Note Buying Can Be a Great Real Estate Investment Strategy

by David Gerlitz on June 14, 2011

Note buying can be a good real estate investment strategy, especially compared to short sales.

Note Buying Can Be a Great Real Estate Investment StrategyBuying notes from a bank, trustees or other third parties requires upfront cash but it is a simpler, shorter process than short sales. There are plenty of mortgages to buy and less competition.

So how do you begin buying real estate notes? The easiest way is to talk to a bank and get a list of notes it is willing to sell.

You usually have to sign a nondisclosure agreement to get this list. Then you make an offer on one or two on which you want to make an offer. Next, you should write a letter of intent stating your intent to purchase that note and what specifics you would like to see in a contract between you and the bank. You should outline what documents you want the bank to provide, specify your price, the due diligence period and a funding timeline. It can take about a week or so for the bank to let you know whether your offer has been accepted, countered or denied.

Once the bank accepts your offer, it will draw up a loan sale agreement. Sometimes a bank will send you a servicing transferring form and a company information form for you to complete.  Sometimes a bank will also want earnest money at this time.

The negotiations usually take about a week. After you sign the loan sale agreement and perform your due diligence, your funding period begins. When you sign the loan sale agreement, your due diligence period begins. Make sure you pull the title during this period in case an issue pops up — and it frequently does! Generally, the bigger the deal the more time you will want for due diligence!

To close, you simply wire your funds to the bank and the bank then sends you an assignment of mortgage or assignment deed of trust.

When the bank sends over the Assignment Deed of Trust, the bank will send the borrower an estoppel letter that informs the borrowers of who their new lender is and where to send their payments. This usually takes about two weeks. Then the bank will send you the entire loan file for your records. At that point, you become the bank.

Note buying can be a great real estate investment strategy if you are willing to take the financial risk of holding a note. For more information about real estate investing strategies (like Real Estate Syndication) in Colorado, call Dave Gerlitz at 720-306-8017.

Related posts:

  1. Buying Pre-Foreclosure Properties Can be a Good Real Estate Investing Strategy
  2. Why Now is a Great Time to Invest in Colorado Real Estate
  3. Financing Challenges for Boulder Investment Properties
  4. What is Your Real Estate Investing Exit Strategy?
  5. What Are Your Private Lending Real Estate Investment Options?

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