Find Performing Notes for Sale in 2021

Mortgage notes can be a great investment. If you have the knowledge, time and resources you might want to buy non performing notes. But if you’re looking for a more hands-off investment from which you can start collecting income away, then you need find performing notes for sale!

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An Introduction to Performing Notes

It is highly unlikely for institutional lenders to sell their performing notes other than in very large quantities to other institutional investors. So if you are looking for instant income from your note investing, you are left with three main options; originating you own loans as a private lender; buying seller financed notes from real estate investors; or buying re-performing notes from other note investors.

Finding performing Notes for Sale

In the latter two of the above, you are effectively acting as the exit strategy for another investor. This usually means you are getting the thinnest end of the wedge in terms of profit. If you are originating your own notes as a private lender, you get to set your own terms from the outset, and you likely get a better opportunity to assess both the borrower and the collateral before making your investment.

Private Lending Notes

Private money is the lifeblood of real estate investing. Whether it is hard money from a professional lender, or a private money loan from a passive investor, real estate investors rely on access to quick cash to close deals fast. This means private lending is a great way to originate your own performing mortgage note.

I use private money loans for almost all of my acquisitions. I’ve used that model to build a portfolio of over 70 rental properties. I do all the heavy lifting, and my private lenders just sit back and collect their monthly interest check every month. You can learn all about the performing notes I offer for sale to my investors on our Investor Page.

Private Lending is a Great way to Invest in Performing Notes

If you want to start private lending, then you need to find a credible borrower with a good deal. You also need to know how to asses you risk, what terms to set and how to manage the relationship with your borrower once you have made the loan and own the note. You can learn more about how to do all that in my Guide to Private Lending.

A great place to start looking for credible borrowers and deals is your local REIA meet up. Since Covid hit, many of these are now hosted online so they’re pretty easy to find and attend. You will find no shortage of potential borrowers there.

Related: An Introduction to Private Lending

Seller Financed Notes

Another option is you are looking for performing mortgages is to buy seller financed notes. Offering seller financing is a very common exit strategy for real estate investors. Typically, they will take a deposit from the buyer and carry a mortgage note for the balance. They can then keep the note, borrow against it to release their capital, or sell the it (or part of it) to another investor.

Seller financed deals are a great source of performing notes

There are lots of place to find seller financed notes for sale. But be aware that you did not choose your borrower. Extra care must be taken to ensure the seller of the note has made a good loan to a solid borrower, or at least if it is a risky loan that the interest rate and discount reflects that!

You can find plenty of investors selling this type of performing note. You can see my list of verified places to buy mortgage notes here.

Related: Is Private Lending Bad or Unethical?

Re-Performing Notes

Your last (but by no means least) option to find performing notes for sale, is to work with other note investors. As with seller financed note, buying a re-performing note means you are the exit strategy for the investor selling the note. This is not necessarily a bad thing, but it does mean that the seller will be looking to retain most of the profits for themselves – and rightly so!

Note investors buy non performing notes, and work with existing borrowers to modify the terms of the loan to make the note re-perform. I.e. the borrower starts making payments again. Again, you must be careful that the new loan terms and the borrower’s ability to meet them are sustainable. It has been known for note investors to create unsustainable re-performing notes to sell at a profit, only for the note to turn non-performing again shortly after.

Reperfomring notes can be a great source of income

You can buy re-performing notes from a variety of sources online. Of course, you must do your due diligence not only on the borrower and collateral, but also on the note seller. Look for a note seller with a good track record and clean reputation. Be wary of anything that sounds too good to be true – it usually is!

Some Useful Resources

So that concludes the three types of performing notes you will find for sale to the general public. In order to get you on your way, here are some useful resources that will help you find your own performing notes for sale:

Some External Resources:

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