even more exciting is that most note sellers are keen to get rid of the note, and expect to offer the note at a discount. Obviously the bigger the spread, between buying and selling the note, the bigger your potential profit margin, and with none of the associated problems of property ownership.
One of the best strategies requires a little preparation, and in many cases, it will become easier to accomplish as you establish a relationship within the industry, but it is possibly one of the best opportunities in the marketplace today and does not even require any investment. Provided a suitable investor or institutional buyer can be found, the skill is to buy and sell the note instantaneously, at a significant profit. This negates the need for any investment on the provides an easy and hassle free profit instantly. The wider the spread, the bigger the profit, with one of the keys to this strategy creating relationships with the aforementioned private investors or institutions.
Many banks have defaulted loans that they are only too keen to remove from their accounts. Rather than venturing down the route of a short sale, buy the note, from the bank, because once the note has been acquired the process of obtaining the deed from the homeowner is a relatively simple process. This is both a legal and ethical procedure and is a lot less hassle for all concerned than going through a short sale.
There has rarely been a better time to get involved in notes. With the possible exception of an all cash deal, which are rare in these times, notes are a key component of all other real estate transactions. As with everything in the real estate industry, they key to making significant profits, is to have a thorough understanding of the various options available, before investing heavily. A little knowledge as the saying goes is a dangerous thing, and never has a saying been truer than when applied to notes. However, once your knowledge is at the sufficient level, the opportunities that are available are phenomenal with the potential to make huge returns even without cash or lines of credit. Don’t just read this information and do nothing with it, grab it with both hands and use it to your advantage; you won’t regret it!
Want to learn how to BUY NOTES from banks for pennies on the dollar? CLICK HERE to learn more about this month’s training featuring someone who specializes in just notes as a way of investing in real estate.
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