Buying & Selling Real Estate Notes
by Ken Volkman


Are you confused about what real estate notes are and if they should be something that's in your portfolio? Simply put, a real estate note is a promise to pay back a loan. Real estate notes are the loan documents that are created when you finance the sale of your house or other type of property. It could be in the form of a mortgage note, land contract, trust deed or a contract for deed. What it boils down to is that someone is making payments on that loan to another party.

Often an individual or business secures a loan from a bank to pay for a piece of real estate. The bank or mortgage lender can, at any time, sell this note to another lender. Handling this sales transaction is a real estate broker.

There are many reasons that real estate notes are bought and sold. The owner of the note may decide that instead of getting a set amount of money each month they would really rather have one lump sum. The note holder may need the money for a new investment venture, a family situation or just be tired of waiting for monthly payments.

If you have a note to sell the value is determined according to several factors. These include: Down payment, interest rate, payment amount, the term or length of the note, the buyers credit rating and payment history. In addition, the type of the property and the condition of the property will factor into determining the value of the note.

Across the country there are thousands of individuals who invest in notes. But the main buyers and sellers of notes are banks and pension funds. However, don't let this detour you if you are interested in investing in real estate notes.

Real Estate has always been a good investment and will no doubt continue to be a good financial instrument. For individuals with money to invest, but that do not want the hassles of actually owning a piece of property, real estate notes may just be the answer. With privately held real estate notes you can earn anywhere from 7% to 15% interest on your money.