February 22, 2024

Illuzzi Letter

Envisioning And Creating Your Dream Home

Tips For Selling Real Estate Notes For Cash Or Investment Purposes

Many reasons exist to sell real estate notes for cash. Some people want to be released from the financial burdens, while others are seeking lump sum cash to invest in additional properties or pay off outstanding debts. Some realty instruments can be sold in whole or part such as seller carry back trust deeds and promissory notes.

In order to sell real estate notes specific transaction documents must be created and recorded through courts. Each time a realty note is sold a new note must be executed to record the transaction and assign buyer rights. Other common legal documents used to record note transfers include purchase contracts, sale agreements, and letter of intent to purchase.

The type of document required depends on the type of property being sold. Mortgage notes secured with bank financing are used with residential and commercial properties. Vacant land is secured with land contracts. When sellers carry all or part of financing a seller carry back mortgage contract is required.

Property owners holding seller carry back trust deeds can sell the note in whole or part. This strategy is often used by investors in need of funds to purchase new investment properties. Selling the entire note requires investors to transfer the property deed and cash-out the sale.

Cash flow notes are often used with realty stock purchases. Real estate investment trusts (REIT) are organizations that own and manage multiple investment properties. Investors often partner with others to purchase expensive property such as commercial realty or parcels of undeveloped land. Investors purchase stocks and funds are transferred to the trust.

Investors who buy notes must become educated about the many facets of investing. At minimum, investors must have an understanding of state and federal property laws, property management, landlord / tenant laws, financing options, business management, and marketing.

Caution should be exercised when buying or selling real estate notes for profit. While selling notes provides the opportunity to quickly raise cash, this practice is not without risk. Sellers must realize they will not obtain full face value when selling their realty contract. Investors typically pay between 50- and 75-percent of the actual value price. Sellers are often required to obtain property appraisals and pay title transfer and recording fees.

On the flip side, buying and selling notes and land contracts can be a profitable niche. Those who invest time learning the trade can create a strong portfolio of profit-generating properties or cash flow notes. Individuals new to investing often find selling realty notes is easier and more profitable than rehabbing houses or maintaining investment properties used as rentals.

The Internet offers a good starting point for locating investing information. Joining investment groups or real estate forums helps investors network with realtors, mortgage brokers, attorneys, property inspectors, and other investors. Individuals who simply want to sell their real estate note can also utilize networking groups to locate a buyer.