Buying mortgage notes may be a great addition or switch to make to your investment strategy this year.
There are many reasons that more savvy and experienced real estate investors have been making this shift. While it is also an attractive opportunity open to those new to investing as well.
What Is Mortgage Note Investing
This is the most common investment strategy that the wealthy and banks have been using for decades. It is largely responsible for their huge success and billions. Though Wall Street has certainly been trying to take as big a bite of this asset class as it can too.
Private real estate investors can now directly participate in this investment, with far more security and profitability, than leaving their money in a low or negative yielding bank deposit account.
Buying mortgage notes means that you become the lender. The borrowers pay their mortgage and interest each month. You get the profit from the interest, and return of your capital. In the rare case that they default, you get the whole house to resell for an even larger profit, or to rent out.
Five Reasons Mortgage Notes Make Good Real Estate Investments
- All The Benefits Of Real Estate, Without The Hassles
Mortgage note investing offers all of the benefits and advantages real estate is famous for. All without the risk and hassles of property management or maintenance.
You fund the front line active investors to flip properties, manage their rentals or regular home buyers to live in and maintain them. They do all the hard work. You just get the rewards.
- Predictable Passive Income
If what you really want is passive income, or at least predictable returns, then this is going to be one of your best choices.
It’s even far better than flipping or leasing. It is on the borrower to pay, no matter what. If they don’t flip their deal on their expected timeline, renters are late, or a homeowner has a slow week at work, they still have to pay the mortgage every month.
- Attractive Returns
There are multiple ways to make money on mortgage notes. You can even flip them, or add value to them by enhancing their performance, or simply seasoning them.
Even just holding them can often deliver returns of 5% to over 14% per year.
That’s a whole lot better than bonds, precious metals, and many other investments. It’s better than the averages of most stocks. These are predictable, fixed returns you know you are buying into when you make your investment.
- Tax Benefits
Mortgage notes investing can produce many tax saving benefits. Using the right structures and tax strategies you can even enjoy tax deferred or tax free returns on your note investments. Such as through self-directed 401ks and IRAs.
- Less Competition, More Value
While this domain is one of the most foundational pillars of the wealthiest individuals and organizations, it is not as well known to the mass public. You aren’t competing for deals with tens of millions of homebuyers and investors from around the world for the same deals.
That lower level of competition means buying in at far better values and equity positions, with the same great security.