Use a Real Estate Note to Liquidize Your Owner Financed Loan

Use a Real Estate Note to Liquidize Your Owner Financed Loan

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Last week we were talking about the benefits of owner financing. You, as the owner of a house, will collect a monthly payment from the lender who is either flipping or living in the house. The obligation of these payments is recorded in a real estate note. This note can be sold to a business or individual, providing a way to quickly liquidize your owner financing loan.



What is a real estate note?

A note is created when a person commits himself to repay a loan over a certain amount of time. In the case of owner financing, the house is used to back the note. This is called a secure note. Specific conditions are decided upon between both parties.

There’s a large open market for the trade of notes. Some companies specialize in acquiring well performing notes and make a good living off of the monthly payments they’re bringing in. They will also buy underrated notes and sell them with a premium.


Reasons to sell your note

It might be wise to sell your note if you suspect that your payer will be in financial trouble soon. Once the monthly payments stop coming in, your note will be much less valuable.

If you have a well performing note (payments are coming in regularly), selling it can be very lucrative. This can be convenient when you’re in need of quick cash or when financial crisis hits. You can also choose to reinvest it into something that has a higher return on investment.


Real Estate Note


By selling your note you won’t have to worry anymore about collecting the monthly payments. This can save you time on administration work and a lot of headaches if your payer is regularly late. You also don’t have to go through the hassle of paying property taxes anymore.


What a note buyer is looking for

Every note buyer has different requirements to notes they want to buy, but they will all keep a close eye on the value of the property that’s backing the note. This is their last resort, in case the payer can’t afford the monthly payments anymore.

If the property is in a good location and well maintained, it will have a positive effect on the price of the note. Almost all note buyers also prefer a note that has been running successfully for a couple of years already. A note with history give a great indication that the buyer is trustworthy and that the payments will come in on time.


Selling a real estate note

You can sell a note to a bank, an investor or a private person. Notes can be sold through newspapers, the internet, investment clubs and many other ways. is a website that functions primarily as a platform to connect note buyers with note sellers.

A note that’s nearing the end of its duration is worth a lot less than one in the earlier stages. Once the remaining balance of future payments is less than about 25% of the property attached to the note, you’ll get significantly lower offers. If you prefer to cash out anywhere during the process, it’s advisable to do it before this moment.


Photo credit: Mark Moz/ CC BY

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