NOTE 411 INVESTMENT GROUP

Types of Real Estate Notes

Real estate notes are financial instruments tied to property transactions. Here’s a breakdown of the key types:

• Performing Notes:
  • Borrowers are current on payments.
    Attract investors seeking consistent, predictable income streams.
  • Example: A homeowner paying their mortgage on time.
• Non-Performing Notes (NPNs):
  • Borrowers are behind on payments (90+ days).
  • Sold at a discount; investors can renegotiate terms, resell, or foreclose.
  • Example: A defaulted home loan being liquidated by a lender.
• Seller-Financed Notes:
  • Created when a seller finances a property directly for the buyer.
  • Common for buyers who don’t qualify for traditional loans.
  • Example: A landowner selling a property and collecting payments directly.
• First Lien Notes:
  • Secured by the primary loan on a property, with priority over other claims.
  • Considered lower risk because they’re repaid first in foreclosure.
• Second Lien Notes:
  • Secured by secondary loans, such as home equity lines of credit (HELOCs).
  • Riskier, as repayment depends on the value left after the first lien.
• Land Contracts:
  • The buyer pays the seller in installments; the deed transfers after full payment.
  • Popular for raw land and small properties.
• Commercial Real Estate Notes:
  • Backed by income-generating properties (e.g., offices, malls).
  • Attract institutional investors or those seeking higher returns.
• Rehab or Fix-and-Flip Notes:
  • Short-term loans for purchasing and renovating distressed properties.
  • Targeted at house flippers or property developers.
• Construction Notes:
  • Loans used for building new properties, converted into permanent mortgages upon completion.

Seller Financing Overview

Seller financing is when the property seller acts as the lender, offering the buyer a loan directly.

• Benefits for Sellers:
  • Faster sales.
  • Can earn interest and profit over time.
  • Potential tax benefits by spreading income across years.
• Benefits for Buyers:
  • Easier access for those without traditional financing options.
  • Flexible terms and lower upfront costs.
  • Example Transaction:
    A homeowner sells a $200,000 property to a buyer who pays $20,000 upfront and agrees to monthly payments for the remaining $180,000 with interest.

Selling Real Estate Notes

Selling a note converts future payments into immediate cash.

• Steps to Selling:
  • 1. Evaluate the note (terms, borrower credit, payment history).
  • 2. Request quotes from buyers (like Note411).
  • 3. Agree on a sale price.
  • 4. Complete a due diligence process.
  • 5. Finalize the transaction and receive payment.
• Factors That Affect Value
• Interest rate (higher rates = more attractive).
• Remaining balance and payment term.
• Property value and borrower creditworthiness.

Note Valuation

• Key Factors:
  • 1. Interest rate: A note with an 8% rate is worth more than one with a 3% rate.
  • 2. Loan-to-Value (LTV) Ratio: Lower ratios (e.g., 70%) are safer investments.
  • 3. Payment history: Regular payments increase value.

Risks & Rewards

• Rewards of Buying Notes:
  • 1. Steady income from performing notes.
  • 2. Discounted purchase price for non-performing notes, with potential for high returns.
  • 3. Ability to foreclose and take ownership of the property if needed.
• Risks of Buying Notes:
  • 1. Borrower default or inability to pay.
  • 2. Decline in property value affecting recovery in case of foreclosure.
  • 3. Legal complexities in foreclosure or renegotiation.

Legal and Market Trends

• Current Market Trends:
  • Increasing demand for seller-financed notes as traditional lending tightens.
  • Growing investor interest in non-performing notes due to economic uncertainty.
  • Rising popularity of land contracts in areas with affordable real estate.
• Legal Considerations:
  • Seller-financed transactions must comply with local and federal regulations.
  • Foreclosure processes vary by state.
  • Non-performing note buyers must understand legal risks and remedies.

How Note411 Supports You

• For Note Holders:
  • Fast and competitive quotes to sell notes.
  • Guidance on maximizing the value of your note.
• For Investors:
  • Access to a variety of real estate notes (performing, non-performing, etc.).
  • Insights into market trends and valuation techniques.
• For Beginners:
  • Easy-to-understand resources explaining real estate notes.
  • Support in navigation your first transaction.